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Arbitration is a generally accepted form of dispute resolution. The legal basis for arbitration is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.
The “New York Convention” enshrines the right of individuals to submit private disputes for adjudication to non-governmental arbitration institutions. The Convention has been signed by most world countries: to date, 172 countries have ratified it.
This means that arbitration is a GLOBAL way of dispute resolution. For example, if a citizen of Vietnam and the United States signed an agreement to submit their dispute to an Arbitrator, the Arbitrator's decision will be recognized in all member-states. That means that the plaintiff has the opportunity to seek debt collection through state courts of not just the US and Vietnam, but in all the rest 170 counties, should the defendant has his assets over there.
This feature of arbitration awards makes them more convenient in international relations, since the procedure for recognizing decisions of foreign state courts is much more complex and unpredictable.
In order to enforce the award, it shall be submitted to the state court of the required country. For Example, in the USA it takes the procedure under the Federal Arbitration Act, chapter 2 that allows to apply to the court for an order confirming the award. The procedural codes of foreign countries provide for similar procedures that implement the rules of the “New York Convention”.
A feature of such proceedings is that the court does not review the arbitration award on its merits. The court does not delve into the details of the case and does not act as a supervisory authority. The court checks only some formal points:
The “New York Convention” enshrines the right of individuals to submit private disputes for adjudication to non-governmental arbitration institutions. The Convention has been signed by most world countries: to date, 172 countries have ratified it.
This means that arbitration is a GLOBAL way of dispute resolution. For example, if a citizen of Vietnam and the United States signed an agreement to submit their dispute to an Arbitrator, the Arbitrator's decision will be recognized in all member-states. That means that the plaintiff has the opportunity to seek debt collection through state courts of not just the US and Vietnam, but in all the rest 170 counties, should the defendant has his assets over there.
This feature of arbitration awards makes them more convenient in international relations, since the procedure for recognizing decisions of foreign state courts is much more complex and unpredictable.
In order to enforce the award, it shall be submitted to the state court of the required country. For Example, in the USA it takes the procedure under the Federal Arbitration Act, chapter 2 that allows to apply to the court for an order confirming the award. The procedural codes of foreign countries provide for similar procedures that implement the rules of the “New York Convention”.
A feature of such proceedings is that the court does not review the arbitration award on its merits. The court does not delve into the details of the case and does not act as a supervisory authority. The court checks only some formal points:
LEGAL ANALYSIS
- whether there was a valid agreement for the binding arbitration;
- whether the Arbitrator exceeded his powers (as defined in the arbitration agreement).
Some other matters are also checked, such as the proper notification of the defendant about the proceedings, but those are the main ones.
In practice, this means that if:
- the Parties included a correct arbitration clause in their contract
- the Arbitrator has carried out the procedure correctly,
then the winning party will be able to easily enforce the arbitration award in any country where the defendant has property.
The disadvantage of that procedure is that if the defendant does not voluntarily comply with the arbitration award, then he can only be forced thought the court. It turns out to be a kind of "double" process (arbitration + court), even if the second process is carried out in a simplified form.
The disadvantage of that procedure is that if the defendant does not voluntarily comply with the arbitration award, then he can only be forced thought the court. It turns out to be a kind of "double" process (arbitration + court), even if the second process is carried out in a simplified form.
This feature of arbitration must be taken into account, but you should also know its advantages:
- Arbitration, on average, is much faster and cheaper than the state court (including the lawyer’s fee);
- Some cases, especially related to blockchain, web3, and e-commerce, may experience huge problems when are heard by state judges who are not familiar with their specifics;
- The arbitration award is easier to recognize abroad than a state court ruling.
Arbitration also has other advantages:
- Speed: simple cases can be considered in a few days, while the court usually takes at least six months;
- Remote hearings: the Parties do not need to appear at the hearing or send representatives. The adjudication is mostly limited to video calls and the exchange of electronic documents;
- Informal process in a friendly atmosphere: the litigation usually associated with significant stress and requires a lawyer who knows procedural and substantive law. In arbitration, it is permissible to conduct cases pro se (i.e. on your own, without a legal representative). The Arbitrator will request the necessary data on his own and will issue award in accordance with the will of the Parties as reflected in the contract.
“Pravda Arbitrage” specializes in cases related to e-commerce and cryptocurrencies, and selects professional arbitrators with the relevant experience.
The potential scope of the specialized arbitration is illustrated by eBay "Resolution Center", which adjudicates more than 60 million disputes per year (buyers’ claims against the sellers on eBay).
Dissatisfaction with state justice is a prominent trend of recent decades. For example, the "International Chamber of Commerce" has demonstrated a 20-fold increase in arbitration applications over the past 50 years. In turn, "The Hong Kong International Arbitration Centre", despite the pandemic, broke its own record by considering cases worth about USD 9 billion in 2020. In total, in 2018, the top ten arbitration courts considered 50% more cases than in 2012, with the total case value of more than USD 40 billion.
The potential scope of the specialized arbitration is illustrated by eBay "Resolution Center", which adjudicates more than 60 million disputes per year (buyers’ claims against the sellers on eBay).
Dissatisfaction with state justice is a prominent trend of recent decades. For example, the "International Chamber of Commerce" has demonstrated a 20-fold increase in arbitration applications over the past 50 years. In turn, "The Hong Kong International Arbitration Centre", despite the pandemic, broke its own record by considering cases worth about USD 9 billion in 2020. In total, in 2018, the top ten arbitration courts considered 50% more cases than in 2012, with the total case value of more than USD 40 billion.
The general trend is that international business prefers to transfer cases to the jurisdiction of arbitration courts. There are the following reasons for this:
- Neutrality of the forum: the Parties can regulate their relations exclusively by the contract, without reference to any specific law;
- Speed and finality: arbitration is client-oriented and organize the process in a fast and convenient way. The arbitration award is usually final, which excludes the lengthy appeal process;
- Confidentiality: the hearings are held private, which prevents the leakage of sensitive data;
- Possibility of enforcement: international conventions ensure the enforcement of the arbitration award in most states.
