Arbitration in International Commercial Disputes: A Modern Solution to Global Challenges

The world has undoubtedly become one village, given the supply chains that extend across the seven continents, Energy transport and production contracts and technology transport contracts had to be devised a specific mechanism to settle the commodities arising from these international contracts. It was in this spirit that the idea of arbitration was a tool for resolving an internationally binding dispute that was objectively impartial and without prejudice to the provisions of international law.

What is Arbitration?

The Saudi Center for Commercial Arbitration defines arbitration as:

“A private, consensual, flexible decision-making process for resolving business disputes in a binding and enforceable manner. In arbitration, parties agree to submit their dispute to an independent and impartial decision-maker (Arbitrator) appointed by mutual consent or statutory provision. Arbitrators hear evidence and argument and issue final and binding decisions (the ‘Award’).”

Arbitration consists of the arbitration clause, the procedural law of arbitration, the substantive law of arbitration, and the place of arbitration, each part of which may belong or take place in a different jurisdiction.  For this reason, arbitration is an ideal choice in international transactions and can meet contractors’ different needs in accordance with the principles of impartiality and fairness.

Advantages of Arbitration

1. Neutrality: Impartiality or objectivity is an essential requirement in the arbitral process. The arbitrator is therefore obliged to disclose his relationship with the parties to the dispute prior to his appointment to the arbitral tribunal. The other party has the right to challenge the arbitrator nominated or to accept the results of the disclosure.
2. Flexibility: The arbitration process is quite flexible. The litigants can agree on the procedural rules they see for considering the dispute between them away from the series of administrative procedures required by certain procedural legislation.
3. Confidentiality: One of the fundamental advantages of arbitration is to be done in a completely confidential environment, so many professionals, entrepreneurs, and athletes prefer to resort to arbitration to maintain the market value of reputation and brand.
4. Efficiency: Arbitration has the advantage of speed compared to traditional judicial procedures. Arbitration has the advantage of having substantive expertise in arbitrators. An engineer can consider a constructive dispute. He therefore understands all the engineering terms traded by the adversaries and is aware of the nature of the dispute. He is therefore more specialized than the judge general.
5. Enforceability: The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) ensures that arbitration awards are recognized and enforceable in over 160 countries. This provides parties with greater assurance that the decision will be upheld across borders. Furthermore, there are many international agreements between the GCC countries as well as Arab states members of the League of Arab States.

Challenges in Arbitration

Despite its many advantages, arbitration is not without its challenges. Some common concerns such as the additional costs of appointing arbitrators, as well as the weak digital structure for the management of judicial disputes, as well as the difficulty of appealing the arbitral award, and I believe that international arbitral institutions are constantly working to overcome these challenges.

Key Institutions in International Arbitration

Several reputable institutions administer international arbitration proceedings, including:

1. International Chamber of Commerce (ICC)
2. London Court of International Arbitration (LCIA)
3. American Arbitration Association (AAA)
4. Singapore International Arbitration Centre (SIAC)
5. Hong Kong International Arbitration Centre (HKIAC)

Khalaf Bandar Khalaf has the privilege of obtaining international membership in the Young Arbitrators Programs at LCIA, AAA, and ITA. He is the founder of the Young Arbitrators’ Club in Saudi Arabia.

Conclusion

Finally, arbitration can be said to be one of the means of resolving alternative disputes that have proven their worth in resolving international commercial disputes by overcoming the challenges of spatial jurisdiction and applicable law, and therefore many companies have consistently adopted arbitration in most international contracts.