Originally from AAA/ICDR Handbook on International Arbitration Practice

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Negotiators concerned with drawing up an international agreement, whether it is simply for a one-off venture or for a more permanent relationship such as a long term gas or oil supply contract, will come to the point where they have to decide: what is to happen if the parties fall into dispute? There may be a considerable discussion about this, with each side urging the merits of its own courts and its own domestic legal system; but in the end, there is only one truly “neutral” solution to the problem.

It is, of course, to agree that any dispute should go to international arbitration, before an independent tribunal chosen by or on behalf of the parties, sitting in a neutral venue and applying the law of the contract, in the language of the contract. In a purely local or domestic setting, there may well be a useful debate as to the comparative merits of a reference to the local courts or to arbitration. In an international context, there is no real alternative: arbitration, it has been said, is the only game in town. Parties however will want more assurance than this. It is not enough to say that there is no real alternative to international arbitration. The question then is: if we choose international arbitration, can we have confidence in the fairness and effectiveness of the process? The answer is “yes”, on the following three conditions, which in turn depend on the choices made by the parties themselves.