When problems arise under international commercial contracts, international commercial arbitration can be used to resolve them. Alternative to litigation, it is governed by the contracting parties’ prior agreements rather than by national legislation or procedural regulations. When it comes to contract conflicts, most clauses stipulate arbitration rather than litigation as a means to resolve them. For instance, when negotiating a contract, the parties can agree on a venue, procedural procedures, and controlling legislation.
Both institutional arbitration and ad hoc arbitration are possible. The type of arbitration will be determined by the contract. Institutional arbitration occurs when the parties have agreed to have a third party arbitrate the dispute. Ad hoc arbitration is one in which the parties have defined their own rules for arbitrating the dispute. Ad hoc arbitrations are handled independently by the parties, who are responsible for deciding on the arbitration forum and arbitrators as well as the procedure to be followed, as well as any other aspects of conducting the arbitral proceeding.
Some of these laws are international treaties and national laws (procedural laws and substantive laws), together with arbitral institution procedural guidelines. Arbitral awards rendered in the past have persuasive authority, but they are not legally binding. Doctrine can also be used to refer to scholarly commentary.
If you’re involved in commercial arbitration, it can take place on a national or international level. In order for arbitration to be international, the parties to the arbitration agreement must have their places of business in different countries, or a considerable part of the contractual obligations must be performed in a country other than the parties’ place of business. There are certain key characteristics that set international commercial arbitration apart from traditional litigation. International business arbitration is characterized by four characteristics:
1) It is an alternative to national courts
2) it is a private mechanism for dispute resolution
3) it is controlled by the parties
4) it constitutes a final and binding determination of parties’ rights and obligations
The system of national courts is the most common mechanism for resolving conflicts. States are responsible for ensuring that these courts function correctly and for establishing substantive and procedural guidelines for their proceedings. There are a number of drawbacks to litigating in these national courts, including large expenses and delays. With the volatility of litigation and globalization, arbitration has become a preferred method for resolving disputes since it is viewed as more flexible and quicker. It’s a quasi-judicial agency that draws its authority from an arbitration agreement, not the national court system. National courts have no jurisdiction over a dispute when an arbitration agreement is in place, giving sole authority to the arbitral tribunal.