Although used as a method of dispute resolution as far back as Plato's time, arbitration has grown into a 21st-century institution. Especially on the international scene, where claimants range from individuals to nation states to global commercial entities, arbitration offers a flexible, expedient, and cost-effective alternative to formal courtroom litigation. This is reflected in several of the largest arbitration institutes reporting their highest-ever numbers of cases filed in 2015, averaging between 10 to 22 percent increases over 2014 case numbers.
Arbitration can be generally described as the private determination of a dispute by an independent third party through a judicial or quasi-judicial process agreed upon, at the outset, by the parties. The neutrality of the third-party decision maker ideally positions arbitration for resolving international disputes. As a result, parties with nation-spanning disputes increasingly opt for arbitration in order to benefit from the advantages it offers over regular litigation.
Unlike court rulings from a particular country and jurisdiction, judgments resulting from international arbitration are enforceable in a wider range of countries. For example, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958—commonly called the "New York Convention"—ensures that international arbitration judgments are fully enforceable within its 156 signatory countries, including the United States, Canada, the United Kingdom, Germany, India, Australia, China, Japan, and Singapore.
Another advantage of arbitration is expediency. In addition to easier scheduling and streamlined processes, international arbitration can effectively fast track resolution of disputes in jurisdictions suffering from a large backlog of court cases. Even in courts without significant case backlogs, formalized courtroom procedures covering discovery, hearings, motions, trials, and every other step of the litigative process can drag out into months or even years.
A large part of arbitration's enduring appeal lies in its flexibility. Unlike formal litigation, where attempting to "shop" for a favorable judge is frowned upon, parties to arbitration by and large have the ability to choose the arbitrator or tribunal of arbitrators who will decide the case. This allows highly technical or specialized cases to benefit from a decision maker who is well versed not only in dispute resolution but also the controversy's underlying subject matter. In addition, free as it is from the bounds of the courtroom and its procedures, the arbitration can be scheduled in times and places conducive to parties and witnesses, and the process itself can be streamlined, simplified, or truncated as the parties' needs may warrant. International arbitration in particular allows parties to sidestep potential jurisdictional issues and comes with ethical standards independent of both country-specific and domestic arbitration guidelines. Especially when claims span borders, the benefit of a unified set of rules and a judgment that binds across jurisdictions cannot be overstated.
Last year, the five most frequently chosen venues were London, Paris, Hong Kong, Singapore, and Geneva. These five cities' popularity as locales for arbitrating disputes directly track with the presence of highly regarded international arbitral institutions: the London Court of International Arbitration ("LCIA"), the International Chamber of Commerce's International Court of Arbitration ("ICC," headquartered in Paris), the Hong Kong International Arbitration Centre (“HKIAC”), the Singapore International Arbitration Centre (“SIAC”), and the Arbitration Institute of the Stockholm Chamber of Commerce ("SCC"). By far the most important factor considered by parties is the locality's reputed neutrality and impartiality, track record, and perceived level of "internationalism." Other venues catering to specific subject matters include the International Center for Settlement of Investment Disputes ("ICSID"), headquartered in Washington, D.C., and, for the adjudication of intellectual property disputes, the World Intellectual Property Organization (“WIPO”) in Geneva.
One of the most prominent international arbitration cases of the last decade is Abaclat v. Argentina, in which an ICSID tribunal found that a state's refusal to honor its sovereign debt can breach the terms of bilateral investment treaties and allow aggrieved investors to pursue their claims. More notably, the Abaclat v. Argentina case marks the first time that an ICSID tribunal found jurisdiction over "mass claims" brought by more than 60,000 Italian bond holders, potentially opening the door for other class-action-type claims to be heard before other international arbitrators.
While international arbitration options are often less costly and time-consuming than formal courtroom litigation, not all claimants are equally resourced. Litigation finance can offer claimants the capital to fund an international arbitration case where their own war chest would fall short, or even bolster operating funds to keep a business running during the months a dispute remains pending before an arbitrator or tribunal. LexShares' innovative platform makes it easy for claimants to connect with funders and obtain the resources they need, with returns that are only payable if their claims prevail.
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White & Case, 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration, http://www.arbitration.qmul.ac.uk/docs/164761.pdf.
London Court of International Arbitration, Registrar's Report 2015, http://www.lcia.org//media/download.aspx?MediaId=500.
Singapore International Arbitration Centre, SIAC Announces Record Case Numbers for 2015, http://siac.org.sg/images/stories/press_release/SIAC%20Announces%20Record%20Case%20Numbers%20for%202015_25%20February%202016.pdf.
Sheppard Mullin Richter & Hampton LLP (Robert S. Friedman & Rena Andoh), International Arbitration Update: Choosing A Forum In Disputes Arising Out Of India, http://www.metrocorpcounsel.com/articles/25824/international-arbitration-update-choosing-forum-disputes-arising-out-india.