Write an essay on the role and importance of international commercial arbitration as an alternative dispute settlement mechanism in the present day world.

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OLUWAYEMISI   DIYA

INTERNATIONAL BUSINESS TRANSACTIONS

SEMINAR LEADER: DR A.F.M MANIRUZZAMAN

DATE: 12th MARCH 2004

QUESTION NUMBER 21

Question: write an essay on the role and importance of international commercial arbitration as an alternative dispute settlement mechanism in the present day world.

Arbitration can be defined as where parties state their views, offer evidence at an arbitration hearing, and agree to let an impartial, professionally-trained arbitrator make a decision that will end the dispute. In most cases, once the arbitrator hears the evidence, he or she hands down a binding decision. There is, however, also non-binding arbitration where the disputing parties put their case before an impartial third party who renders an opinion or recommendation, which the parties may choose to accept or not.

Alternative Dispute Resolution ("ADR") refers to any means of settling disputes outside of the courtroom. ADR usually includes arbitration, mediation, early neutral evaluation, and conciliation. As rapidly increasing court queues, rising costs of litigation, and time delays continue to affect litigants, more states have begun experimenting with ADR programs. Some of these programs are voluntary; others are mandatory.

The two most common forms of ADR are ‘arbitration’ and ‘mediation’. Arbitration is a simplified version of a trial involving no discovery and simplified rules of evidence. Either both sides agree on one arbitrator, or each side selects one arbitrator and the two arbitrators elect the third to comprise a panel. Arbitration hearings usually last only a few hours and the opinions are not public record. Arbitration has long been used in labour, construction, and securities regulation, but is now gaining popularity in other business disputes.

Resolution by arbitration is particularly suitable for international commercial disputes.

International commercial arbitration has expanded rapidly in recent years. Given the dramatic increase in international trade and disputes arising there from, international arbitration institutions have flourished, many jurisdictions have passed new or updated international arbitration statutes, and arbitration jurisprudence has increased diversely. U.S. courts have abandoned their traditional distrust of international arbitration, holding that the international nature of contracts constitutes a reason to recognize and enforce arbitration clauses that might not be held valid in a purely domestic context. 

Unlike mediation, which attempts to help parties voluntarily resolve their disputes, international commercial arbitration is a binding dispute resolution mechanism. It must be agreed to by the parties; either at the time of drafting of a contract or sometime thereafter, usually after a dispute has arisen. With the exception of International Centre for the Settlement of Investment Disputes ("ICSID") arbitration, which always involves a sovereign entity or constituent subdivision or agency thereof, international commercial arbitration takes place between private parties (including, perhaps, state-owned companies acting in a non-sovereign capacity). 

In its basic structure, international commercial arbitration resembles the usual litigation process: parties make claims and defences, submit written pleadings, and call witnesses or submit their statements. Upon the completion of arbitration, the arbitral tribunal issues its award. With the notable exception of ICSID arbitration awards, which may be annulled by a special ICSID ad hoc committee, most arbitral awards are considered final and binding on the parties. Whether and to what extent the award is "reasoned" (i.e., contains a doctrinal justification of the result) and whether dissenting opinions are rendered vary according to the arbitral rules used and the advantages or disadvantages of having a "reasoned" award in the jurisdiction(s) where the award may be enforced. The awards need not be made public, and, technically at least, are not binding precedent for future arbitral tribunals. 

International arbitration is important because it differs from international litigation in that arbitrating parties determine to a large extent what procedural rules will govern the resolution of their dispute, and who will decide the dispute. In the context of international trade in commodities, disputes are often resolved within the context of trade organizations and their standards. In "ad hoc" arbitration, the parties negotiate procedural rules directly, either before or after a dispute has arisen, then conduct the arbitration pursuant to those rules. Alternatively, the parties may adopt the arbitration rules developed by the United Nations Commission on International Trade Law ("UNCITRAL").  

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Also, international commercial arbitration is important because, unlike mediation, once the parties have agreed to set up the arbitration for the resolution of a dispute, their right to withdraw will be construed as a breach of the arbitration agreement.

.  International arbitration is a mechanism for dispute settlement that provides an alternative to litigation for international commercial disputes. It plays the vital roles of:

a)        Enforceability of Arbitral Awards — Arbitration awards can be challenged under very limited circumstances.

b)        Impartiality of Decision Maker — Neither party may be able to find neutral tribunal in other country.

c)        Confidentiality ...

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