ABSTRACT
For the settlement of cross-border conflicts, the majority of companies in almost every industry choose for international commercial arbitration. Litigation does not give the flexibility and neutrality of a neutral court that results in an award that is practically enforceable everywhere. Like international business itself, international arbitration can present particular difficulties because the parties may not speak the same language, have different ethical standards, and originate from different legal and corporate cultures. These obstacles can be addressed by arbitration agreements, institutional guidelines and arbitral institutions, “soft law,” knowledgeable attorneys, and seasoned arbitrators. By treaty, an arbitration award rendered in any of the 155 other nations is enforceable in the United States, and an award rendered in any of the 155 other countries is enforceable in the commercial arena. The United States and no other nation have a treaty that provides for the reciprocal recognition and enforcement of judicial rulings. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as “the New York Convention of 1958,” has provided commercial arbitration awards with worldwide enforceability, which is a significant benefit of arbitration over litigation in disputes involving nationals of different nations. Many businesses that are currently involved in the global market have taken note of this benefit. In fact, the general consensus is that arbitration clauses are present in 90% of contemporary international commercial contracts, despite the lack of exact statistics to support this claim. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as “the New York Convention of 1958,” has provided commercial arbitration awards with worldwide enforceability, which is a significant benefit of arbitration over litigation in disputes involving nationals of different nations. Numerous companies currently participating in the global market have taken note of this benefit. In fact, it’s often estimated that 90% of all contemporary international commercial contracts contain arbitration agreements, despite the lack of specific statistics to support this claim.
Keywords: Conflicts, international commercial arbitration, arbitral award, the New York convention
INTRODUCTION
The establishment of new international contacts between nations has been facilitated by trade treaties and conventions, as international trade is regarded as a necessary condition for any nation’s development. States and private individuals regularly engage in economic activity with both domestic and international ramifications in today’s global trade. International Commercial Arbitration (ICA) is a dispute resolution process for international contracts. It serves as a substitute for litigation and is mostly governed by prior agreements between the contracting parties as opposed to procedural regulations or national legislation. Innovations in information and technology and computer networks, a global shift towards market economies within country, polity and regional and multilateral free trade arrangements, have all led to an increasingly globalized world economy. Multinational companies that operate both internationally and locally within home markets have grown in power and influence, giving rise to what are perceived as “stateless” firms that “move around the world without particular reference to national borders.” International commercial arbitration has emerged as the primary substitute for litigation in the resolution of cross-border commercial disputes, owing to the growing complexity and transnationality of corporate operations and strategies.Most contracts have a dispute resolution language that says that arbitration, not litigation, will be used to settle any issues pertaining to the contract. The forum, procedural guidelines, and governing laws may have been defined by the parties at the time of the contract. Laws must control the conduct of cohabiting individuals in society. The causes are clear-cut: as society has developed, so too has conflict within it. The development of society makes human conflicts inevitable. Strong, straightforward, and quick procedures for resolving such conflicts are needed as a result of this unfavourable situation. In order to reduce the burden on the system and still ensure fast justice in these inevitable situations, it is also critical that conflicts be resolved for the least amount of money and as soon as feasible. As a result, ADR processes have emerged as distinct options to state-instituted courts, hence the term “alternative.” International Commercial Arbitration is styled as international, not because sovereign nations participate, but because the parties, the facts, or the legal effects of the disputes extend beyond a single jurisdiction. The expenses, delay and complexity of a court action are normally avoided in the case of arbitration procedure. These problems arises when the parties fails to agree upon a choice of Law and disagreement in procedural aspects of substantive law.
RESEARCH METHODOLOGY
The topic of this research paper is “International Commercial Arbitration and its Legal Issues.” A mechanism for resolving disagreements resulting from international commercial contracts is international commercial arbitration. It is a substitute for litigation and is mostly controlled by the conditions that were previously set out in the contract between the parties, not by national laws or procedural guidelines. This research paper is descriptive in nature. The present study employs a comprehensive literature review methodology to gather and assess prior research papers, publications, and articles about the legal obstacles and concerns encountered by international commercial arbitration.
REVIEW LITERATURE
International commercial arbitration
The process that offers an alternative framework for settling conflicts originating under international contracts is international business arbitration. For international investors, one of the best aspects about commercial arbitration is that it is more flexible and accessible. Generally, there are two type of arbitration:
1) Institutional arbitration (governed by Institutional rule).
2) Ad-hoc arbitration (which is not governed by institutional rule and the parties have to set up their own rule).
Many dispute resolution processes and strategies are available in the modern period to settle international issues. One of the key strategies is the legal system, which gives national courts the authority to resolve disagreements between parties. If the parties cannot agree, then international treaties and bilateral agreements provided that their countries have ratified them will decide whether the dispute can be resolved by the court of one party’s nation or the country of the other party. It is extremely difficult for the parties to determine jurisdiction in the absence of these treaties. When disagreements emerge between the parties over routine business matters, they frequently choose to resolve them amicably, discreetly, and casually through conciliation and negotiation.
