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Critically discuss the advantages and disadvantages of international arbitration, compared with litigation, as a means of resolving international business disputes.
Freedom to choose a neutral and competent body for
dispute resolution is a significant advantage of arbitration over litigation.
Each party to an international transaction might be reluctant to submit to the
jurisdiction of the other party’s home court. It is commonly believed that such
a court could be biased toward the party coming from the state litigated in.
Arbitration can thus be seen as a trusted process, whereby a balance is struck
between the influence of each contractor, regardless of the composition of the
tribunal. In addition, choosing arbitration would be a valuable option if
certainty of having a body proficient in a particular field adjudicating upon a
dispute is sought. By contrast, resolution of a complex commercial matter in a
court might result in a judgment based upon misconception or in a significant
delay due to the need for expert evidence.
Finality and enforceability of an international
arbitral award are two further advantages of the arbitration process when
compared with litigation. Conclusiveness of an award makes arbitration a more
efficient process than litigation. Nonetheless, lack of an appeal procedure is
only of benefit if the award issued is sound. English law, for instance, allows
for an appeal from an arbitral award on a point of law in limited circumstances
provided for under section 69 of the Arbitration Act 1996. As a result, not
only fairness of the process might be at risk of being challenged, but also
development of commercial law may be inhibited. Litigation is, therefore, much
better suited to ensuring a just outcome in a given dispute. Still, it is
easier to enforce an international arbitral award than a judgment of a court of
a particular state, especially if enforcement is sought in a Member State of
the New York Convention 1958. This is of distinct advantage since party against
whom enforcement of an award is attempted might hold an asset in a different
jurisdiction than the one in which the decision was made. Domestic law
regarding enforcement of foreign judgments might also allow for a more
extensive review of a judgment than the New York Convention 1958 does in
respect of an arbitral award.
Confidentiality of the arbitration process is yet
another advantage of that form of dispute resolution over litigation. It is,
however, to be borne in mind that unless specifically agreed, there is no duty
placed upon either party to maintain the proceedings confidential.