Q: What is arbitration?

A. Arbitration is a proceeding or hearing in which a dispute is resolved by an impartial adjudicator (“arbitrator”) or panel of adjudicators whose decision the parties to the dispute have agreed will be final. Arbitration is a cheaper, private and usually quicker way of resolving disputes without the need to go to court.

Q: What is international arbitration?

A: International arbitration is a method for resolving disputes arising from international commercial agreements and other international relationships. As the international marketplace continues to expand, business transactions are taking place across the world. These include jurisdictions that may be less developed and where the courts may not have the capacity or knowledge to know how to adjudicate on commercial disputes. Also, where business transactions take place across several jurisdictions, arbitration is a more efficient way of hearing a dispute.

Q. What is the process?

A. Arbitrations are usually held under the rules of one of the principal arbitral bodies, such as London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC) or the International Centre for Settlement of Investment Disputes (ICSID). Or the parties can agree to “ad hoc” arbitrations, where they set their own rules.

Q: What are the advantages of arbitration?

A:  The arguments in favour of international arbitration are:

• Confidentiality: all the proceedings and the result can be kept private without anyone else having to know.
• Impartiality: the parties decide who should arbitrate their dispute. The arbitrator can act impartially and independently leading to a fairer result.
• Procedural flexibility: arbitrations are less formal than court proceedings.
• Cost savings: arbitration is generally cheaper than litigation.
• Speed: the dispute is usually processed and heard more quickly than litigation.
• Enforceeability: most states have signed conventions that ensure that arbitral “awards” can be enforced in the courts, if necessary.

Q: What are the disadvantages of arbitration?

A: There are some disadvantages, but these are more than outweighed by the advantages:

• Final decisions: the decision of the arbitrator is “binding”, that is the parties have to agree to it whether they like it or not.
• Costs: in complex disputes, it is possible that costs can escalate. The top arbitrators also charge top dollar. If the fees are not limited in advance, the costs of arbitration can exceed the costs of a court-based adjudication.  
• Dispute over arbitrator selection: sometimes, the parties find it difficult to agree on who the arbitrator should be. However, there is now a growing body of skilled arbitrators so this disadvantage is diminishing.

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