International Commercial Arbitration

Author:Anthony Connerty
Profession:Barrister and member of WIPO arbitration panel

1) Introduction: Advantages of Arbitration. Disadvantages of Arbitration. -2) The Agreement to Arbitrate. -3) The Course of an International Arbitration: UNCITRAL Notes on Organising Arbitral Proceedings. International Arbitral Bodies. -4) Arbitration and National Laws. -5) The UNCITRAL Model Arbitration Law: i) Introduction. ii) The Model Law: Chapter I: General Provisions. Chapter II:... (see full summary)


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1) Introduction

This chapter looks at international commercial arbitration. The subject is vast. As with other topics considered in the Manual, the hope is that what is set out here will give an overview of the subject, highlighting certain areas and pointing in the direction where more detailed information can be found.71 With that in mind, the chapter considers the agreement to arbitrate; the course of an international arbitration; arbitration and national laws; the UNCITRAL Model Arbitration Law; and the New York Convention. First, however, it looks at the advantages and disadvantages of arbitration over litigation.

While the International Court of Justice (ICJ) deals with disputes between States, there is no international court to deal with pure international commercial disputes. Therefore if no provision is made in a contract for dispute resolution, any disputes arising out of that contract that cannot be resolved by negotiation between the parties are likely to have to be dealt with by litigation in the national courts.

As mentioned in Chapter 16, resort to litigation in these circumstances will probably mean that one of the parties will have to fight a case in a foreign court, in a foreign language and under a foreign legal system.

The way to avoid that problem is to make provision for some other method of resolving disputes. One obvious dispute resolution process to include in an international commercial contract is arbitration. The parties can agree that, instead of their disputes being dealt with in the national courts, any disputes will be heard by an arbitral tribunal.

Advantages of Arbitration

The advantages of arbitration over litigation are clear.

Control of the parties over the procedure, etc

Because arbitration is a consensual process, the parties have far more control over it than would be the case with litigation in a national court. For example, the parties can decide which language shall be used for the purposes of the arbitration and which law shall govern their contractual relationship - a matter of considerable significance. It is generally accepted worldwide, in both the common law and civil law countries, that - subject to certain constraints - the parties are to be allowed to choose the law that will govern the contract between them.

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Selection of the tribunal

Because of the degree of control that they exercise over the process, the parties can select the tribunal that is to decide the dispute. In an ad hoc arbitration the parties may have complete control and can name the arbitrator or arbitrators. In an institutional arbitration the parties will generally be able to name arbitrators, although in those circumstances the choice may be limited to arbitrators listed in the panel of the particular arbitral institution. The obvious benefit is that the parties have the opportunity to choose arbitrators who are known and respected in the field of international commercial arbitration and/or who are experts in the area of the dispute in question.

Neutral venue

Again, because of the degree of control that the parties exercise over the arbitration process, it is open to them to specify the country in which the arbitration will take place. Parties from State A and State B may agree that the arbitration be held in neutral State C.


Arbitration is a far more flexible process than litigation in the national courts.The parties can choose an arbitral procedure that suits them - for example, arbitration under the rules of one of the international arbitral institutions such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC) or the American Arbitration Association (AAA). Or they can choose ad hoc arbitration, where they agree to adopt the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.


While many judgements handed down by national courts are subject to appeal, arbitral awards are final and subject only to challenge in very limited circumstances.


The New York Convention has provided a very successful means of enforcing arbitral awards. Generally speaking, the international enforcement of arbitral awards is a far more effective process than is available for the enforcement internationally of judgements made in national courts.


Because arbitration is a private dispute resolution process, the parties will know that, subject to certain exceptions, the proceedings will be confidential.

Cost and speed

Arbitration may - indeed in many cases should - prove to be a cheaper and quicker means of resolving disputes than litigation in the national courts.

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Disadvantages of Arbitration

However, arbitration does have its disadvantages. Because it is a consensual process, the powers of the arbitrators are limited to those that are given to them either by the parties or by national legislation. Arbitrators therefore do not have the range of powers that are vested in judges sitting in national courts. One particular example is the general inability of arbitrators to order joinder of parties or consolidation of issues. These are powers that can be exercised by judges and that are aimed at ensuring that different courts do not reach different decisions on the same issues - a problem referred to in the earlier chapters dealing with investor-State disputes.

Similarly, arbitrators do not possess the same coercive powers as judges. To take a simple and obvious example, arbitrators cannot order committal to prison on failure of a party to comply with a direction made by the tribunal.

2) The Agreement to Arbitrate

Given that arbitration may be used as a dispute resolution process only as a consequence of the agreement between the parties, the wording of that agreement is of considerable importance. It can either relate to future disputes (a 'clause compromissoire') or to an existing dispute (a 'compromis'). The agreement in relation to future disputes is likely to be contained within the trading or commercial contract. An agreement in relation to an existing dispute will probably be a one-off contract drawn up following the emergence of the dispute.

Most international arbitral institutions provide model forms of arbitration clauses. For example, the LCIA model clause relating to future disputes provides:

"Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference to this clause.

The number of arbitrators shall be [one / three].

The seat, or legal place, of arbitration shall be [City and/or Country].

The language to be used in the arbitral proceedings shall be [ ].

The governing law of the contract shall be the substantive law of [ ]."

The model clause for a dispute that has already arisen provides:

"A dispute having arisen between the parties concerning [ ], the parties hereby agree that the dispute shall be referred to and finally resolved by arbitration under the LCIA Rules.

The number of arbitrators shall be [one / three].

The seat, or legal place, of arbitration shall be [City and/or Country].

The language to be used in the arbitral proceedings shall be [ ].

The governing law of the contract [is / shall be] the substantive law of [ ]."

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3) The Course of an International Arbitration

A general idea of the course that an international commercial arbitration is likely to follow can be gathered from the outline of the English Arbitration Act given earlier, from the UNCITRAL Model Law referred to later and from the Notes provided by UNCITRAL for the organisation of arbitral proceedings.

UNCITRAL Notes on Organising Arbitral Proceedings

The matters listed in the UNCITRAL Notes for possible consideration indicate the potential complexity of an international commercial arbitration. UNCITRAL states that the purpose of the Notes "... is to assist arbitration practitioners by listing and briefly describing questions on which appropriately timed decisions on organizing arbitral proceedings may be useful. The text, prepared with a particular view to international arbitrations, may be used whether or not the arbitration is administered by an arbitral institution."72

The Notes list the following questions:

1 Set of arbitration rules: if the parties have not agreed on a set of arbitration rules, would they wish to do so

2 Language of proceedings

(a) Possible need for translation of documents, in full or in part

(b) Possible need for interpretation of oral presentations

(c) Cost of translation and interpretation

3 Place of arbitration

(a) Determination of the place of arbitration, if not already agreed on by the parties

(b) Possibility of meetings outside the place of arbitration


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