International Arbitration: key to protecting and expanding business globally

Introduction to International Arbitration

In an increasingly globalized world, international expansion is a strategic necessity for many companies seeking to capitalize on new business opportunities in foreign markets. However, this process is not without its risks and challenges, particularly when it comes to resolving contractual disputes. The differences in legal, cultural, and economic systems between countries can significantly complicate the protection of commercial interests abroad. In this context, international arbitration emerges as an indispensable tool for investment protection and ensure legal stability in cross-border commercial transactions.

What is International Arbitration?

International arbitration is an alternative dispute resolution mechanism designed to avoid going to court. Instead of submitting their disputes to the jurisdiction of a national court, the parties to an international transaction agree to resolve their disputes through arbitration, in which one or more independent and neutral arbitrators make a final and binding decision, known as an arbitral award.

Unlike other systems like mediation, it is important to clarify that the arbitrator’s decision is binding and has the same effect that a court judgment, which can be enforced coercively.

One of the main advantages of international arbitration is the neutrality of the forum. Unlike litigation in national courts, where one party might perceive bias in favor of the national counterpart, arbitration allows the parties to select a neutral tribunal. This neutrality is particularly valuable in international contracts, where differences in legal systems, languages, and regulatory frameworks can create uncertainty.

Moreover, international arbitration is supported by a robust and recognized legal framework, such as the 1958 New York Convention, which facilitates the enforcement of arbitral awards in over 160 countries, providing legal certainty rarely found in national courts.

The Arbitration Agreement: The Cornerstone of the Process

The success of international arbitration largely depends on the strength and clarity of the arbitration agreement that the parties establish. This agreement, which can be included in a clause within the main contract or in a separate agreement, sets the foundation for how disputes will be resolved.

A well-drafted arbitration agreement is essential to ensure an efficient and fair process. Below are some of the most important elements that should be included in an arbitration agreement:

• Scope of Arbitration: It is crucial to clearly define the disputes that will be subject to arbitration. A clear scope of the arbitration agreement avoids ambiguities regarding its applicability to certain disputes.
• Number of Arbitrators and Selection Process: The parties must decide whether the arbitration will be conducted by a sole arbitrator or by a tribunal of three arbitrators. It may also be advisable to agree on a fair and transparent selection process, although this may be unnecessary if an arbitration rule is chosen that addresses this issue.
• Seat of Arbitration: The seat of arbitration determines the applicable procedural law and affects the ease with which the arbitral award can be enforced. It is crucial to choose a jurisdiction with a solid reputation for supporting arbitration that is neutral to both parties.
• Applicable Rules: The parties must specify the procedural rules that will govern the arbitration, whether those of a recognized institution or a set of ad hoc rules. Most reputable arbitration institutions have arbitration rules that facilitate the conduct of the proceedings for both the parties and the arbitrators.
• Language of Arbitration: It is important to agree on the language in which the arbitration will be conducted, as this can have a significant impact on the costs and accessibility of the process.
• Governing Law: The parties must agree on the substantive law that will govern the dispute, which can be the law of one of the countries of the parties involved or a neutral law.
• Confidentiality: Arbitration allows the parties to maintain the confidentiality of the process and the final decision, which should be guaranteed in a specific clause in the arbitration agreement. Most arbitration rules also establish the confidentiality of the arbitration.

The Arbitration Procedure and the Award

Once the arbitration process is triggered, it follows a series of steps designed to ensure a fair and efficient resolution.

• Commencement of the Procedure: The arbitration formally begins when a party files a request with the arbitration institution or directly with the designated arbitrator.
• Constitution of the Arbitral Tribunal: Arbitrators are selected according to the terms of the arbitration agreement, ensuring that they possess the necessary experience and neutrality.
• Exchange of Written Submissions: The parties present their cases in writing, setting out their legal arguments and documentary evidence.
• Oral Hearing: In many arbitrations, a hearing is held where the parties present oral arguments, examine witnesses, and submit evidence.
• Deliberation and Arbitral Award: After the hearing, the arbitral tribunal deliberates and issues the arbitral award, which is the final and binding resolution of the dispute. The award, in most cases, cannot be appealed, except in exceptional situations.
• Enforcement of the Award: One of the advantages of international arbitration is the ease of enforcing the award, guaranteed by the New York Convention, which allows it to be enforced in nearly any country in the world.

Conclusion

International arbitration is an essential mechanism for companies seeking to expand globally and protect their investments in jurisdictions outside their home base. It offers a neutral and efficient forum for resolving disputes, backed by a solid legal framework that provides legal certainty in a complex global environment. To maximize the benefits of international arbitration, it is crucial to have a well-structured arbitration agreement that addresses all relevant aspects. With the right legal advice, companies can ensure that their interests are protected and that any disputes are resolved fairly and efficiently in their international operations.”