Arbitration or Litigation? Choosing the Right Forum for Cross-border Disputes
Participants and parties to cross-border disputes, that is disputes of an international nature involving entities located within different jurisdictions, must choose the forum within which disputes are to take place. The choice of forum for resolving international disputes is either litigation or arbitration.
In simple terms, litigation means referring a dispute to a court process in order to resolve the matter. Arbitration is an alternative to court proceedings and is a contractually agreed method of resolving disputes.
In terms of choice, there are various applicable determining factors. Parties may find themselves contractually bound to arbitrate because of a dispute resolution clause in the contract entered into between the parties, explain the experts from Barlow Robbins LLP.
If a choice is available, litigation may be favored due to the openness and associated tactical pressure of knowing that there is scope for the public reporting of the proceedings, unlike arbitration which tends to remain a confidential process. Alternatively, parties may opt to arbitrate because it offers greater flexibility in terms of process and procedure.
Parties can choose the rules governing the conduct of the arbitration by selecting an arbitral institution and are able to select the composition of the tribunal. The most common institutions are the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA), although there are many institutions across the world offering similar services. The parties also choose (if it is not already pre-determined under a contract) which country’s laws should apply to the process. The arbitration agreement will confirm much of this detail and should set out who the arbitrators will be, how many of them will sit and how they will be appointed.
The relatively straightforward process of enforcing arbitral awards in other countries also makes it a popular choice in the context of international cross-border disputes. The awards are enforceable by virtue of international conventions – the most important being the New York Convention, which is recognized by 161 nation parties. This Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states. In contrast, the process of recognizing and enforcing judgments obtained at the end of litigation can be lengthy and costly and the prospects of successful enforcement can be uncertain in some jurisdictions.
As the UK prepares to leave the European Union by 31 January 2020, businesses involved in cross-border transactions should remain aware of their existing contractual obligations in relation to the choice of dispute resolution forum. Even at the early stage of commercial negotiations, businesses should think carefully about how they want to resolve any future dispute relating to the commercial engagement.
Advantages of Arbitration
- Flexible processes
- The rules for the conduct of the arbitration as well as the composition of the arbitration tribunal and the arbitrators can be freely determined
- Choice of national law that should apply
- Arbitral awards are enforceable in 161 countries
Author: Barlow Robbins LLP, Guildford, Surrey UK.
Barlow Robbins LLP is a law firm headquartered in Guildford, with offices in Woking and London. It is a member of ECOVIS International.