Originally from The College of Commercial Arbitrators Guide to Best Practices in Commercial Arbitration, Fifth Edition

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International arbitration is an essential part of a globalized world economy; it generates enforceable awards between individuals and companies when neither side trusts the other side’s courts. These arbitrations share many characteristics of domestic arbitration in the United States, but in other aspects, from reliance upon written direct testimony to joint testimony by experts, from “Redfern” discovery schedules to the frequent presence of arbitrators from civil and common law backgrounds on the same panel, are quite different.

This chapter and the next discuss the prominent features of international arbitration.

I.           INTRODUCTION

The term international arbitration can be defined in various ways. For purposes of this guide, an international arbitration is an arbitration with one or more cross-border elements. International elements may include the site of the arbitration, the applicable substantive law, the nationalities of the parties, the likely places of performance or enforcement, or other similar factors that reflect a reasonable relationship with one or more foreign states and their citizens and entities. See, e.g., 9 U.S.C. § 202.

The conduct of international arbitration in the United States has become increasingly commonplace, indeed, today it is the norm for resolving cross-border business disputes. Factors contributing to the rise of international arbitration in the U.S. range from (1) greater receptivity to and endorsement of international arbitration in a series of United States Supreme Court decisions (see, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985)) to (2) the increased sophistication and number of U.S.-based arbitrators and attorneys with international/foreign law and international arbitration backgrounds and (3) the heightened emphasis on international arbitration by U.S.-based arbitral institutions and centers.

The defining event that heightened awareness and acceptance of international arbitration as a viable cross-border dispute resolution mechanism was the adoption of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 330 U.N.T.S. 38 (New York Convention). After a notable delay, the United States ratified the New York Convention in 1970, and Congress implemented the Convention by enacting Chapter 2 of the FAA. The New York Convention, now with more than 170 signatory countries, has two major aims: (1) the enforcement of international arbitration agreements and (2) the recognition and enforcement of foreign arbitral awards. The Convention applies to arbitral awards that are not considered domestic awards in the state in which their confirmation and vacatur, or recognition and enforcement, are sought. It generally provides that when the court of a contracting state “is seized of an action” involving an international commercial dispute with respect to which the parties have made a written agreement to arbitrate, the court shall, upon the request of one of the parties, “refer the parties to arbitration” unless it finds that the agreement is “null and void, inoperative or incapable of being performed.” New York Convention, Art. II (3). The New York Convention also requires contracting states to recognize and enforce foreign arbitral awards, subject to only limited defenses set out in Article V of the Convention. It implements these goals with a bias toward enforcement, having reallocated the burden of proof to the party opposing arbitration, with typically narrow grounds for exception to enforcement. In the years since the United States and other countries have acceded to the New York Convention, considerable case law has been generated on how to apply the Convention.

The pro-enforcement nature of the New York Convention accords a special status to international arbitration, particularly because the United States is not a party to any treaties that mandate enforcement of foreign court judgments. By virtue of the large number of countries that have acceded to the Convention and the general willingness of member-state courts to apply the Convention in a transparent and pro-enforcement manner, it has come to be considered one of the most successful multilateral agreements on any subject. In addition to the New York Convention, other international treaties relating to commercial arbitration—such as the Inter-American Convention on International Commercial Arbitration, January 30, 1975, 1438 U.N.T.S. 249 (the Panama Convention) and the Convention on the Settlement of Investment Disputes Between States and Nationals of other States, 575 UNTS 159 (1965) (the Washington or ICSID Convention)—have come to play an increasingly important role in both enforcing agreements to arbitrate and the awards issued in proceedings conducted in accordance with such agreements