International Arbitration International arbitration is a leading method for resolving disputes arising from international commercial agreements and

other international legal & business relationships. As with arbitration generally, international arbitration is a creation of contract, i.e., the parties' decision to submit disputes to binding resolution by one or more arbitrators selected by or on behalf of the parties and applying adjudicatory procedures, usually by including a provision for the arbitration of future disputes in their contract. The practice of international arbitration has developed so as to allow parties from different legal and cultural backgrounds to resolve their disputes, generally without the formalities of their respective legal systems. Main Features International arbitration is sometimes described as a hybrid form of dispute resolution, which permits parties broad flexibility in designing arbitral procedures. International arbitration is a contractually based dispute resolution mechanism that offers an alternative to national courts. International arbitration has experienced a remarkable growth in the last three decades, due to its unique advantages over litigation. The advantages of arbitration include privacy and confidentiality of proceedings, procedural flexibility, and high rates of enforceability of arbitral awards. Despite its many advantages, there is growing concern that arbitration is becoming increasingly expensive and time-consuming. This concern, although not unfounded, is often overplayed. Ultimately, it is down to the users of arbitration to draft effective arbitration agreements and to put an effective arbitration procedure in place. To arrive at a successful resolution of disputes through arbitration, the parties involved should pay particular attention to the choice of arbitrators and the arbitration institution, and, most importantly, give due consideration to the drafting of the arbitration agreement.

Different Forms of Arbitration There are two basic types of arbitration: ad hoc and institutional. Parties are free to choose between these two types in their arbitration agreement. If the parties fail to specify in their agreement which type of arbitration they prefer, the arbitration will be presumed to be ad hoc. Ad hoc arbitration is an arbitration that is specifically designed by the parties for a particular dispute. Here there are predetermined rules for the arbitrators to rely on when conducting the proceedings (although sometimes the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules are used). Thus, it is up to the parties to determine the proceedings and to the arbitrators to fill any gaps. Ad hoc arbitration is more flexible than institutional, as the parties are completely free to

adapt the proceedings to the particulars of the case. It can also be less expensive than institutional arbitration, as the parties avoid the fees of the institution and they can negotiate the fees of the arbitrators. However, for an ad hoc arbitration to work, the parties must have provided for a clear set of proceedings in advance, as there are no institutional rules to fall back on if they disagree on the arbitration process after the dispute arises. Institutional arbitration is an arbitration that is conducted under the auspices of a particular arbitration institution and in accordance with the rules of that institution. Institutional arbitration is more popular among international parties. This is because the parties feel more comfortable with experienced institutional administrators (known as case managers) who are willing to take care of any issue that might arise during the proceedings. Parties are also attracted by the reputation and the strong brand name of many established arbitration institutions, which, as many parties believe, increases the enforceability of an arbitration award. The most popular institutions are the International Chambers of Commerce (ICC), the London Court of International Arbitration (LCIA), the American Arbitration Association (AAA), and the Stockholm Chamber of Commerce

Differences between Domestic Arbitration and International Arbitration

Domestic Arbitration Domestic Arbitration takes place in India when the arbitration proceedings, the subject matter of the contract and the merits of the dispute are all governed by Indian Law, or when the cause of action for the dispute arises wholly in India or where the parties are otherwise subject to Indian jurisdiction. In the domestic arbitration, the cause of action for the dispute should have arisen wholly in India or the parties are otherwise subject to Indian jurisdiction. Domestic arbitration is an attractive option for the settlement of disputes. In a domestic arbitration: 1) The arbitration takes place in India 2) The subject matter of contract is in India 3) The merits of the dispute are governed by the Indian Law. 4) The procedure of arbitration is also governed by the Indian Law. International Arbitration

International Arbitration can take place either within India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject matter of the dispute. The law applicable to the conduct of the arbitration and the merits of the dispute may be Indian Law or foreign law, depending on the contract in this regard, and the rules of conflict of laws. The most significant contribution of 1996 Act is the categorical definition of international commercial arbitration. Clause(f) of sub-section (1) of section 2 of the 1996 Act defines international commercial arbitration as arbitration

relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is: a) An individual who is a national of, or habitually resident in or any country other than India b) A corporate body which is incorporated in any country other than India c) A company or an association or a body of individuals whose central management and control is exercised in any country other than India d) The government of foreign country.

