Basic knowledge of international commercial arbitration

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More and More China companies are involved in international commercial arbitration, ever since China business entities' commercial activity increases. International commercial arbitration is the process of  resolving business disputes between or among transnational parties through the use of one or more arbitrators rather than through the courts.  It requires the agreement of the parties, which is usually given via an arbitration clause that is inserted into the contract or business agreement. The decision is usually binding.  This chapter will present the major international arbitral institutions and the resources found on their Web sites.  It will also review commercial and private databases that provide primary and secondary sources of arbitration information.  Any omissions or errors are solely the responsibility of the author.

As the number of international commercial disputes mushrooms, so too does the use of arbitration to resolve them.  The non-judicial nature of arbitration makes it both attractive and effective for several reasons.   There may be distrust of a foreign legal system on the part of one or more of the parties involved in the dispute.  In addition, litigation in a foreign court can be time-consuming, complicated, and expensive.  Further, a decision rendered in a foreign court is potentially unenforceable.   On the other hand, arbitral awards have a great degree of international recognition.  For example, more than 140 countries have agreed to abide by the terms of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, known as the New York Convention.

Another reason for choosing arbitration is that the process is administered by a panel of arbitrators who are agreed upon by both parties.  These arbitrators may have specialized competence in the relevant field.   Arbitral awards are usually final and binding, which avoids a drawn-out appeals process.  In addition, the confidentiality of the arbitration process may appeal to those who do not wish the terms of a settlement to be known.  This is the biggest obstacle to researching international commercial arbitration:  as its popularity grows, so does its interest to outside parties.  However, because many awards are not made public, it can be frustrating to search for information.

There are essentially two kinds of arbitration, ad hoc and institutional.   An institutional arbitration is one that is entrusted to one of the major arbitration institutions to handle, while an ad hoc one is conducted independently without such an organization and according to the rules specified by the parties and their attorneys. On its face, ad hoc arbitration may seem to be less expensive and more flexible.  However, institutional arbitration provides an independent, neutral set of rules that already exist, and it requires that an institution provide services that are critical to ensuring that the arbitration proceeds smoothly.  For example, the International Court of Arbitration(ICA) decides on the number of arbitrators and their fees, appoints the arbitrators, ensures that the arbitration is being conducted according to International Chamber of Commerce Rules, determines the place of arbitration, sets time limits, and reviews arbitral awards.  In addition, an arbitral body will ensure controlled costs, since it will have a pre-determined framework of charges.

Many international agreements, treaties, and conventions facilitate the use of arbitration as a method for resolving disputes.  Other agreements address the enforcement of awards.  There has been a tremendous increase in arbitration options in the last 50 years. Previously, there were a few countries with well-developed arbitration practices and sympathetic national laws. Interference with arbitration by the courts was a well-founded fear in many countries. Conversely, the necessary actions on the part of the national legal system in compelling witnesses and enforcing judgments were not always available.

One reason for the growth of arbitration is that there are now many arbitral bodies, and parties can select one that is best suited to their needs.  Some organizations welcome any type of dispute.  In contrast, there are organizations that specialize in particular types of disputes, such as those involving investments or that focus on a particular topic, such as intellectual property. Some arbitral bodies specialize in disputes in particular industries.  An example is the American Arbitration Association (AAA), which has different sets of special rules governing disputes in different subjects.  Another factor in selecting an institution is the nature of the party;  one institution may be open only to states or member governments, while another may be available to any entity or individual.  The fact that awards are issued by a number of institutions can complicate research.

An arbitral body sets forth a set of arbitration rules that governs the potential arbitration.  It may also issue a model arbitration clause that can be incorporated into the contract or business agreement when the transaction is made.  Arbitration rules and model clauses are often found on the organization's Web site.

Read 3234 times Last modified on Thursday, 15 March 2012 15:34
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