The benefits of arbitration in international transaction disputes

Although a great majority of transactions are executed satisfactorily or are agreeably resolved before getting to the threshold of a contentious relationship, some international transactions do fall through the cracks and inevitably go sour. In these circumstances, arbitration provides as good a method of resolution as any alternative and is often a better option.

International commercial transactions are varied and in matters of dispute, arbitration has several principal benefits. It is likely to be a confidential matter and will benefit from a resolution external to court based proceedings. Arbitration is usually a one-stop shop with limited opportunities for a reluctant party to appeal.

Unlike adjudication, for example, an arbitration award is intended to be a final disposition of the matter and unlike a mediated agreement or an expert's opinion, an arbitration award is intended to be enforceable as a procedural matter. The latter is courtesy of the New York Convention of 1959 which makes an award, at least in theory, exportable to a very considerable number of countries in a way that a judgment isn't.

However, one must not be under any illusion that arbitration is always a speedy option. That said, if both parties are keen to find a resolution and want it quickly then arbitration can move as swiftly, effectively and economically as any other procedure available.

It also has the potential benefit of finality. If, however, one party is reluctant to have the matter resolved then there are a variety of methods available to slow things down. It is usually the respondent or the putative respondent that will be reluctant to press on. Given such an approach there are methods which can be employed to delay and disrupt. For example, jurisdictional challenges loom large in such cases allied to challenges of appointees to the tribunal on various grounds.

Clause rules

This sort of problem is more easily overcome if, at the time of the negotiation of the contract, a suitable institution and its rules have been imported into the arbitration clause.

Other matters can be taken up at that same negotiation time. For example, the authority of the signatory of the contract. Does the person have actual or ostensible authority to sign up to an arbitration clause? This is an issue in respect of which questions have recently arisen in Dubai. Arbitration is seen under the local code as a procedure that takes the case away from the courts and therefore requires a particular formality. This sort of problem is difficult to resolve once the dispute has arisen. If the point is a good one, then the only arbitral route is to see if a fresh agreement can be established, either expressly or implicitly.

Given jurisdiction and a tribunal - problems with which are most effectively overcome by a suitably pro-arbitration institution and rules - the complaint still arises that arbitration is slow and expensive. The following are just some examples of steps which might be taken in the interests of a satisfactory outcome, at least with respect to time and cost:

• Press the tribunal for a fast timetable. Do not easily agree with the other side to a lengthy procedure.

• Resist long hearings. There are very few cases that cannot be disposed of in a week's hearing.

• Resist post hearing briefs. They should not be necessary and they provide great opportunities for delay. If you must have them they should one submission only, on agreed issues, simultaneous and delivered within, at most, a week of the end of the hearing.

• Build a 'latest' date for the award into the original timetable.

• The tribunal's remuneration is often determined essentially on a lump sum basis by many institutions. If that is not the basis - for example, it may be a case of hourly rates - seek to agree a lump sum with the tribunal although that will necessarily involve express limitations on time.

Other expedients may be appropriate in other cases. All the above said, it is implicit that there are some situations where arbitration may not be the ideal choice. Two good examples come to mind.

If both parties are happy to submit to the jurisdiction of a state court which is demonstrably speedy and dispassionate, and if both parties have substantial assets within that jurisdiction which are not removable at a keystroke, then those courts (provided the publicity is not objectionable) may well provide a very effective means for the resolution of a contentious dispute.

Sanctions

The need for assets within the jurisdiction is to ensure that the sanctions, that a court can provide and that arbitration cannot, can be seen to be meaningful. Absent the immediately available assets, then the sanction which looks good on paper may indeed be just that: a paper sanction.

The second group of cases for which arbitration may not be the best choice are those where both parties genuinely want to resolve matters and are prepared to make concessions to do so. These are not always easy to identify in practice.

While such cases may be eminently suitable for mediation or expert determination, the problem is the sheep's clothing; is the willingness of the respondent to join in the process genuine, or is it a potentially very useful delay on the road to resolution? If in doubt and if it is possible, the answer may be to run both arbitration and the alternative dispute resolution process simultaneously.

In summary, in a contentious situation, arbitration, under the auspices of a competent institution, a sensible tribunal and driven by a party or parties who are focused on a rapid resolution - will often deliver

John Tackaberry QC FCIArb practises at 39 Essex Street and has a great deal of expertise in global international disputes

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