Arbitration is the most common method of dispute resolution in international trade. It is a private means of dispute resolution based on the agreement of parties to refer their disputes to a private tribunal and to abide by its determination.
It is preferred to litigation for a number of reasons. Arbitration tends to be speedier than litigation conducted in national courts. An arbitral tribunal is appointed to hear a particular dispute and will devote its full attention continuously to that dispute.
Courts, by contrast, have long and varied lists of cases demanding their attention and sometimes a case may be protracted to the point where it has to be heard by a succession of judges. Although arbitral tribunals must observe the requirements of natural justice and decide according to law, they can adopt flexible and expeditious procedures.
Arbitration allows the use of experts as adjudicators. Although arbitration can be more expensive than litigation to conduct, traders stand to gain in the long run because of the time saved in reaching finality.
Besides, the costs of arbitration are borne by the parties and not the taxpayer. Traders often prefer the privacy of the arbitral process to the publicity that attends court proceedings.
However, the greatest historical impetus for arbitration in international trade is the fear of parties to litigate in foreign lands. International commercial disputation, by its nature, involves parties of different nationalities, but litigation has to be conducted before the courts of one nation. Litigants have justifiable apprehension of being unequally treated by foreign courts.
The parlous state of the rule of law in many countries has not helped. The fear of unfair treatment is heightened when states are parties to disputes or when national interests are involved.
Even where courts are unbiased, foreign litigants remain disadvantaged by having to proceed in unfamiliar legal environments using local lawyers. In these circumstances arbitration is a logical alternative.
Of course, arbitration is not without its drawbacks. By its nature, it is available only to resolve disputes between parties to an arbitration agreement.
Hence, it is a process that usually occurs among traders. Consumers, for example, rarely have arbitration agreements with retailers. Note though, that it is possible for parties to a dispute to refer a dispute to arbitration after the dispute has arisen if they agree to do so.
In other words, an arbitration agreement may concern future disputes or past disputes. However, even where a trading contract contains an arbitration agreement, not all parties to a dispute may be parties to the agreement, thus creating obstacles to a final resolution.
Arbitral tribunals also have no coercive powers and hence, often need the intervention and support of the courts. However, despite its limitations, the practice of arbitration has grown to the point that it has become an integral feature of global trade.
Its importance to international trade has been recognised by national legal systems and by the community of nations which have established a global statutory framework to facilitate the arbitral process.
Although the arbitral process is essentially a private mechanism based on contract, like all other contracts, it needs an institutional infrastructure to be effective. In fact, owing to its adjudicative character, it needs more infrastructure than ordinary contracts.
There are two types of institutional infrastructure which support international commercial arbitration. One type consists of laws which enable courts to enforce arbitration agreements and arbitral awards and to assist and supervise the arbitral process.
The second type of infrastructure consists of services provided by organisations such as the International Chamber of Commerce (ICC), the American Arbitration Association (AAA), the London Court of International Arbitration (LCIA) and the International Centre for Settlement of Investment Disputes (ICSID).
These organisations have formulated arbitration rules which can be incorporated easily into contracts by reference and provide the personnel and the facilities to hold arbitration proceedings.
It is not possible in a short essay to deal comprehensively even with that part of the infrastructure which involves the courts. Hence we propose to limit our discussion to three key aspects of the infrastructure involving the courts which are important for the success of arbitration as a mode of international commercial dispute resolution.
They are, in the order of discussion:
• recognition and enforcement by courts of arbitration agreements such that parties are not permitted to litigate in violation of such agreements;
• limited judicial review of arbitral decisions which encourages the finality of arbitral awards while providing recourse against illegal decisions; and
• enforcement of arbitral awards.
No comments:
Post a Comment