International arbitration is similar to domestic court litigation, but instead of taking place before a domestic court it takes place before private adjudicators known as arbitrators. It is a consensual, neutral, binding, private and enforceable means of international dispute resolution, which is typically faster and less expensive than domestic court proceedings.
The use of international arbitration has evolved to allow parties from different legal, linguistic and cultural backgrounds to resolve their disputes in a final and binding manner, typically without the formalities of the procedural rules of their own legal systems.
What Is International Arbitration Used For?
International arbitration is sometimes called a hybrid form of international dispute resolution, since it blends elements of civil law procedure and common law procedure, while allowing the parties a significant opportunity to design the arbitral procedure under which their dispute will be resolved. International arbitration can be used to resolve any dispute that is considered to be “arbitrable,” a term whose scope varies from State-to-State, but which includes the majority of commercial disputes.
Companies frequently include international arbitration agreements in their commercial contracts with other businesses, so that if a dispute arises with respect to the agreement they are obligated to arbitrate rather than to pursue traditional court litigation. Arbitration may also be used by two parties to resolve a dispute via what is known as a “submission agreement”, which is simply an arbitration agreement that is signed after a dispute has already arisen.
Typical arbitration agreements are very short. The ICC model arbitration clause, for instance, merely reads:
“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”
Parties also frequently add rules concerning the law governing the contract, the number of arbitrators, the place of arbitration and the language of arbitration.
What Is Investment Arbitration?
A relatively recent phenomenon, “investment arbitration” is one of the types of arbitration that is growing the most rapidly. It concerns the institution of arbitration proceedings by foreign investors against States on the basis of bilateral or multilateral investment treaties, or domestic laws providing consent to arbitration by the State. It may be the only recourse in response to the expropriation of private investments by a State.