The benefits of international commercial arbitration are substantial. An empirical study of why parties choose international arbitration to resolve disputes found that the two most significant reasons were (1) the neutrality of the forum (that is, being able to stay out of the other party’s court) and (2) the likelihood of obtaining enforcement, by virtue of the New York Convention, a treaty to which over 140 countries are parties. An arbitration award is generally easier to enforce internationally than a national court judgment because under the New York Convention, courts are required to enforce an award unless there are serious procedural irregularities, or problems that go to the integrity of the process. The New York Convention is considered to have a pro-enforcement bias, and most courts will interpret the permissible grounds for non-enforcement quite narrowly, leading to the enforcement of the vast majority of awards.
Other advantages include the ability to keep the procedure and the resulting award confidential. Confidentiality is provided in some institutional rules, and can be expanded (to cover witnesses and experts, for example) by the parties’ agreement to require those individuals to be bound by a confidentiality agreement. Many companies want confidential procedures because they do not want information disclosed about their company and its business operations, or the kinds of disputes it is engaged in, nor do they want a potentially negative outcome of a dispute to become public.
Parties also like being able to choose arbitrators with particular subject matter expertise. In addition, they like the fact that there is less discovery in arbitration, thereby generally resulting in a shorter process than in a full-scale litigation, or at least shorter than is found in U.S.-style litigation. The lack of opportunity for multiple appeals of the decision on the merits is also an attractive aspect. For business people, there is great value in finishing a dispute so they can get on with their business.
While one advantage that has been touted in the past is that arbitration is less expensive than litigation, many companies today do not think that advantage actually exists. As international arbitrations have grown in number and in the amount of money at stake, parties have increasingly incorporated many litigation tactics into arbitration. These tactics tend to raise the costs, create delays, and increase the adversarial nature of the process. Nonetheless, even if the arbitration process has begun to resemble litigation in a number of ways, parties tend to find that arbitration is still worth the cost, because of the other advantages it provides.
Source: The Principles and Practices of International Commercial Arbitration
Author(s): Margaret L. Moses