What is international arbitration?
International arbitration is a method of settling disputes out of court that relies primarily on the will of the parties. In addition, the dispute is settled by arbitrators instead of judges and gives rise to an arbitral award. Arbitration can be applied in principle, to all “arbitrable” disputes which includes in principle, the vast majority of commercial disputes.
How is international arbitration used?
However, the biggest difference between arbitration and recourse to the traditional courts lies in the fact that arbitration can be modulated by means of an arbitration clause. These clauses are inserted into contracts concluded between two parties and are often an important subject during negotiations. They make it possible to determine the precise terms of the arbitration, such as the choice of arbitrators, the seat of the arbitration or the language used, but also the disputes that fall within the arbitration jurisdiction and the law that will govern the arbitration. The arbitration clause in a contract must therefore be carefully drafted by the parties wishing to have recourse to arbitration.
However, a distinction must be made between ad hoc arbitration, which is an arbitration where all the terms and conditions have been determined and chosen by the parties, and institutional arbitration, which is organised and has precise rules and procedures.
Specifically, the arbitration clause in institutional arbitration generally contains general provisions relating to its application, a section on the procedures for commencing the proceedings, a section on the Arbitral Tribunal, a section on the procedures for conducting the proceedings, a section setting out the award and, finally, a section determining the fees and expenses. To help the parties draft the arbitration clause, there are arbitration rules proposed by the International Court of Arbitration, an institution based in The Hague in the Netherlands. Still in the context of institutional arbitration, the parties will have their dispute arbitrated by institutional arbitration courts such as the International Chamber of Commerce or the International Centre for Settlement of Investment Disputes.
The arbitration clause in the contract makes recourse to arbitration compulsory. If a court is seized despite the presence of an arbitration clause, it must refer the dispute to the competent arbitral tribunal. Although inserting an arbitration clause when the contract is concluded in anticipation of possible disputes is the most common way of proceeding, it is nevertheless possible to insert an arbitration clause after a dispute has arisen in order to submit it to arbitration.
Advantages of international arbitration
Arbitration has several advantages over judicial dispute resolution. Firstly, the procedure is more rapid, confidential, independent and avoids having to submit to state formalism. The arbitrators are chosen directly by the parties on the basis of their expertise and the dispute in question, which can result in better quality “justice“. In fact, commercial disputes sometimes require specific skills specific to a particular field that the ordinary judge does not have.
The parties may decide to use only one arbitrator but generally, for questions of fairness, there are three so that there is one arbitrator chosen by each of the parties and a final one who has been chosen by common agreement of the parties. They must be neutral and may well decide to rule in equity rather than in law. A judge is obliged to rule in law, i.e. to give a decision based on the law and legal texts, and is prohibited from ruling in equity, i.e. on the basis of considerations that are not legal and that could, for example, be social, economic, equitable, etc. However, the arbitral tribunal is still subject to certain fundamental rules, such as the adversarial principle and the obligation to give reasons for and notify the arbitral award.
In addition, the arbitral award, i.e. the decision rendered by the arbitrator(s) is enforceable in most countries of the world unlike a judgment which is authentic in the state of performance.
How is the arbitral award applied and enforced?
As regards the application and enforcement of the arbitral award, this is governed by the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, which has now been ratified by more than 168 countries. These are all countries in which the arbitral award can be applied and enforced. In principle, the award is automatically enforced insofar as it has the force of res judicata.
The International Law department of the law firm Navas&Cusí, expert in dispute resolution (mediation, arbitration and negotiation), with a reputable office in Brussels in the centre of Europe , will provide you with the best advice for your success in this area.