To arbitrate

The advantages of arbitration in a global business environment cannot be ignored, argues Essam Al Tamimi

In today’s globalised business environment the complexities of international transactions leads to complicated, multi-jurisdictional and costly disputes.

Traditionally, the first recourse by parties in a dispute has been to the Courts but the development of modern and efficient global arbitration centers in the past five years has witnessed a steady change in this approach to litigation.

Indeed, global judicial systems are becoming more expensive and time consuming requiring continuous and heavy investment in training and infrastructure. In terms of efficiency, is not uncommon for parties to find themselves at the end of a very long judicial queue in many jurisdictions.

Arbitration offers an excellent alternative for the resolution of international disputes. In some sectors, arbitration is now considered the forum of choice for dispute resolution.

The strengths of international arbitration are many, and include neutrality, confidentiality, efficiency, cost-effectiveness and enforceability.

The neutrality of the arbitration process allows the parties to decide jointly on the arbitrator (in the case of a sole arbitrator), or, to each nominate their preferred arbitrator (in the case of a tribunal).

Institutions such as the London Court of International Arbitration or the Dubai International Arbitration Centre have an extensive list of experienced arbitrators with a diverse wealth of expertise across many different fields, and parties who choose to arbitrate under the auspices of these, and other similar centres, are likely to find they are able to nominate an arbitrator with experience of adjudicating their type of dispute.

This is unlike litigation, where a judge is simply appointed to hear the case.

In some cases, the publicity and attention naturally created by the onset of litigation is unwelcome. The arbitration process, on the other hand, allows for disputes to be resolved in private. Many centres have adopted confidentiality provisions in their respective rules.

The arbitration process is often faster than resorting to litigation. Once an arbitrator or arbitral tribunal has been formed, the dispute can be heard quickly, in contrast, civil litigation, particularly in common law jurisdictions, must wait until a court has the capacity to hear it.

When this is combined with lengthy appeals, it can often take months or even years for a final ruling. In binding arbitration, the parties will generally have no option to appeal, unless an option is built in to the arbitration clause.

Parties to arbitration can, however, request that a Court set aside an arbitration award on procedural grounds, but unlike litigation, arbitration is not subject to lengthy appeals on merit.

Arbitration is usually more cost-effective than litigation. The costs of arbitration are limited to fees for the arbitrator (which typically depends on the size of the claim), any administrative fees imposed by the arbitration centre, plus lawyers fees.

In litigation, lawyers’ fees are often higher than in arbitration due to timescales.

The fundamental element that makes international arbitration such an attractive option is the enforceability of the final decision.

International enforceability of a court judgment is reliant on the strength of bilateral enforcement treaties between the adjudicating country and the country in which assets are positioned. International arbitration, on the other hand, is graced with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The convention provides arbitral awards with greater, almost unlimited, cross border enforceability than court judgments. Put simply, arbitral awards rendered in one signatory country are enforceable in another.

Although still a developing dispute resolution mechanism, the many advantages of international arbitration over multi jurisdictional litigation are certainly working to establish it as the forum of choice in international disputes. The last 15 to 20 years have also seen the emergence an international league of arbitrators, who form a strong, well-educated and experienced community to drive international arbitration forward.

Essam Al Tamimi is a senior partner at Al Tamimi & Company in Dubai