Published online by Cambridge University Press: 05 June 2012
Arbitration is a private system of adjudication. Parties who arbitrate have decided to resolve their disputes outside any judicial system. In most instances, arbitration involves a final and binding decision, producing an award that is enforceable in a national court. The decision makers (the arbitrators), usually one or three, are generally chosen by the parties. Parties also decide whether the arbitration will be administered by an international arbitral institution, or will be ad hoc, which means no institution is involved. The rules that apply are the rules of the arbitral institution, or other rules chosen by the parties. In addition to choosing the arbitrators and the rules, parties can choose the place of arbitration and the language of arbitration.
Arbitration thus gives the parties substantial autonomy and control over the process that will be used to resolve their disputes. This is particularly important in international commercial arbitration because parties do not want to be subject to the jurisdiction of the other party's court system. Each party fears the other party's “home court advantage.” Arbitration offers a more neutral forum, where each side believes it will have a fair hearing. Moreover, the flexibility of being able to tailor the dispute resolution process to the needs of the parties, and the opportunity to select arbitrators who are knowledgeable in the subject matter of the dispute, make arbitration particularly attractive. Today, international commercial arbitration has become the norm for dispute resolution in most international business transactions.