In recent years, many companies have adopted the practice of including arbitration clauses upon entering into agreements. They stipulate that in the event of a dispute between the parties, it shall not be resolved by State courts but referred to a third party, that is to say, an expert of their choice. In general, the arbitration panels are usually comprised by more than one person, typically attorneys. However, parties can also convene other subject matter specialists such as economists or engineers to ponder technical criteria. 

Although the parties can freely chose the rules to which the arbitration will be subject, usual practice consists of referring to one of the regulating systems available such as the United Nations Commission on International Trade Law (UNCITRAL) or the International Chamber of Commerce (ICC). 

Arbitration is useful not only for agreements between companies located in the same country but for agreements between foreign companies. In fact, on the website of the American Society of International Law (ASIL), Gloria Miccioli explains that arbitration has become a particularly important international tool, “As the number of international commercial disputes mushrooms, so too does the use of arbitration to resolve them”.

There are several reasons why companies tend to choose international arbitration over the jurisdiction of State courts. Here are six important reasons: 

1. Greater technical knowledge of those resolving the dispute: a document from the United Nations Conference on Trade and Development (UNCTAD) affirms that “ Arbitration permits the parties to choose persons with specialized knowledge to judge their dispute. Judges in State courts are less likely to acquire the same degree of expertise in the technical aspects of the transactions that come before them as are the lawyers who represent the parties and who may later serve as arbitrators in similar transactions. In a construction arbitration there may be engineers or architects as well as lawyers serving as arbitrator.”
2. Greater flexibility throughout the procedure: the International Chamber of Commerce explains that “the arbitration procedure is driven by ‘party autonomy’, that is choices made by the parties themselves about how they want the dispute to be dealt with.” The UNCTAD document affirms that this is useful because, for example, “an arbitration in respect to the quality of the grain delivered in a sales contract does not call for the same procedure as would an arbitration in regard to the construction of a factory.” According to UNCTAD, this is even more important in the case of international arbitration, “where the parties and their advocates may have strikingly different expectations as to the procedure to be followed”.
3. Faster and cheaper: although recently doubts have been raised as to whether arbitration is in fact less expensive and faster, according to UNCTAD the truth is that “the parties can have a relatively speedy arbitration at lower costs if that is what they want.” As a result of the flexibility of the procedure, according to ICC, “the parties can choose to have a slow and thorough or a fast and economical arbitration. For obvious reasons, speed, efficiency and costs are usually considered important. Where appropriate procedures are put in place, arbitration can be faster and less expensive than litigation, especially considering that there is generally no appeal from international arbitral awards”.
4. Final decisions: local judicial proceedings usually extend way over time because the parties have the possibility of appealing each decision made throughout the proceeding. In this regard, UNCTAD explains that : “arbitration is not subject to appeal on the merits. What the parties lose in legal security, because errors made by the tribunal in the application of the law cannot be corrected, they gain in the reduced amount of time required to reach a final decision and reduced costs.”
5. Neutral procedure: when an international dispute reaches the courts of the home country of one of the parties in the dispute, the risk is that the other party will feel that the proceeding is not fully equal. The ICC website affirms that “at the very least, the procedure, and possibly also the language of the proceedings, will be less familiar to one side than to the other, thus creating a real or perceived advantage for one side. “ In contrast, in international arbitration “The parties can choose any place of arbitration, any applicable law, and any language for their arbitration. All of these elements can be neutral with respect to the parties. ”
6. Ease of enforcement: unlike State courts, arbitrators do not have the means to enforce their decisions. There is no international police to make the parties abide by the decision and therefore they need a State judge to order compliance.

Hence, in the case of domestic arbitration, the decisions are more difficult to execute than those of local judges. However, in international arbitration, when it is necessary to enforce the decisions awarded abroad, it is easier to apply the decisions of arbitrators than those of foreign judges, UNCTAD explains that “Unless there is a treaty between the State in which the judgment was issued and the State in which enforcement is sought, the requested court is under no international obligation to enforce the judgment.” By way of contrast, if the contract between the parties includes an arbitration clause the local courts can execute the arbitrators’ decision.