Role of Arbitrators in the Resolution of Commercial Disputes - Paper Example

Abstract

International commercial arbitration which leads to enforcement of arbitral awards has been historically found to be a quick, cost-effective, and confidential technique for resolving commercial disputes between international businesses parties. International arbitration is rapidly gaining momentum because many businesses are ;looking to resolve their disputes out of courts so as to save money, time, and to maintain healthy business environments. As a result of this growing need, the role of international arbitrators has become more recognized and important than ever before because these arbitrators play a significant role to the success and sustainability of commercial activities globally. Arbitration has become so prominent in international trade dispute resolution and has taken a center stage in resolving disputes over the years. However, with time, as a result of the expansion of parties using arbitration, the regulations and values of the process are slowly being eroded and there are numerous cases where the conduct of arbitrators has resulted to arbitral awards not being enforced effectively. Slowly, arbitration is becoming costlier than court litigations and confidentiality is rapidly becoming diminished because of intervention and conventions of institutions administering arbitration. Arbitral awards are now lacking the same enforcement regulations and this raises the concern about using arbitration as opposed to litigation.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Keywords: International commercial arbitration, arbitrators, tribunal, arbitral awards, enforcement, litigation, international business, court processes

Introduction

Effectively resolving disputes in business relationships is a major challenge that continues to face businesses all over the world. For businesses to be able to find alternative methods of resolving disputes out of courts brings great relief to trading partners globally. International Commercial Arbitration is the process of resolving commercial conflicts between business people in different countries through the use of services provided by legally appointed expert arbitrators by the conflicting parties as opposed to using court services. Many states often enter in to trade agreements, but many times, these agreements fail to hold water because of some violation or disagreement. These countries, therefore, enter in to trade disputes that are sometimes detrimental to their economies and their relationships at large. Sometimes, resolving these disagreements in court takes a lot of valuable time and money, and so parties may decide to seek the services of an arbitrator or arbitrators to resolve the disputes amicably.

However, in spite of all the good intentions of international commercial arbitration, the questions remain whether the arbitral awards can effectively and successfully be implemented. Similarly, another question remains whether these awards are already being successfully applied in real life situations or whether their robustness and effectiveness only exist in theory as opposed to in practice. To accurately reach an answer to these questions, it is imperative that extensive research is conducted and evaluated. One of the most relevant sources of acquiring these answers is through the analysis of the UK Arbitration Act 1996.

The primary objective of arbitration is to help conflicting parties avoid court sessions and procedures that are often cost and time-consuming and follow strict rules and regulations. Strict regulations and time and cost consumption are not contributory factors when it comes to business because in this case, time is money. This situation is especially the case in international business agreements where the stakes of the parties are unpredictably involved.

However, this does not mean that arbitrations are entirely informal and conducted in dubious ways. The conflicting parties have the freedom of choosing their judges who in turn have the chance to select a chief arbitrator who is entirely impartial to avoid potential favoritism. In other cases, a single arbitrator accepted by both disputing parties may get chosen. In either case, the appointed arbitrators are expected to be completely neutral and unbiased during the arbitration process. Arbitration reference is governed under the arbitration clause within the trade or issue under conflict.

It is usually recommended that the arbitration does not take place in either of the conflicting party's country; instead, it should happen in a different country altogether. When this happens to be the case, it becomes even more complicated to select the state in which the process would take place. The selection of the law to govern the arbitration and contract also depends on the location where the agreement was executed. However, the question often remains how the arbitration award would be implemented and enforced.

The arbitration laws must make sure that the award is capable of being implemented in the state in which the liable parties under the award are located or where the assets of the parties' are being held. The implementation also often depends on the award's finality because in the cases of concerns regarding substantive law, the complaining party is allowed to appeal against the award. In this case, therefore, another question arises.The problem would be how far the liable party would frustrate the implementation of the award under one or another pretext. Award enforcement or implementation is essential because if not correctly applied, the purpose of the entire arbitration then becomes utterly futile.

Therefore, a succinct and critical examination of the role of international arbitrators is crucial if the arbitration process is to be entirely understood. This examination is important because arbitrators play a significant role in determining the outcome of any international commercial conflict; thus they are expected not only to be fair but also neutral and non-partisan throughout the whole process. This paper, therefore, examines the crucial role of arbitrators in the arbitration process, case studies of incidents where arbitral awards failed to be enforced, and the vital impact of enhancing the legitimacy of arbitration.

Justification of the Study

As discussed above, choosing to resolve disputes through litigation has been found to be time-consuming, expensive, and sometimes inefficient. Additionally, arbitral awards are far more likely to be enforced following an arbitration process than they would be in courts. Similarly, businesses are much more likely to maintain their privacy and their business relationship by using arbitration as opposed to using litigation. Therefore, conducting this research on the roles of arbitrators and some of the issues that may lead to non-enforcement of arbitral awards is important because it will enable the researcher to contribute substantially to the knowledge of the role played by arbitrators. Understanding the roles of arbitrators in the arbitration process will help inform business parties of what to expect during the arbitration process which will, in turn,lead to better chances of arbitral awards being enforced. Similarly, focusing on issues that may lead to awards not being enforced will help business parties as well as arbitrators to avoid them thus making the whole arbitration process more successful for disputing parties.

Primary Questions

What is international commercial arbitration?

Who are the main participants in the arbitration process?

What are some of the primary roles of arbitrators?

What are some of the circumstances that may lead to refusal of enforcing arbitral awards?

What are some of the cases where arbitral awards failed to be enforced?

Literature Review

Before focusing on the international roles of arbitrators in commercial disputes, it is crucial to have an accurate understanding of the contexts under which present commercial operations take place. With the growingrole that globalization has in the world of trade and commercial activities, it is essential that commercial activities get protected from the potential damage of individuals with vested interests. Before considering the question of award enforcement, it is important first to examine the implementation of the arbitral agreement. It means that in arbitration, enforcement of the arbitral agreement and the final award are the two most significant things to be considered. International courts broadly analyze and interpret the order and agreement parties to submit to arbitration processes.

According to Born, (2016) the level of enforcement of the arbitral agreement becomes easier when parties adhere to the New York Convention Act because over 135 countries in the world are signatories to it. Based on the UNICITRAL Model Law, the national arbitration legislation provides for the enforcement of international agreements and awards. Another issue is forum selection. Cooley, Heard and Walker (2015) state that although there are specific industry arrangements and forums; the New York Convention is the most widely preferred and used forum for international commercial arbitration. Some countries place restrictions on forum selection by demanding a reasonable relationship to exist between the conflicting parties and the selected forum. The New York Convention steers enforceability of the arbitral award by applying conducive national forms of arbitration legislation in member countries.

However, Rodriguez (2018) argues that enforcement of the arbitration award has become an issue of concern and many parties recommend for it to be implemented so as not to defeat the whole purpose of arbitration. The ability to enforce the arbitral award significantly enhances the role of international arbitration as a resolution strategy. It is the most important way through which international trade can be protected and safeguarded. International arbitration has numerous advantages for trade dispute resolution as compared to litigation by courts. For a business person, it is challenging to be in a foreign court because they are not conversant with the court procedures and the laws applied. Rodriguez adds that arbitrators ensure the application of mutually acceptable laws and procedures as compared to foreign judges who cannot be predicted. The arbitrator can be loyally trusted because their duty bounds them to make enforceable awards and some rules explicitly obligate arbitrators to do this.