Arbitration proceedings can be a meaningful alternative to litigation and are possible in both national and international disputes.
In many cases, arbitration offers itself as a way to settle a legal dispute. Both on a national level and in cross-border legal disputes, arbitration provides advantages over litigation. Typically, arbitration is faster and more cost-effective. Additionally, arbitral awards can often be enforced internationally more easily than court judgments, says lawyer Michael Rainer, MTR Rechtsanwälte.
Whether litigation or arbitration is the better option to settle a conflict depends on a number of factors that need to be considered. Arbitration can usually be conducted faster and incurs fewer costs than litigation in most states. Moreover, arbitration is not open to the public, which can be a crucial advantage in protecting the reputation of an involved company. Especially in legal disputes between business partners, arbitration can be advantageous, as it puts less strain on the business relationship.
The arbitrators in arbitration proceedings are independent and selected by the parties involved. These are experts who are thoroughly familiar with the subject matter. Thanks to the New York Convention of 1959, arbitral awards can be enforced in most countries; nearly 170 states have signed the convention. Thus, arbitral awards can be enforced worldwide. Often, an arbitral award is easier to enforce than the judgments of national courts. Additionally, international arbitration can help avoid a ‘home advantage’ for one party or the other.
Where there is light, there is also shadow. A disadvantage of arbitration is that there are only very limited possibilities to challenge an arbitral award. There is usually no appellate instance, and state courts have very limited room for maneuver. Challenging an arbitral award is possible, for example, if the right to be heard was violated.
Therefore, it is important to weigh the pros and cons in advance and then decide whether the conflict should be resolved through arbitration or a state court.
