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Advantages and Disadvantages of Arbitration

International Contact Law

Seminararbeit 2013 8 Seiten

Jura - Zivilrecht / Handelsrecht, Gesellschaftsrecht, Kartellrecht, Wirtschaftsrecht


Table of Contents

International Contract Law - Advantages and Disadvantages of Arbitration
1. Advantages of Arbitration
2. Disadvantages of Arbitration
3. References

International Contract Law - Advantages and Disadvantages of Arbitration

In the last three decades, international arbitration has experienced a remarkable growth and become an important and widely used instrument in the resolution of international disputes. This paper deals with the main advantages and disadvantages of arbitration in the context of international contract law and is based primarily on two references: the textbook The Principles and Practice of International Commercial Arbitration, by Margaret L. Moses (2008), and the homepage of The International Chamber of Commerce (2013).

Advantages of Arbitration

1. Process flexibility: The procedure of arbitration is determined by “party auton- omy”, which means that the parties themselves choose how they wish internation- al disputes to be approached and resolved. The first question is what kind of dis- pute settlement to use first - whether to use arbitration in the first place or to try to find an agreement through mediation, for example. Secondly, the parties can choose which kind of arbitrators they would like to select. The question here is whether the arbitration process should be administered by one or more persons with specific knowledge and skills or by an institution from a particular legal field or industry sector. Moreover, the parties can select the place, the language and the applicable law of the arbitration. There is also great process flexibility within the case parameters. For example, the choices between having a detailed and slow process - in other words, on the basis of documents or witnesses - and an eco- nomical and fast process of arbitration are made by the parties themselves. The parties can also fix or limit the arbitrators’ role and powers and even decide to remove at any time an arbitrator with whom they are not satisfied.

2. Choice of arbitrators: The parties’ ability to select the arbitrators is a major advantage of arbitration over court proceedings. In particular, the parties can de-cide on a specific arbitrator based on the expert knowledge or relevant legal and technical expertise that will be used to resolve the disagreement. For example, an architect or an engineer is often hired as an arbitrator to resolve a technically complex construction dispute. In this way, the selection of arbitrators creates confidence in the decision making process of dispute settlements. Moreover, the fact that less discovery is needed for an arbitration procedure than for court judgments provides a distinct advantage by limiting costs and time.

3. Neutrality: With regard to disputes arising from international contracts, neu- trality is of great importance, as each party will try to prevent the application of the national law of the other party - or in other words to ensure no home-country advantage of the contractual counterparty. Consequently, the proceedings should usually take place in a neutral country. Additionally, the dispute should be deter- mined in line with the national law of a country to which neither party has any links, or according to transnational rules. Furthermore, arbitrators should be se- lected from different countries and have diverse backgrounds.

4. Confidentiality: Confidentiality is considered as an important commercial ad- vantage of arbitration, where a duty of confidentiality is binding on all parties. Notably, arbitral hearings and proceedings are entirely private unless agreed oth- erwise. Rather than allowing observation by the general public, only the parties - including their counsellors - and the arbitrators are authorized to attend. Similar- ly, no copies of correspondence, submissions, awards or any other documents - that are produced during the arbitration - are allowed to be distributed to the pub- lic.

5. Final and binding decisions: An ultimate and executable resolution of an international dispute can be achieved by arbitration, just as it can by litigation. The arbitrator or the arbitral tribunal is authorized to make a final and binding award. In contrast to court judgments, there is usually no appeal whatsoever allowed from an arbitrator’s award, which leads to a speedy decision-making process. The result is absolutely final, except in certain limited cases, for example, the arbitrator’s lack of independence and, therefore, an unfair procedure.



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ISBN (Buch)
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Universität Hamburg
advantages disadvantages arbitration international contact



Titel: Advantages and Disadvantages of Arbitration