There are numerous strategies available to the parties under the extrajudicial settlement system for resolving their disagreements and conflicts. In terms of international commerce and economic issues, these are beginning to offer certain advantages over litigation. Although negotiation is not legally binding, it might be helpful in situations when the people involved are friendly and do not need outside assistance to resolve their differences. Another non-binding process that the parties embrace is conciliation. The conciliator, a third party, assists the parties in resolving their differences by encouraging voluntary agreement that meets their needs.
The United Nations Conference on International Commercial Arbitration’s 1958 Resolution was the first to highlight international commercial arbitration. The inescapable phenomena of “development” has absorbed many facets of humankind. The field of international business arbitration has advanced significantly as a result of the increased dissemination of knowledge regarding commercial arbitration legislation. Trade and related notions have undergone a fundamental shift as a result of the blending of ideas such as globalization, consumerism, and liberalization. Treaties and policies that are booming, multilateral, bilateral, and transnational have an unavoidable influence that transcends national boundaries. Therefore, it is thought that international arbitration is a great way to resolve business issues. Over an extended length of time, international arbitration has been recognized as the most favoured means of resolving disputes between transnational contracting parties. Arbitral tribunals are preferred over national courts for dispute resolution because they offer a more neutral platform, easier enforced awards, speedier processing times, and more cost-effectiveness. Apart from all the benefits of international commercial arbitration, there are some fundamental errors that must be addressed in order to determine the jurisdiction of international arbitration. This is because every coin has two sides. It was considered that the International Commercial Arbitration regime needed to be denationalized, that national laws needed to be viewed independently, and that the lex mercatoria system should oversee the entire system. However, this was not possible to do. However, it was also impossible to maintain complete indifference to the national laws. The national laws showed signs of convergence. Despite the many methods used by national courts for arbitration, an attempt was made to harmonize and unify the legislation governing international commercial arbitration. The fact that many national jurisdictions have arbitration mechanisms in place under their various civil procedure statutes suggests that even in the modern day, national jurisdictions still play a supervisory function. In the context of international commercial arbitration, however, it is up to the nation states to define what is “international” and “commercial.”
Problems in International Commercial Arbitration
Decision-makers:
The ability of the parties to choose the decision-makers is one of the features of international arbitration. Although this feature is typically cited as one of international arbitration’s greatest benefits, it has also drawn criticism. Mostly, detractors have questioned the validity of an award made by arbitrators who were hired privately. If the parties decided on the tribunal’s President first and subsequently nominated the other two arbitrators with their input, that would further bolster the legitimacy of party-appointed arbitrators.
Conduct of Counsel:
The conduct of counsel is a crucial aspect of international arbitration. However, due to the diverse histories and legal cultures of the parties involved, their guidance may not necessarily align with the same ethical norms and values. In practice, regulating counsel conduct is difficult due to the lack of a globally enforceable common code and an international body to enforce it. This raises concerns about the validity of international arbitration.
Domestic court oversight:
Some have contended that the arbitral process is simply too independent of domestic courts and domestic legislation. One of the most important dispute resolution procedures in international trade today is arbitration. Therefore, attorneys need to be familiar with the principles of international arbitration in order to practice effectively in the sphere of international commerce and trade. A reliable and effective process for resolving disputes is an essential component of every international business deal that is being negotiated. Therefore, by coming to a clear understanding of dispute settlement, the parties to such a transaction will best serve their interests.
Length:
International arbitrations take longer than they used to for a variety of reasons. Firstly, the disputes that are brought before the tribunal are usually complex. Secondly, even though the parties and the tribunal are free to choose a procedure that suits them best based on party autonomy, they frequently settle on one that is fairly drawn out.
Cost:
Even though it was once believed that arbitration had an advantage over litigation, that conclusion is currently being reexamined. International arbitration has become more costly as well as more complicated over time.
Different legal philosophies:
It’s possible that the parties are from different legal cultures. In international business arbitration, it is usual to face the issue of satisfying the expectations of one party from a common law country and the opposing expectations of the other from a civil law country.
The majority of common law nations, including the US, were formerly a member of the British Empire. France, Germany, Spain, Portugal, and the Netherlands are only a few examples of the nations that formerly belonged to the Roman Empire or its empires. The majority of nations with civil law were formerly a part of the Roman Empire. Common law countries are significantly less numerous than civil law countries. Additionally, most nations that have modernized their legal systems in the last century or so—such as China and Japan have adopted a civil law framework.
Different contractual construction:
Contracts are the primary source of most international business arbitrations. Americans are occasionally taken aback by how differently contractual duties are understood around the world, especially American lawyers.
To sum up, a reliable and effective means of resolving disputes is an essential component of each international business deal that is negotiated. Therefore, it’s imperative to resolve any concerns with international arbitration in order to make it the simplest option for resolving disputes.
