What Is International Arbitration?

International arbitration is a method of dispute resolution where the parties agree to resolve their disputes before private arbitrators instead of a national court. For most cross-border transactions, international arbitration is generally recognized as the preferred dispute resolution mechanism because it creates a neutral forum, awards are usually easier to enforce than court judgments, and parties can choose who decides their dispute. 

Parties must agree to arbitrate. The most common way they do so is by including an arbitration clause in their commercial agreements. If there is no arbitration clause, parties can also agree to submit a dispute to arbitration after it has arisen. This is called a submission agreement.

In the arbitration clause, the parties frequently agree on critical parts of the arbitral process, including the arbitral institution that will administer the arbitration, the number of arbitrators and how they will be appointed, the legal place of arbitration (also called the “seat”), and the language of the arbitration.  Sometimes, they will also specify the governing law of the arbitration (which does not need to be the same as the substantive law governing the contract).

The scope of the arbitrators’ authority is determined by the arbitration clause and the law of the seat of arbitration. The arbitral process concludes with the arbitrators issuing a final award, which is binding on the parties and can be enforced in most courts around the world. There is usually no right of appeal and the award can only be set aside (or vacated) on limited grounds. 

Key features of international arbitration

Enforceability

One of the main advantages of international arbitration over litigation is that in most countries, international arbitration awards are easier to enforce than foreign court judgments. Over 170 countries have ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (also known as the New York Convention), a multilateral treaty for the recognition and enforcement of international arbitration agreements and awards. Under the New York Convention, non-domestic arbitral awards are enforceable in any of the ratifying states subject to certain narrow exceptions.

Neutrality

International arbitration provides a neutral forum for resolving cross-border disputes. This is particularly important when the parties want to avoid giving the other a local court advantage, or where the domestic judicial system of one party may be unfamiliar, complex, or challenging to navigate. 

Privacy and Confidentiality

Unlike for court filings, the submissions, rulings, and orders issued by an international arbitral tribunal are generally not available to the public and are communicated only to the parties. Hearings are also usually not open to the public. Further, the parties can agree that the existence and content of the arbitration will be kept confidential. 

Choice of Arbitrators

Parties can specify any qualifications for arbitrators in their arbitration clause, such as experience in a certain area of the law, industry, subject area, or otherwise select arbitrators that have the background or expertise they believe are relevant to the case.

Finality

Generally, an arbitration award is final and binding and there is no right of appeal.  Also, awards usually cannot be set aside (or vacated) except in limited circumstances, often centered around due process or the power of the arbitrators, and not the merits of the award.

Autonomy

As a private and mutually agreed-upon form of dispute resolution, international arbitration is less formal than judicial proceedings and allows the parties a degree of flexibility and autonomy to agree on things like how the arbitration will be conducted, the procedural rules, and where the arbitration hearing will be held.