Originally from Dispute Resolution Journal

There are many ways of resolving international disputes, ranging from negotiated settlements to all-out war. Somewhere on the peaceful—or relatively peaceful—side of the divide, we find international commercial arbitration. It is a private method of dispute resolution that depends initially upon the parties’ agreement to arbitrate, but it has public consequences in the sense that it produces an award that is binding and may be enforced, if necessary, through the national courts.

A valid international commercial arbitration cannot occur without the parties having agreed to arbitrate (this agreement, once given, cannot be unilaterally withdrawn). But why should parties agree to arbitrate in the first place? The text books and learned articles list numerous reasons. But I suggest that frequently, when parties are negotiating an international commercial agreement and come to the point at which they have to decide how future disputes between them will be resolved, they realize that there is no real alternative to arbitration.

The parties may consider mediation, but if they are sensible they will realize that they need a fallback position in case the mediation does not lead to a settlement. They may consider a panel of experts (as in the Channel Tunnel case or a dispute resolution board in the Hong Kong Airport case), but they probably will be reluctant to entrust the final, binding decision in an important dispute to an outside expert or panel of experts. They may consider recourse to the national courts, but neither party is likely to be willing to submit a dispute to the other’s national court if it means having an unknown foreign judge, a different legal system and a different language from that of the contract.

This is the reason that I suggest there is often no real alternative to international commercial arbitration. It is a process in which each party has an opportunity to have its say in the selection of the arbitral tribunal, which will carry out its task in the language of the contract, in accordance with the law chosen by the parties, and in a neutral place of arbitration.