International commercial arbitration is autonomous, private and 145 different countries recognise arbitral awards

International Arbitration

What is the difference between a domestic arbitration and an international arbitration?

Both domestic and international arbitrations begin with an arbitration agreement. People or companies doing business with each other agree to refer disputes to arbitration and not to the courts.

However, if one or more of the following factors applies to your arbitration agreement, then any disputes your arbitration agreement applies to will go to international commercial arbitration. They are:

  • When you entered into the arbitration agreement, you and other person or company had places of business in different countries; or
  • You and other person or company agreed in the arbitration agreement that the place of arbitration is situated in a different country; or
  • A substantial part of the contractual obligations are to be performed in a different country; or the subject matter of the dispute is most closely connected with a different country; or
  • When you and the other person or company have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

If none of these four factors applies to your arbitration agreement, then you have a domestic arbitration. If you have a domestic arbitration, you will be unable to enforce the award in other countries with the same ease as enforcing an award from an international arbitration. In fact, you may be completely unable to enforce the domestic arbitration award in others countries.

For more information on determining whether your arbitration agreement results in an international arbitration, look here!

Why arbitrate international commercial disputes?

Let’s start at the end...

In any dispute, early settlement is the best result. The next best result is a court giving you a judgment, which orders another person or business to pay you money, return goods, complete a transaction, etc.

When you want a court in another country (not your own country) to make such orders, then consider this... As a matter of agreed international law, courts in 145 different countries WILL enforce foreign international arbitration awards, from outside their jurisdiction. If you have an international arbitral award, then courts in 145 different countries WILL enforce it for you.

As a matter of agreed international law, courts in 145 different countries will NOT enforce foreign domestic arbitration awards from outside their jurisdiction. If you have a domestic arbitral award, then courts in 145 different countries will NOT enforce it for you.

As a matter of agreed international law, courts in 145 different countries will NOT enforce foreign judgments given in courts from outside their jurisdiction. If a court in your country gives you a judgment, then courts in 145 different countries will NOT enforce it for you.

Therefore, international commercial arbitration has the ultimate advantage over litigation... awards are enforceable around the world, judgments are not.

Apart from enforcement, there are other advantages that international commercial arbitration has over litigation and domestic arbitration. Let’s have a look...

Autonomy and flexibility

In terms of procedure, a court of any land will have fixed rules and processes, which you are typically unable to change. On the other hand, in international commercial arbitration you can negotiate the procedural rules and processes, and the constitution of the arbitral tribunal.

This means that the arbitration of international commercial disputes is autonomous and flexible. We discuss various applications and configurations of this autonomy and flexibility as follows.

Harmonised procedures

  • The civil law operates in more countries around the world than the common law. With international commercial arbitration, if one party is from a common law country and the other party is from a civil law country, then they can agree on a ‘harmonised’ procedure. This means that you do not need to learn an entirely new legal system for the resolution of your international commercial dispute.

Nationality and language of arbitrators

  • With international commercial arbitration, you can agree that at least on arbitrator has the same nationality as you do (that is, at least one arbitrator is from your own country). Same nationality arbitrators can explain cultural behaviour, language and demeanour of witnesses to the other arbitrators on the arbitral tribunal who are from other countries.

Arbitrator's qualification and industry experience

  • In international commercial arbitration, you can agree that arbitrators will possess specific qualifications and industry experience.
  • For example, some judges may only ever preside over one computer software trial in their lifetime. On the other hand, if you agree to an IT expert arbitrating your international computer software dispute, then you will not need to explain complex software codes, structures, languages, performance, specifications, industry standards and practices or design to an IT expert. This means that an IT expert arbitrator can ‘cut to the chase’, whereas a judge in a courtroom (with no experience in IT) cannot.

Arbitration is economically efficient and fast

  • In international commercial arbitration, you can negotiate and agree on how the arbitration is to proceed. This means that (unlike litigation), you can agree on a process that is economically efficient and fast. For example, you might agree to limited discovery of documents, hearing of some (or all) disputes ‘on the papers’ only, limited hearing times (chess-clock), ‘hot-tubbing’ expert witnesses, ‘witness conferencing’ and other processes which are not generally available in litigation.

Limited rights of appeal

  • International commercial arbitration, no matter which country it takes place in, is subject to limited rights of appeal. You can go further and agree to limit rights of appeal so only the tribunal's findings on points of law are appealable. On the other hand, litigation typically provides an appeal process for all judicial decisions. Appeals can go on to the 'highest court in the land'.

Privacy

Litigation takes place in the public arena. Whilst the courts have the power to gag the media and restrict the public’s access to trials, the courts seldom exercise that power. This is because ‘justice must be seen to be done’. On the other hand, international commercial arbitration takes place in private. This means that no one else can see, hear, or read about your business processes, intellectual property, commercially sensitive information, market research, company structure, financial position, etc.

Worldwide Enforcement

It is very difficult to enforce a court's judgment freely around the globe.

Respective countries may have legislation in place, which mutually or reciprocally recognises judgments that courts have given, in the other country. This is mutual or reciprocal recognition of judgement legislation.

However, this type of legislation is far from watertight. This is because such legislation generally allows the person or business against whom the foreign judgment is being enforced, to challenge that foreign judgment... in their own country. Furthermore, mutual or reciprocal recognition of judgement legislation is by definition made between two countries only.

On the other hand, one of the principle instruments in international commercial arbitration, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the New York Convention"), now has 145 signatories. This means that 145 convention countries will recognise and enforce international arbitration awards given in any other convention country (subject to limited reservations). The New York Convention permits very limited grounds to challenge an award.

Where to from here?

We can help you with disputes concerning the following international commercial activities:

  • Building and Construction
  • Buying and Selling
  • Domain Names
  • Financial Investment
  • Information Technology (IT)
  • Leasing
  • Manufacturing
  • Oil and Gas
  • Recruitment
  • Services
  • Transportation (maritime and aviation)

IBA

International Bar Association

We have been a member of the International Bar Association (“IBA”) since October 2011 (War Crimes Committee and European Regional Forum).

CIArb

Chartered Institute of Arbitrators (UK and Australia)

We have been associated with the Chartered Institute of Arbitrators (“CIArb”) since October 2011. The CIArb is located at 12 Bloomsbury Square, London.