How arbitration oils the wheels of international trade
We have discussed before the nature of arbitration and its benefits in facilitating contracts and transactions. However, arbitration also has an important role in dispute resolution related to international trade, which constitutes a large share of GDP in many countries in an advanced era when the world is effectively “one village.”
International trade is essentially a way to exchange goods and services among different countries, regions and territories. Some countries cannot satisfy all the needs of their communities with only their own resources and products. Equally, goods and services unique to one country may be exported to, and widely used by, the rest of the world. International trade is also one of the most important factors in strengthening the international relations that bind the countries of the world and their societies.
The development of international trade has stimulated the process of framing and codifying the contracts that govern it. There is therefore an urgent need for innovative laws that facilitate and clarify these contracts, most of which are subject to international arbitration.
In international arbitration, different foreign laws apply, either mutually agreed by the parties to the contract, or in accordance with applicable conflict rules. The rules of procedure for contract disputes subject to international arbitration are based on the principle of free choice of the competent authority and the applicable law. Thus, there are many established international arbitration bodies that have their own rules but whose decisions remain independent, unique and binding.
There may be wide differences between the legal regimes of different countries, which can hamper the growth of arbitration as a facilitator of international trade, so international conventions have been developed over the years to address such issues. Examples are the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, the League of Arab States Convention on the Enforcement of Judgments and the 1965 Washington Convention on the settlement of investment disputes between states and nationals of other states.
Moreover, the decision as to which international arbitrator is chosen is discretionary, leaving the relevant institution to determine the rules and provisions most appropriate to the circumstances of each case. One of the sources used by the arbitrator when considering international cases is the legal rules chosen by the parties, and when the parties do not specify the applicable rules, the arbitrator will, of course, resort to prevailing commercial norms.
International arbitration may face some obstacles, the most significant of which is the internationalization of the rules governing disputes; it is not reasonable to subject international arbitration to the laws and interests of a particular state. Many experts believe the laws of some developed countries are the most appropriate; I believe the adoption of distinctive laws under the umbrella of the rules of arbitration institutions or international conventions is the best solution to achieve the independence of international arbitration.
International arbitration has many benefits, including the role of the client in selecting the arbitrator, swift procedures, confidentiality and of course neutrality, but all these benefits depend on how they are harnessed and used to maximum effect — otherwise they are useful only as research titles and for marketing purposes.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif