INTRODUCTION
Greater speed, lower expense, expert decision, and confidentiality are the mostcommon reasons given for arbitration. Since commercial disputes are driven byeconomic interest, the most logical settlement is by arbitration. This is to widenthe possibility of reconciliation and to keep the business relationship alive for both parties. Arbitration is an amicable way forward through authoritative decision andconsidered a contractual mechanism to resolve a momentary problem occurringduring business dealing with the assistance of a third party. Because of theexpansion of the global trade and investment, international dispute rises and every business enterprises can find themselves entangled in legal proceedings withforeign companies. Arbitration clauses have become virtually widespread ininternational contracts to lessen the doubts associated in international commercialdisputes. International business operators favour international arbitration over litigation because of its excellent neutrality, flexibility, and confidentiality. Thesignificant advantage of institutional arbitration is a certain measure of convenience, security, and administrative effectiveness. Moreover, many believethat institutional arbitration is more readily honoured by national courts than thoseoperating outside the formal institution.
SUBJECT MATTER OF THE DISSERTATION
As mentioned above, arbitration is an amicable way forward and a contractualmechanism to resolve a transitory dispute in a business deal. However, not all arbitral proceedings are effective in reconciling international dispute. Since there are twomajor types of international commercial arbitration,
ad hoc
and arbitral institution, wemust take in account the advantages and disadvantages of each process. Whether or not arbitral institutions are effective in settling international commercial disputes isthe issue that will be addressed in the subsequent chapters. As such, the document isdivided into three chapters.
•
The first chapter will give us a background on arbitration and the rationalewhy it has become the favoured dispute settlement approach of theinternational business community. It will also discuss the swiftness andefficiency of the arbitration process and its dissimilarities from local court proceedings.
•
The second chapter will give us the functions of arbitral institutions, therules of arbitral institution, and the public policy requirements of the law.It will present a comparison between ad hoc and arbitral institution.
•
Third chapter will give us the growth of international commercialarbitration, and put forward the advantage and effectiveness of institutionalarbitration.It was felt appropriate to restrict the research to ad hoc and arbitral institutionsince our concentration is within international commercial arbitration.1
CHAPTER I- INTERNATIONAL COMMERCIAL ARBITRATION
1.1
BACKGROUND: INTERNATIONAL COMMERCIAL ARBITRATION
The term
“
International” is used to define the difference between arbitrationswhich are national or domestic and those which are transcend boundaries becausethey involve more than one country.
Whether the arbitration is international or not,there are two reasons to the international nature of dispute or to the nationality or residence of the parties.
International trade which either through their nature or through the fact that they involve their residents, nationals and corporations of different countries are also included.
International arbitration will have no connectionwith state; accept that it is taking place on that country’s territory.
ICC states that theinternational nature of arbitration does not mean that the parties must necessarily beof different nationalities.
The wide interpretation of term “international” is also foundin French
New Civil Procedure Code
on international arbitration
, in its article 1492 provides
that “an arbitration is international when it involves the interests of international trade”.
In civil law countries “commercial” is distinguished between contracts which arecommercial and those that are not commercial. Commercial contract in wide term arecontract made by merchants or traders for the purpose of their business whether their business is to buy or sell.
There is no universal definition exists for “commercial”,the term has significance for international arbitration because under the laws of somecountries only “commercial” disputes can be submitted to arbitration, a fact which isrecognised by the international conventions such as the Geneva Protocol of 1923 and New York Convention 1958 to not arbitrate such disputes of such states which are notregarded as commercial under their laws.
Commercial term has now become thelanguage. It serves to distinguish international arbitrations concerning business or trade disputes from international arbitrations between different countries over boundary disputes and other political issues. In England commercial court that dealsonly disputes which arises from trading and other commercial relationships.
1
A. Redfern and M. Hunter,
Law and Practice of International Commercial Arbitration
, 3
rd
edn,Published by Sweet & Maxwell, 1999, P. 12
2
C. Buhring-Uhle, L. Kirchhoff and G. Scherer,
Arbitration and Mediation in International Business,
Published by Kluwer Law International. 2006, p.34
3
Ibid.
