The advantages and disadvantages of international arbitration compared with litigation in international dispute resolution?
As the world’s borders no longer pose a barrier to trade in the same manner as they once did, international trade has developed and is further fuelled by supranational organisations such as the World Trade Organisation.[1] When disputes arise between trading parties, be that body corporates or sovereign state, there are a plethora of methods that can be employed to resolve the matters; the main two methods used in international disputes are arbitration and litigation. This essay concludes that arbitration can be significantly more conducive to the international trade environment, but there are certain pitfalls that can allow litigation to prevail over arbitration.
One of the prime advantages of arbitration is the neutral forum within which the dispute can be conducted. This works to alleviate concerns that one or both of the parties may have that the forum could be biased towards a certain party because that party is a national of that state.[2] This neutrality increases that integrity of arbitration in comparison to litigation.
A further advantage of arbitration is that the parties are able to control, between themselves, who can sit on the arbitration panel. Prima facie, this gives the impression that the process if open for biased abuse; however, as both parties must agree on the choice this is not likely to be the case. The ability to choose is particularly important for international business disputes because these will often involve incredibly complex issues that require specialist knowledge; the lack of such control in traditional litigation means that the judiciary in question may have relatively little, or even none, experience in the field in question.[3] Equally, ass arbitration is not as cemented in the law of precedent that modern law judiciaries operate under, it allows the arbitrators to be flexible in the light of commercial reality and needs.
Arbitration has been adopted by the WTO. Its rules of selection for those members that sit on an arbitration panel are that in that they must be impartial, independent, and avoid conflicts of interest which are both direct and indirect. Furthermore, there is a requirement that should such a conflict of interest or relationship arise that could give rise to doubt regarding the impartiality and independence of the person concerned they must make this known.[4]
We then turn to the question of enforceability. If one turns to the New York Convention on Arbitration, Article II allows a domestic court to review a decision to arbitrate, whilst Article V permits a court to decline the enforcement of an arbitration decision on the grounds of public policy. Whilst it is argued that these rights have been relinquished, there is still a strong feeling that such matters are dependent on the states.[5] The lack of appeal procedure within an arbitration forum is a major disadvantage.
In summary, whilst arbitration can be important for international business for reasons of integrity and flexibility, the lack of appeal mechanisms and the ability for states to review such decisions could discourage its uptake if judicial practice makes it common to interfere.
[1] Peter Van den Bossche, The Law and Policy of the World Trade Organization: Text, Cases and Materials, (CUP, 2008).
[2] Anita Alibekova and Robert Carrow, International Arbitration and Mediation: From the Professional's Perspective, (Lulu, 2007), 110.
[3] Stanley Mosk, ‘The Lawyer and Commercial Arbitration: The Modern Law’, (1953) 39 ABA Journal, 193, 195.
[4] Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes, Para II(1) and Para III(1).
[5] Christopher Whytock, ‘Litigation, Arbitration, and the Transnational Shadow of the Law’, (2007) 18 Duke J. Comp. & Int'l L. 449, 465.
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