Thus it is clear from the above discussion that international arbitration can take place in India in accordance with the same procedure as domestic arbitration. Arbitration becomes international when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. In International arbitration the law applicable may be the Indian Law or a foreign law, depending on the terms of contract in this regard and the rules of conflict of laws.

The Advantages of International Arbitration

For international commercial transactions, parties may face many different choices when it comes to including a mechanism for resolving disputes arising under their contract. Several Advantages of International Arbitration are: A. The success of international arbitration can be explained by several major advantages it offers in comparison with litigation, especially litigation in foreign courts. B. Most of the specificities of international arbitration result from its principal feature: party autonomy. Arbitration is, indeed, a creature of contract and can be fashioned by parties in many ways. Parties are thus free to select the place of arbitration, the language of the arbitration, the procedure governing the arbitration, the number and identity of arbitrators constituting the tribunal, the type of evidence they wish to allow and so on. C. Freedom to Choose a Neutral and Competent Decision maker 1. The Parties will have a freedom to choose their Arbitrator. And also arbitrators are expected to spend more time on a case than judges can usually afford to. This is particularly valuable in complex matters and favors the issuance of high-quality decisions. D. Speed 1. Until fairly recently, speed was considered to be one of the main advantages of international arbitration. In the past few years, however, practitioners have increasingly questioned whether arbitration is today still a speedier procedure than litigation.

2. Arbitrators in principle have more flexible schedules than judges and can make themselves available in the evenings and during weekends and holidays. E. Cost 1. While the cost of arbitration was also traditionally considered an advantage of arbitration over litigation, that judgment is today being revised. International arbitration proceedings have been increasingly influenced by the litigation process, and have grown more and more complex and, accordingly, expensive. While international arbitration is by many still considered to be less expensive than US litigation that is often not true for less costly litigation in civil law countries. 2. The fact that international arbitral awards are not subject to appeal can, however, make a significant difference in costs. Also, the enforcement of an arbitral award in a foreign country will mostly be simpler and thus more inexpensive than enforcement of a foreign court judgment. By contrast, increases in cost can result from a partys recourse to national courts, be it to obtain relief in aid of arbitration or, to the contrary, to hamper the arbitration process. F. Confidentiality 1. The desire to keep a dispute and its resolution confidential frequently plays an important role in a partys decision to agree to arbitration. Indeed, arbitral proceedings are private and, unlike court proceedings, are not part of the public record. G. Ability to Select Place and Language of the Arbitration 1. Arbitration is convenient in that it allows the parties to freely determine many aspects of their procedure. In particular, the parties are free to choose where they wish the arbitration to take place, a decision that should systematically be made in the contracts arbitration agreement itself, at a stage where the parties are much more likely to find an agreement than after a dispute has arisen. 2. The parties can thus define which place of arbitration is most convenient for them. Negotiations typically result in agreements pursuant to which the law of one partys country is to govern the contract while the place of arbitration is to be in the other partys country. H. Flexibility of Process 1. The parties to an international arbitration are free to fashion the arbitral process to suit their needs and preferences. With the possible exception of certain very general requirements of the law of the place of arbitration, no particular set of procedural or evidentiary rules is in principle applicable to an international arbitration proceeding. I. Limited Discovery

1. Contrary to litigation in civil law countries, however, a certain degree of discovery is often permitted by arbitration tribunals. Parties who are favorable to discovery will thus prefer international arbitration to litigation before courts in a civil law country. J. Absence of Appeal 1. International arbitral awards are final and cannot be appealed, at least in the vast majority of countries. There remains a very limited scope for judicial review of arbitral awards in the context of a judicial procedure to set aside or to vacate an award. In countries that have ratified the New York Convention (seeSection IV(A) (4)(b)), such vacatur can occur only in very exceptional circumstances. K. Enforceability 1. One of the key advantages of arbitrating rather than litigating international disputes is the relative ease with which an international arbitral award rendered in one country can be enforced in another country. This advantage is crucial, as the prevailing party in an international dispute frequently has to enforce the judgment or award rendered in its favor in another country in which the unsuccessful party has assets.