4
A. Redfern and M. Hunter,
Law and Practice of International Commercial Arbitration
, 3
rd
edn,Published by Sweet & Maxwell, 1999, P. 12
5
The International Solution to International Business Disputes
- ICC Arbitration, ICCPublications, no. 301, 1977, p.19
6
Chap. 12 of Swiss Private International Law Act
7
A. Redfern and M. Hunter,
Law and Practice of International Commercial Arbitration
, 3
rd
edn,Published by Sweet & Maxwell, 1999, P. 14
8
C. Buhring-Uhle, L. Kirchhoff and G. Scherer,
Arbitration and Mediation in International Business,
Published by Kluwer Law International. 2006, p.34-35
9
A. Redfern and M. Hunter,
Law and Practice of International Commercial Arbitration
, 3
rd
edn,Published by Sweet & Maxwell, 1999, P. 14
2
Arbitration is the substitute authority to national courts, which are specificallyestablished by the state to use and uphold the law and determine all forms of dispute.It is a disagreement resolution system of choice for organizations to internationalcontracts.
Arbitration is straightforward means of dispute resolution: the courts areno longer the place for international business. International commercial arbitration isrecognized, uniform enforceable and it’s fair.
In arbitration procedural rules arefewer and simpler than adjudication in court.
It is a device whereby the resolution of an issue, which of significance for two or more persons, is entrusted to one or moreother persons. The arbitrator or arbitrators who derived their authority from a privateagreement, not from the authorities of a State, and who are to carry on and decides thecase on the basis of such agreement.
Arbitration is also the authority specified by the parties in preference to national courts. However, the degree to which parties can refer their argument to arbitration is unavoidably a matter to be regulated by the law. For arbitration to be present and happen as expected there must be a regulatory structure,which controls the legal significance and effectiveness of arbitration in a national andinternational legal setting.
“Arbitration proceedings are generally private”.
When one party contests the authority to adjudicate at the commencementof the process or at the end of the process, confidentiality of the arbitration may beinvaded because the litigation procedures will generally be exposed.
Arbitration iscontractual type of dispute resolution implemented by individuals, chosen directly or indirectly by the parties. The contractual agreement must be generally recognized inthe sense that the parties’ authority can be given in a numerous ways andsubsequently.
Arbitration as a concept is known in the mainstream of legal systems;however, it does not at all times takes similar form in different countries.
The prevalent observation that arbitration is the consequence of contract between parties and not a public institution and it could not be linked to a specificstate is inaccurate, as the legislative provisions on arbitration are instituted amid thestatutory procedural provisions. This makes arbitration blend to the legal system towhich the said procedural provisions affect and assign it an explicit nationality. Thisadditionally established by the expression ‘foreign arbitral decision’ or a ‘foreign
10
R. Naimark and C. Drahozal Christopher.
Towards A Science of International Arbitration
. Published by Kluwer Law International. 2005, p.3
11
C. Buhring-Uhle, L. Kirchhoff and G. Scherer,
Arbitration and Mediation in International Business,
Published by Kluwer Law International. 2006, p. 29
12
Trippe S. Fried,
Maintaining the Home Court Advantage: Forum Shopping and the Small BusinessClient
, 6 Transactions: Tenn. J. Bus. L. 419, 2005, p. 430
13
P. Fouchard, E. Gaillard, J. Savage, B. Goldman,
Fouchard, Gaillard, Goldman on International Commercial Arbitration
, Published by Kluwer Law International, 1999, p. 9
14
J. Lew, L. Mistelis, and S. Kroll,
Comparative International Commercial Arbitration
, Published byKluwer Law International, 2003, p.17
15
S. Bennett,
Arbitration: Essential Concepts
. Published by ALM Publishing. 2002, p. 6
16
Mistellis Loukas and Lew Julian.
Pervasive Problems in International Arbitration
. Queen Mary andWestfield College. University of London. Centre for Commercial Law Studies. Published by Kluwer Law International. 2006, p.11
17
R. Naimark and C. Drahozal Christopher.
Towards A Science of International Arbitration
. Published by Kluwer Law International. 2005, p.6
18
J. Poudret, S. Besson, S. Berti, A. Ponti Annette,
Comparative Law of International Arbitration
,Published by Sweet & Maxwell, 2007, p. 3
19
M.R. Sammartano,
International Arbitration Law and Practice: Law and Practice
, Published byKluwer Law International, 2001, p.1
3
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