Instructive comment from China Law Blog on 4/27/2006 on having arbitration clauses in all international contracts. China Law Blog writes that domestic lawyers have to realize that having a clause requiring all litigation be in a certain jurisdiction may more often than not causes only increased costs and time.
International arbitration has some advantages compared to litigation in national courts. International arbitration awards may more readily be enforceable. Companies that carefully draft dispute resolution clauses in contracts may influence and have more control over resolving international disputes.
For instance, over 130 countries are signatories to the New York Convention, which facilitates enforcement of arbitration awards in signatory countries.
Court judements are not recognized usually abroad because the United States is not normally a party to any treaty allowing enforcement of court judgments abroad.
International arbitration allows for neutrality when parties are from different cultures and legal backgrounds, unlike foreign courts. The venue is usually at a location where the parties perceive neutrality such as New York, Hong Kong, Paris, Singapore, London, Geneva, Zurich.
The agreement should designate the governing law for the proceeding and the substantive dispute. If a party requires certain discovery and evidentiary proceedings, the agreement should so specify.
There are three popular arbitration institutions that have an international presence: (1) International Chamber of Commerce (ICC), (2) London Court of Arbitration, (3) American Arbitration Association international arm also known as the International Centre for Dispute Resolution.
Usually it is less expensive and faster to have an arbitration conducted by one arbitrator. Sometimes parties prefer to have three so that each party can nominate one, and the nominated arbitrators in turn choose the third. This gives the parties greater confidence in the proceedings because they had the opportunity to have input on the selection of the decision-makers.
The language for the proceedings should be designated in the agreement. For United States companies, English should be insisted because costs and time for translations may otherwise result. Arbitrators may decide that the contract language will be the proceeding language.
Thus, to manage the risks associated with international business, drafting dispute resolution clauses suited to a company's needs is suggested.
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