Challenges Concerning International Commercial Arbitration:
1. Concerns with relevant laws.
2. Questions about the courts’ authority to grant temporary relief
3. Concerns about overseas award recognition and enforcement
Aristotle-
It bids us remember to settle a dispute by negotiation and not by force; to prefer arbitration to litigation for an arbitrator goes by the equity of a case, a judge by the strict law, and arbitration was invented with the express purpose of securing full power for equity.
CONCERNS WITH RELEVENT LAWS
Parties to international business arbitration typically have multiple nationalities among them, as is well known. Due to the application of lex mercatori, or the principles of equity and justice, various laws would apply to their contract in addition to the specific national law, making the contracts between them more complex. As a result, it’s important to determine which laws apply to the various components of arbitration, including curial law, the law governing arbitration agreements, the law of reference, and the proper law of the contract or law applicable to the substance of the dispute.
The Supreme Court of India noted in the case of National Thermal Power Corporation v. Singer co. And others that in situations where the parties’ intention is not explicitly stated and no inference about it can be drawn regarding the appropriate law of contract, courts attempt to impute an intention by determining the legal system with which the transaction has its closest and most genuine connection. In addition, the courts would infer an intention by using the objective test to ascertain which law the parties would have reasonably intended to apply if they had given the matter careful thought.
Questions about the courts’ authority to grant temporary relief
The important turning point in the conduct of arbitration proceedings that garner the desired attention is the jurisdiction and authority of the courts to give interim relief. Almost all legal systems across the world acknowledge the role of courts in providing parties with an intermediate measure in order to offer them justice. It is also true, though, that courts with excessive authority to grant temporary relief run the risk of undermining arbitration’s primary goal of settling disputes in private.The Court has framed a number of legislation and regulations as a result of the unresolved issue surrounding its power to grant temporary relief.
Concerns about overseas award recognition and enforcement
It is often known that one of arbitration’s main benefits is that verdicts are enforceable across national borders. The arbitral tribunal renders a ruling in the form of an award following the arbitral hearing, thereby resolving the questions brought before it. In this regard, the tribunal has the authority to make a final decision after resolving all problems in a single award or by extending one or more partial or interim awards. When a dispute is submitted to arbitration, the parties usually anticipate that the award that is made at the end of the process will be binding on both of them. Nonetheless, it is frequently observed that the award is susceptible to the right of appeal or redress.
The conflict of awards is another problem with international commercial arbitration. The idea of precedents has little bearing on arbitration, which is largely why conflicts of awards arise. There is no rule that says arbitrators faced with comparable issues or similar facts must follow the decision made on a particular issue or set of facts. Every award is independent. This points to a state of hesitancy and doubt.
Some argue that decisions are slow to come by and can be rather costly at times. Should the tribunal’s jurisdiction be contested, things only get worse. Even in cases where a written agreement to arbitrate has been pre-signed, it is common for the tribunal’s jurisdiction to be contested in modern times. Since the decision made in an arbitration lacking jurisdiction would be void, it becomes crucial to resolve the issue. It is essential to emphasize that jurisdiction must exist in order for any adjudicating authority to provide a lawful judgment or award. Since jurisdiction might be contested at any point during the process, it must be established upfront in any conflict resolution process.
MEETING THE SPECIAL CHALLENGES OF INTERNATIONAL COMMERCIAL ARBITRATION.
Lot many challenges of international commercial arbitration can be mark by arbitration agreement itself, the procedural law chosen for the arbitral process, and “SOFT LAW” (guidelines, recommendations, and “best practices” published in support of international commercial arbitration by various non-govermental organization). Facts states that, many companies have discovered that including “soft law” and specific procedural guidelines in the arbitration agreement is itself is beneficial, turning them into contractual obligations. Nevertheless there are still a great deal of concerns that need to be setteled by party agreement or arbitrator discretion.
SUGGESTIONS
SURPASSING THE SPECIAL TROUBLES IN INTERNATIONAL COMMERCIAL ARBITRATION –
- To prevent the parties from abusing their authority to designate arbitrators, strict conflict rules and procedural controls must be adopted and enforced.
- There had to be an ethical code to make sure arbitrators performed their duties with diligence in order to promote credibility and impartiality.
- It can be proposed that it would be beneficial to enhance the credibility of the decision-maker if the parties consented to designate the president of the tribunal ahead of the other two arbitrators.
- It is important to create regulations or guidelines to manage the unethical behavior of the council in order to prevent it.
CONCLUSION
For the settlement of cross-border conflicts, the majority of companies in almost every industry choose for international commercial arbitration. Litigation does not provide the advantages of an impartial venue and a flexible process that results in an award that is enforceable virtually everywhere. However, due to the possibility of linguistic barriers, cultural differences in business and law, and ethical differences between the parties, international arbitration, like international commerce itself, offers particular difficulties. Arbitration agreements, arbitral institutions and institutional procedures, “soft law,” knowledgeable lawyers, and seasoned arbitrators are addressing these issues.
Submitted by:
SHRAVANI SUNIL SUBHEDAR
UNIVERSITY OF MUMBAI THANE SUB-CAMPUS, MUMBAI, MAHARASHTRA