Five Considerations In Choosing To Arbitrate Rather Than Litigate Your International Commercial Dispute

1. Neutral Ground: Some opposing jurisdictions are better understood than others: the laws of Canada and the United States, for example, vs. the United States and China. Nevertheless, even a court system similar to your own isn’t your own and and an arbitral tribunal may provide a neutral forum more comfortable for both parties, the situs of which can also be determined by the parties which can be different from the home jurisdiction of either or any of the parties.

2.      Judges of your own choosing: Apart from the usual attributes of demonstrated achievement, experience, intelligence and integrity which should be apparent from an arbitrator’s resume, specialized knowledge and experience may also be a desirable and even critical element for a third party decision-maker to reach a fair and just resolution of the dispute. National courts can seldom offer any prospect of specialized competence and in some jurisdictions, the “basics” may also be questionable.

3.      Confidentiality: For some parties, this is the most important reason for choosing to arbitrate. Courts and the cases they hear are matters of public record and subject to public access and publicity. It is often in the best interests of both sides in a dispute not to run the risk of perceived dirty linen being aired on either side. Arbitral proceedings are confidential at the behest of those invoking them and cannot be waived unilaterally by either side once the agreement to arbitrate has been concluded.

4.      Cost, Speed and Efficiency: It is a not uncommon misperception that it is less expensive to arbitrate than litigate. Arbitration entails the parties paying for their judges, facilities for adjudication and all requirements incidental thereto, which is not the case with respect to national courts maintained by public money. This is particularly the case in international arbitrations where the desire for neutral ground usually entails significant travel and accommodation expenses for both sides. It is generally true, however, that a well-managed arbitration in which both parties also cooperate to that end, is generally faster and more efficient than a court battle where one or both sides are tempted to avail themselves of myriad opportunities for procedural delay.

5.      Enforceability: This is another critical advantage favouring international arbitration, where, depending on the circumstances, particular rules and judicial attitudes in relation to enforcing judgments from foreign jurisdictions. However, the United Nations Convention on the Recognition and Enforcement of Arbitral Awards, dating from 1958, commonly called the “New York Convention”, provides a level playing field for the enforcement of international arbitral awards, precluding defences to enforcement based on the merits of the dispute already decided by the arbitral tribunal. Defences are narrowly focused on considerations of procedural fairness as between the parties and the tribunal,  jurisdictional error by the arbitral tribunal in the exercise of its mandate and fundamental error due to fraud. As of January 2018, 157 nations are party to the New York Convention, a vast majority of the 193 member states to the United Nations as a whole. Chances are good that, for most commercial disputes, the parties to a dispute reside in jurisdictions bound by the Convention and that national courts will  be bound toapply it when judicial enforcement becomes necessary. It is also salient to note in conclusion that, given the other considerations motivating parties to arbitrate internationally – in particular confidentiality — enforcement difficulties are comparatively rare.

The foregoing considerations outlined in brief summary above, are substantial topics on their own and many nuances are not addressed. Comments and inquiries are, of course, always welcome.

Dr. H. Scott Fairley is a partner at Cambridge LLP. He received his B.A. in 1974, in addition to his LL.B in 1977, from Queens University. He has also received his LL.M in International Legal Studies from New York University in 1979, and his S.J.D. in international and constitutional law from Harvard University in 1987. He has been a Fellow of the Chartered Institute of Arbitrators (FCI Arb) since 1999. Scott was called to the bar in 1982. In 2015, he received the Ontario Bar Association Award of Excellence in International Law.

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