Broadly Speaking: Advantages of International Commercial Arbitration

{The author, Kanav Gupta is a Third-year B.A.L.L.B(H) student at Vivekananda Institute of Professional Studies, GGSIPU, Delhi. (kanavgupta1999@gmail.com)}

International Commercial Arbitration as the name suggests is an alternate way of resolving disputes between private parties arising out of commercial transactions conducted across national boundaries that allows the parties to avoid litigation in national courts.[1]

With an increase in international trades, businesses and investments have led to the growth of commercial disputes. So international arbitration has emerged as the preferred option for resolving cross-border commercial disputes and preserving business relationships. With an influx of foreign investments, overseas commercial transactions, and open-ended economic policies acting as a catalyst, international commercial disputes involving India are steadily rising.

Section 2(1)(f) of the Arbitration and Conciliation Act defines an International Commercial Arbitration as a legal relationship which must be considered commercial,7 where either of the parties is a foreign national or resident, or is a foreign body corporate or is a company, association or body of individuals whose central management or control is in foreign hands.[2]

This method of resolving deputes has become so popular nowadays that experts on International Commercial Arbitration say that a figure as high as 90% of the international trade agreements are governed by arbitration clause.

With rapid globalization and increase in contracts of FDIs and trade contracts, many disputes arose between foreign parties and Indian Parties. So as Indian Courts were already over-burdened with cases. So a new way was required for getting the disputes resolved expeditiously as it was creating a major hindrance in the International Investments and Commercial Trades.

Benefits of International Commercial Arbitration[3]:-

1. Neutrality:- The traditional perception that it was inevitable that the courts of a contract breacher's home country may be likely to favour that party in any international dispute is a viewpoint that still has its adherents today. International arbitration is seen as a way of securing a high degree of neutrality in the dispute resolution process. Arbitrators can, if the parties so wish, be chosen so that they are of different nationalities from any of the parties, or they can be chosen in a way that gives a balance between the nationalities of the parties. Likewise, the legal seat of the arbitration can be chosen, if the parties require so that it is in a neutral location.
2. Decision-Maker Selection and Expertise:- One area where international arbitration will always have an advantage over any court system is in the extent of party control, and this is reflected most strongly in the ability in many cases for parties to select arbitrators through a mechanism of their choice. While there are of course many experienced and competent judges, and many judges specialise in large-scale commercial disputes, it is often the case that judges sitting in a national court will have to deal with a very wide range of cases, and will frequently need to balance the limited resources of the court system between their caseload. However, in case of Internation Arbitration, those who are appointed as arbitrators by the parties are well suited to their task, and indeed more suited to the task than a judge in a national court would be. It is often possible to find a well qualified and experienced arbitrators who will combine commercial knowledge with their legal skills and adopt a more international and pro-business outlook. As international arbitration has continued to grow, there has been a corresponding growth in the number of potential arbitrators, and while there remains a need to build further capability as well as diversify the range of those available to sit as arbitrators, there is nowadays a wealth of choice.
3. Confidentiality and Privacy:- A further strength of commercial arbitration is that of confidentiality and privacy. In many countries, court proceedings are in public to some extent and they can, particularly in high profile cases, result in a distracting "trial by media", with parties contacting the press, or unwelcome attention being attracted to the case by pressure groups or even competitors.
4. Co-ordinated Dispute Resolution:- While national courts and systems of national law are confined within national boundaries, the danger is that a dispute relating to the modern global business will be subject to the courts of different countries engaged in parallel proceedings, or having difficult and lengthy proceedings concerned with the question of which courts have jurisdiction. None of these difficulties at the margin detract from international arbitration's clear advantage over national and state courts in providing a co-ordinated forum for the resolution of all the disputes between international parties, notwithstanding the geographical distribution of the subject matter giving rise to the disputes.
5. The finality of Decision:- To a much greater extent than litigation in the courts, international arbitration provides finality in the decision-making process. One of the disadvantages of the court process is that judgments can sometimes be subject to one or more appeals, and these can take years to be resolved.
6. Costs and Speed:- It is sometimes said that arbitrations can bring benefits in terms of costs and speed, and certainly the procedure can be tailored to save time and money. To some extent, the parties are able to decide the approach which they would like the arbitral tribunal to take and the consequences in terms of costs and speed. Some arbitral rules provide the option of an expedited process or set a time limit for the award to be granted. Moreover, it is open to the parties to agree between themselves a timetable which suits their wishes as to speed. Furthermore, there is scope for the parties to agree, either at the time of drafting the arbitration clause or subsequently, to limit within reasonable bounds the extent of processes which would otherwise be time-consuming or expensive, such as the extent of document disclosure and/or the extent to which particular facts must be proved.
   

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[1] https://guides.ll.georgetown.edu/InternationalCommercialArbitration

[2] http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf

[3] https://www.mondaq.com/uk/international-trade-investment/416416/advantages-of-international-commercial-arbitration