By Thomson, Claude R.; Finn, Annie M. K.
Dispute Resolution Journal , Vol. 60, No. 2
Businesses are demanding fair rules and procedures to resolve international commercial disputes in a prompt and cost-effective manner. The author explains why international commercial arbitration fits that bill. His article looks at the advantages of international arbitration and highlights issues that should be addressed during the preliminary conference to maximize efficiency. He also touches on arbitration in Canada and the rules applicable to domestic and international awards.
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Freer and more accessible trading opportunities have generated a myriad of multinational commercial agreements that demand effective, fair and prompt mechanisms for the settlement of disputed rights and obligations. The speed and sophistication of these transactions does not tolerate resolution through traditional legal means developed by and for the convenience of the legal and accounting professions. It is often essential that relationships be preserved while acrimonious disputes are resolved. Litigation, while it has certain advantages, is not known for this. Businesses are demanding procedures for the resolution of disputes that are fair, prompt and crafted to serve the interests of the parties. This article discusses the advantages of international arbitration over litigation and identifies issues the arbitrator and the parties can address in the preliminary conference in order to ensure a fair and efficient proceeding.
Litigation v. Arbitration
An analysis of dispute resolution procedures must begin with litigation, the dispute resolution system provided by the government and paid for through taxation. Its strengths are too obvious to be ignored. Judges are independent and made available without charge to the parties, since they are government employees. The process is public and there is a right to appeal. There are, however, a number of factors that militate against the choice of litigation for international commercial disputes.
Principles of international law provide guidelines for the circumstances in which judgments in national courts will be recognized and enforced in other countries. A party who wins a lawsuit conducted in its home country may have to seek enforcement of the judgment in a foreign country where the defendant has assets. The outcome of litigation is always uncertain but when the litigation is conducted in the adversary's home country, it is even more up in the air because of the possibility that the adversary could enjoy a "home court advantage." Litigating in a foreign country could be quite expensive. Litigation in the United States, for example, suffers from skyrocketing costs due to the long, drawn-out discovery process allowed under U.S. law. In addition, in many judicial systems, there may be delays due to a backlog of cases or a lack of available judges.
Another disadvantage of litigation is its inflexibility. Litigation is governed by legislative rules of procedure and court rules, so the parties have little ability to control the process. They cannot determine the judge who will hear the case. Furthermore, there are legitimate concerns about the integrity of some foreign judicial systems. In addition, the legal principles that apply in a foreign jurisdiction could be unclear.
The primary function of litigation in even the most developed countries is to resolve national and domestic disputes. The rules and procedures are not primarily directed at the resolution of complex international commercial issues.
Compared to litigation, international arbitration has numerous strengths and few, if any weaknesses. Arguably, the most important strength is that international arbitration awards are enforceable in almost all countries around the world. This is due to the fact that the governments of most countries, including the vast majority of the developing world, have become signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). …