A. Arbitration
No dispute, no arbitration. In the legal sense, arbitration is one of the techniques used in dispute resolution where cases are decided out of court. Compared to a normal court case where a judge or jury decides the case, the arbitral tribunal reviews the dispute and issues the decision. Arbitration has the following characteristics: it is consensual, it is neutral, the procedure is confidential, the arbitrators are personally chosen by the parties, and their decision is final and easily executed.
1. International Commercial Arbitration
1.1 Overall
International commercial arbitration or international arbitration involves resolving disputes or cases related to international commercial contracts that are usually entered into between large corporations or international institutions or the government of different countries around the world. The resolution of these contractual disputes is the responsibility of the International Chamber of Commerce or ICC, the American Arbitration Association (its international branch), the International Center for Dispute Resolution or ICDR, the Hong Kong Center for International Arbitration, the London Court of International Arbitration or LCIA, World Intellectual Property Organization or WIPO and Singapore International Arbitration Center or SIAC, as the case may be.
International commercial arbitration is considered a hybrid of dispute resolution due to the versatility of its arbitration procedures. Arbitration proceedings may use a combination of common law and civil law, so the ability to settle a case becomes more achievable and successful. An important reason many parties refer a case to arbitration is to avoid local court practices of litigation in different jurisdictions. Other reasons include: obtaining a more efficient and tailored decision, having expert arbitrators in the matter and the freedom to select and design the arbitration process itself, considering the flexible characteristics of the procedure.
1.1 Why International Commercial Arbitration?
The advantages of resorting to international commercial arbitration can be summarized as follows:
1. The ability to choose a specific method of resolving the dispute that is fair to both parties, especially if they are from different countries where litigation and other legal complexities could hinder the resolution of your case;
2. Enforceability and neutrality are the bases for the solution of the controversy. Decisions become binding on both parties. The legal basis for the recognition of the arbitral award is the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 or also known as the New York Convention;
3. The arbitrators, chosen by the parties, are well known for their competence in their field; and
4. Confidentiality of the proceedings. Judicial processes and decisions are public. The arbitration process is shrouded in confidentiality and therefore appeals to those who do not want the settlement disclosed. Most, if not all, arbitral awards have not been or are not made public.
B. United Nations Commission on International Trade Law (UNCITRAL)
1. General Information
The growing popularity of international commercial arbitration led to the creation of the United Nations Commission on International Trade Law or UNCITRAL in 1966 with the aim of promoting progress, unifying and harmonizing international trade law.
In the area of international business transactions, UNCITRAL helps formulate different model rules, laws and conventions that are accepted around the world. The agency also helps provide legislative and legal guidance and recommendations and updates case law information and uniform business law enactments. In addition to these, seminars related to uniform business law are held regularly and technical assistance is provided to different legal reform projects.
2. UNCITRAL Arbitration Rules
The UNCITRAL arbitration rules are a comprehensive compilation of procedural rules chosen by the parties to guide the conduct of their arbitration proceedings. These rules include the arbitration process (providing a model arbitration clause), the rules for the choice of arbitrators and the conduct of the proceeding, and the rules regarding the form, effect, and how the arbitral award is interpreted.
The UNCITRAL arbitration rules were adopted in 1976* in order to guide the parties in the arbitration procedure without resorting to an international arbitration institution. In 2006, the UNCITRAL Model Law was adopted. Many countries around the world used this model for their own arbitration legislation. This 2006 revision was intended to accommodate changing arbitration practices over the years.
C. Concepts
1. Applicable law
The arbitral tribunal is the third party in the arbitration process. As such, the law of the country or national law where said court is located governs the rules of arbitration procedure unless both contracting parties have stipulated and agreed to a different jurisdictional law. Because the arbitration agreement is a contract in nature, the parties may stipulate the provisions thereof.
2. Arbitration clauses
Arbitration arises as a result of a dispute in a main contract. Whenever a dispute arises and in the absence of stipulation, the case will proceed to court and the tedious process of litigation begins. Most of the time irreconcilable legal and jurisdictional discrepancies arise which make the case more cumbersome to pursue. To prevent this, an arbitration clause must be incorporated into the main contract. In the drafting of this clause, the parties may attend the samples provided by the various arbitration institutions.
The important elements that an arbitration clause must include are: that both parties agree to arbitrate, the scope and definition of the disputes that will be the subject of the arbitration procedure, the method of selection of arbitrators, the place or seat of the arbitration, and that the parties are willing to adapt to arbitration rules that can be institutional or ad hoc. These provisions, although mandatory, are not mandatory and the parties may stipulate other beneficial provisions for them, such as providing for more than one arbitral institution.
3. Decisions and awards
One of the main reasons why the parties resort to arbitration is that the judgments and decisions are easier to enforce. However, it is worth noting that due to the confidential nature of the arbitration process, including the final results of the case, these decisions are not made public. Since the decisions are not published, not much can be researched about the process and its results.
D. Arbitration Institutions
1. Ad hoc arbitration
Ad hoc arbitration allows contracting parties to plan and organize their own arbitration process. This includes the selection of arbitrators, the specification of the rules of procedure and other laws, the definition of the powers of the arbitral tribunal and the like. All these provisions that are not contained in a general arbitration agreement must be expressly stipulated.
However, this method is not without its drawbacks. Ad hoc arbitration can result in the parties not cooperating, especially if the case turns into a tedious dispute. In addition, the initiation of the arbitration process may take some time considering that it does not have internal regulations or a procedural structure similar to that of institutional arbitration.
E. Institutional Arbitration
Institutional arbitration refers to arbitration in general. It does not allow the parties to define the rules. An arbitration institution sets the procedural rules and performs administrative and supervisory functions that may include following the proceedings through a schedule. The only participation of the contracting parties in this situation is the choice of the international arbitration institution that will take up the case.
F. Conclusion
Globalization has contributed in some way to the impact of resorting to international commercial arbitration on the regular litigation process. Global trade has made this method of dispute resolution the preferred form, especially since the process is basically private and confidentiality is highly recognized, especially in determining the arbitration award.
International investments and ongoing trade between different countries drives the need for parties to recognize the importance of international commercial arbitration as part of their major contracts. While the issue of jurisdiction is and always will be an issue, there are a growing number of states that are continually enacting and modifying their own arbitration rules to keep up with changing times.