Issue 8 (3/21)
The common wisdom is that arbitration is the preferred mode of resolution in international business disputes. The development of international trade and domestic economic activity globally, has led to a significant increase in the number of the cases resolved by way of arbitration.
In the Malayan Law Journal publication entitled “The Relevance of Arbitration in Resolving Disputes“, I explore the conceptual distinction between litigation and arbitration, followed by the hallmark advantages of arbitration in the context of business disputes. The general preference for arbitration in certain industries and international trade has little to do with the advantages of speed and cost-saving, which are often emphasised in arbitration textbooks and conferences. In fact, it is rare for these factors to be taken into consideration in modern commercial relationships.
When embarking on arbitration, parties would have to consider costs of hiring a venue, fees of the arbitral tribunal arbitral institution’s administrative fee among others, which would otherwise not be incurred in court litigation. The main reason behind increasing arbitration clauses in commercial contracts is simply the unwillingness of the parties to resort to court litigation. Ironically, this comes with the caveat that the courts do have an important supportive and supervisory role in relation to arbitrations. Parties revert to them when absolutely essential.
Further, with the outbreak of the COVID-19 pandemic, the logistical and procedural advantages that arbitration has to offer despite the geographical placement of parties and arbitrators, makes it a compelling choice to international disputants. However, one factor to bear in mind would be that the uprooting of contractual relations in the COVID-19 world may require an act of balancing of equities. While such a power is vested in the courts, such a power can only be exercised by arbitral tribunals when they are authorised to do so by a party. In my experienced view, this issue may not go too far in dissuading a party from arbitrating a dispute since it is not entirely impossible for an arbitral tribunal to do complete justice while remaining within the contractual limits of its jurisdiction.
Arbitration will remain as the preferred method of solving international commercial disputes as opposed to commercial litigation. The development of international trade and domestic economic activity in the world has led to a significant increase in the number of the cases resolved by way of arbitration. So long as arbitration maintains its promise of a fair trial by an impartial arbitral tribunal and its goodwill in the dispute resolution ecosystem, many domestic and foreign parties will continue to perceive arbitration as the preferred and natural mode for resolution.
Datuk Professor Sundra Rajoo
President of the Asian Institute of Alternative Dispute Resolution (AIADR)
23 March 2021
Disclaimer: This Brevi Nota does not and is not intended to constitute legal advice. All information, content, and materials are for general informational purposes only.