The term “arbitration” is a form of alternative dispute resolution, that resolves disputes outside the judiciary courts, and it gives rise to the term “international arbitration.” It refers to arbitration between companies or individuals in different states. International arbitration is similar to domestic court litigation, but as mentioned earlier, instead of taking place before domestic court, it takes place before private adjudicators. International arbitrations are consensual, neutral, binding, private as well as enforceable, implying that they are typically faster and less expensive than domestic court proceedings. Moreover, what sets international arbitration apart from domestic court judgements is that they can be enforced in nearly all countries of the world. With all of this, international arbitration is the leading mechanism for resolving global disputes.
International arbitration is also called as a hybrid form of international dispute resolution, given the reason that it blends elements of civil law procedure and common law procedure, while allowing parties a significant opportunity to design the arbitral procedure under which dispute would be resolved. Along with this, international arbitration also finds use in agreements made between companies. Organizations frequently include international arbitration agreements in their commercial contracts with other businesses, so that, in case a dispute arises with respect to any agreement, the parties involved would become obligated to arbitrate rather than pursue traditional court litigation. A typical arbitration agreement is very short. The parties involved here also frequently add rules concerning the law governing the contract, the number of arbitrators, the place of arbitration and the language of arbitration.
Let us now understand how international arbitration awards are enforced?
The New York convention of 1958, or the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards enforced the arbitration agreements and arbitral awards. The New York convention required the states that have ratified it to recognize and enforce international arbitration agreements and foreign arbitral awards issued in other contracting states, subject to certain exceptions. Currently, 168 countries have ratified this convention, implying that arbitration rules can be applied in all major countries in the world.
Moving on, international arbitration provides many benefits over traditional court litigation.
For instance, international arbitration can resolve disputes more swiftly than traditional litigation methods since there are only limited appeals from arbitration awards. Accordingly, arbitration methods are much less costly in comparison to the other. Since domestic courts are mostly overwhelmed with cases, judges do not have ample of time to devote towards each case, under such instance international arbitration is said to ripe better-quality justice. While selecting an arbitrator, clients can also participate actively. Parties can also select the procedure which they think is the most appropriate for resolving their international dispute. Moreover, international arbitration can be confidential, which is useful if the parties wish to continue their business relationship and avoid negative publicity.
Finally, let us now look at the trends in international arbitration for the year 2023.
Over the past years, international arbitration proceedings have become more prevalent. Nowadays, arbitration clauses are included in commercial contracts. The same is done especially if the contracting parties or signatories are of different nationalities. In recent times, international arbitration has turned out to be the most preferred option for international conflict resolution, even the ICC reported to have registered 27,000th case in just May 2022. We can understand this increase in adoption of international arbitration methods due to the increase in number of commercial disputes, which are a result of global economic recession and the soaring interest rates which have also placed undue strain on business cooperation and transactions.
In the past, the use of international arbitration for dispute resolution was just limited to contractual disputes, investment agreements and M&A transactions. However, the scenario has evolved now. The choice of international arbitration has expanded itself to infrastructure and building related disputes, as well as IP disputes. Even the corporate law sector has found use of it. Many jurisdictions have now allowed for the resolution of corporate disputes through arbitration, however, the same can only be performed if the company laws include the arbitration clause.
Another trend that has been in conversation is the efforts being laid by arbitration institutions to make these proceedings more efficient. There have also been provisions to introduce new rules for allowing cheaper and more efficient arbitration proceedings.
In the wake of the COVID-19 restrictions preventing litigants from meeting face to face or travel from their countries of residence to the arbitration seat, the advantages of video conferencing and electronic submissions (the bread and butter of international arbitration procedure) have become more conspicuous.
Another marked trend which can be observed over the last few years and which we expect to carry on during 2023 is the introduction of new places in the world which can serve as arbitration seats. The importance of arbitration seat does not derive solely from matters relating to convenience and language. It is the place where the parties can confirm the arbitration award in the local courts or seek the courts’ assistance to facilitate the arbitration process.
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