Arbitration

The advantages of arbitration are:

• in international contracts it allows the parties to choose a neutral forum and tribunal. One party does not have to submit to the 'home' courts of the other, with the advantages of familiarity with language, procedure and local counsel that might follow (it also avoids the unattractive alternative of both parties submitting to the wholly unfamiliar courts of a third country);
• where one of the parties is a State, or State entity, then it will often refuse to submit to the courts of another State as a matter of principle. Arbitration in a neutral venue will be the only alternative to litigation in the courts of the State; 
• an arbitration award is enforceable in more countries than a court judgment. Outside Europe there are few multilateral conventions for the enforcement of judgments, whereas the New York Convention (which governs the enforcement of arbitration awards) covers most relevant countries;
• arbitrators with expertise in the law (and language) of the contract can be chosen. The parties are not obliged to submit to the courts of the State whose law governs their contract to get 'judges' qualified and experienced in that law. Similarly, where the dispute calls for particular technical or other expertise, a suitably qualified or experienced arbitrator can be appointed;
• procedurally, arbitration is more flexible than litigation and this can result in savings of time and cost;
  in most jurisdictions appeal against an award on the merits is either not available or can be excluded by agreement between the parties; and 
• the proceedings are not public.

Arbitration does have some disadvantages:

• Default or summary procedures are not available in arbitration in a form comparable to those which may be available before the courts. In the case of contracts such as loan agreements, where there will usually be no dispute about liability and the lender simply needs to enforce his rights quickly and aggressively, summary judgment in the courts is likely to produce a quicker result. Even then, think about whether the resulting judgment will be enforceable in the location where the party in default has assets; and

• There can sometimes be difficulties where an arbitral tribunal is asked to join third parties to an arbitration (see “Chains of Contracts” for more). This can be a problem with chains of contracts, or other situations where interlinked disputes are likely to arise under separate contracts. Litigation in one forum is one solution to the problem of dealing with such disputes.