INTERNATIONAL ARBITRATION

Alternative Dispute Resolution (ADR) mechanisms, and especially arbitration, have become the main method of resolving international disputes as a consequence of increased globalisation. Arbitration is mostly preferred because of its neutrality and the sense of fairness it embodies—qualities that litigation in foreign courts may lack. When two or more parties decide to arbitrate, a neutral third-party institution administers the proceedings, and a neutral seat may be selected. There are many institutions around the globe that have their own rules for how the procedure may be carried out, such as the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Permanent Court of Arbitration (PCA), and so on.

What is arbitration?

Arbitration is, as mentioned, a method of ADR. If parties choose to arbitrate—whether through a clause in their contract or a separate agreement to arbitrate—and they choose to do so via an international dispute resolution authority, then they may refer the dispute to the said authority to initiate the proceedings.

With the principle of party autonomy in mind, it is widely accepted that a valid arbitration requires a valid agreement to arbitrate. This agreement to arbitrate demonstrates the parties’ willingness to resolve their dispute through their chosen institution and rules. Since arbitration is a fully consensual dispute resolution mechanism, the parties get to decide on the procedure that will apply to the process. It must be kept in mind that if the chosen rules are silent on a matter, the lex arbitri (the law of the seat) may serve as a gap-filling mechanism.

How does the process work?

It is not possible to determine an absolute process, as rules vary between institutions. However, the process is usually similar across different forums. According to their agreement, parties choose an arbitral tribunal or give the institution they have chosen the power to appoint one. The arbitral tribunal may consist of a sole arbitrator, a three-member tribunal, or more, as long as it is an odd number to ensure non-deadlocked decision-making. When there is more than one arbitrator, the common practice is for each party to choose one arbitrator while the institution appoints the presiding arbitrator.

After the application to arbitrate, a memorandum for claimant and respondent are submitted, and the arbitral tribunal is formed. The point at which proceedings commence varies depending on the rules governing the arbitration, but it could be when the request for arbitration is received, when the response is processed, or when the tribunal is constituted.

Closing of the proceedings happen with the final award the arbitral tribunal renders. With the final award, the dispute reaches a resolution. The final award is binding and generally not subject to appeal, with limited exceptions (e.g., public policy, lack of jurisdiction).

What is maritime arbitration?

Maritime arbitration is a specialised area within arbitration that deals with maritime disputes. As disputing parties are often from different jurisdictions, maritime arbitration is commonly used as a form of international ADR. The London Maritime Arbitrators Association (LMAA) is one of the leading institutions in this area, although it is not the only one in the city. LMAA arbitrators accept appointments subject to the LMAA Terms and conduct proceedings in their area of expertise—namely, maritime disputes.

Why choose arbitration?

Arbitration is favored because it provides a neutral forum that national courts may not offer. It includes expert decision-makers that are oftentimes selected by the parties themselves which can lead to more effective outcomes. The process is private and protects the reputation of the parties. The awards are widely enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention. Arbitral processes offer greater procedural flexibility and typically result in a final, binding award, which is often preferred by commercial parties.