Arbitration v court: international dispute resolution

Arbitration has a long history. In international commerce, it remains the dispute resolution mechanism of choice. Parties to a cross-border transaction often distrust the courts in each other’s jurisdiction. They may even distrust their own courts, considering them too slow, too expensive, or lacking a real understanding of their particular business.  

In these times of economic and political uncertainty, when courts are under strain and when there can be doubt as to the international enforceability of their judgments, arbitration makes more sense than ever.

Amongst the benefits of arbitration are:

• Neutrality and independence of internationally minded arbitrators
• Expertise and commercial knowledge of arbitrators
• Finality of awards: limited rights of appeal or recourse to courts
• Enforceability worldwide under the New York Convention 1958
• Confidentiality of proceedings
• Flexible and cost effective procedures

Arbitration is built on, and depends on, trust, both trust in arbitrators and trust in the transnational networks in which parties do business and resolve their disputes.

There has been a backlash against arbitration for the resolution of disputes involving states. New international investment courts have been proposed to replace arbitral tribunals. This may be the right course for this particular kind of dispute. As the late V V Veeder wisely said in the Chartered Institute of Arbitrators Alexander Lecture in November 2015, ‘…arbitration cannot do everything. It is a private, pragmatic, flexible and consensual creature. It has no imperium, no tipstaffs and no armies. It can exist only with the real consent and active support of its users.’

The international commercial arbitration community is composed of diverse overlapping communities based around different business sectors, associations, and institutions. In my view, failures of inclusivity and understanding by influential elites, comprising specialist arbitration lawyers and academics, have led to new and damaging forms of distrust and to uncalled for, inappropriate, and costly regulation.

Arbitrators, commercial parties, and their funders and insurers, must be vigilant if arbitration is to continue to prosper. See my ICMA XX 2017 paper, ‘Regulation of arbitration: where it comes from, who it is for, and its impact on maritime arbitrators’ and my joint article with Cherine Foty, Conflicting Perceptions of Ethics in International Arbitration, Arbitration, 85, 2 (2019), pp 185-2020 (download here).

My LexisNexis Blog post, ICMA 2017: if winter is coming, the answer is hygge, warned of the risks of arbitration becoming more lawyer-controlled,  expensive, and distant from its commercial users. There is no room for complacency. International arbitration is not the default option; domestic courts are.