VI. Distinction from other Means of Alternative Dispute Resolution

So far we only focused on the differences between international commercial arbitrations and state court proceedings. Yet, bearing in mind that arbitration is a method of alternative dispute resolution (also known as external dispute resolution or ADR), it seems reasonable to take a closer look as well at the similarities and differences between international commercial arbitration and other methods of alternative dispute resolution. Methods of alternative dispute resolution include among others arbitration, conciliation, mediation and negotiation. They all have in common that they are processes or techniques of solving a dispute between two or more parties by means other than litigation. Still, significant differences between the numerous types of alternative dispute resolution remain of which those, which are most important for understanding international commercial arbitration, shall be explained in the following.

1.                  Mediation and Conciliation

Mediation and arbitration – like most methods of alternative dispute resolution – have in common that the parties can more or less freely choose the person(s) mediating or arbitrating their conflict. Yet, the goals of arbitration and mediation widely differ: While it is the task and the ambition of a mediator to reach an acceptable agreement between the conflicting parties, it is the purpose of an arbitral tribunal to render an award comparable to a court judgment. Consequently, a mediator’s role is that of a neutral moderator trying to guide the parties to understand each other’s actions in order to find a consensus between the parties. In contrast to that, the role of an arbitrator resembles that of a judge that decides the dispute independently of the parties’ will. Hence, mediation can be of interest to the conflicting parties especially in cases of ongoing long-term business relationships where both parties are still interested in being on good terms with each other. On the contrary, parties may rather benefit from arbitration proceedings when it is of particular concern to them that it is guaranteed that there will be a binding decision at the end of the process.

Conciliation very much resembles mediation in that a conciliator does not decide over the parties’ dispute but tries to seek concessions of both parties instead. Yet, in conciliation the parties hardly ever meet face to face but only meet the conciliator. In mediation the parties negotiate an agreement face to face with the help of the mediator.


2.                  Investor-State Arbitration, Sports Arbitration and WIPO Arbitration

Along with international commercial arbitration there are other types of arbitration; the most important of those being investor-state arbitration, sports arbitration and WIPO arbitration.

Investor-state arbitration often comes into effect when a conflict arises between a party investing in a foreign state and the state in which the investment was made. It is often associated with arbitrations under the aegis of the International Centre for Settlement of Investment Disputes (ICSID) by the World Bank. Yet, while arbitrations administered by ICSID are maybe the most commonly chosen form of institutionalized investor-state arbitration, they are only one out of several options of institutionalized investor-state arbitration used in practice. As is the case in any arbitral proceeding, a vital precondition for investor-state arbitration is that all parties to the arbitration must have agreed to have their dispute settled by means of arbitration instead of litigation. In most cases, this will be through bilateral investment treaties (BITs), international trade treaties or international investment agreements concluded by the home state and the host state of the investor. Yet, also investment agreements between the host state and the investor can include an arbitration agreement.

More often than in arbitrations between private parties, investor-state arbitration is criticized for a lack of transparency due to the obligation of confidentiality which in the vast majority of arbitrations is agreed upon by the parties. A current example for investor-state arbitration, which is often criticized for the named reason, is the proposed free trade agreement between the European Union and the United States of America (known as Transatlantic Trade and Investment Partnership (TTIP) or Transatlantic Free Trade Area (TAFTA)).

Another popular field of arbitration is sports arbitration before the Court of Arbitration for Sport (CAS). Traditionally, it has been set up to settle disputes arising between athletes and the International Olympic Committee at the Olympic Games. More recently, it has also been used to solve for example transfer disputes within professional association football and doping issues. Again as any field of arbitration, an agreement to arbitrate between the conflicting parties is an indispensable prerequisite for any sports arbitration.

Another specialized field of arbitration is that of arbitrations under the administration of the World Intellectual Property Organization (WIPO). WIPO offers specialized arbitration under administration of the WIPO Arbitration and Mediation Center for the settling of national or cross-border intellectual property disputes. Like most arbitral institutions, the WIPO Arbitration and Mediation Center offers its own rules that the parties can agree upon (the WIPO Arbitration Rules).

3.                  Domestic Commercial Arbitration

Although arbitration is particularly popular when it comes to commercial cross-border disputes, also national commercial arbitration is commonly used. In principle, domestic commercial arbitration is very much alike international commercial arbitration. Yet, details may vary depending on the arbitration law of the state of the seat of the arbitration (the arbitration law of the seat of the arbitration is referred to as the lex loci arbitri). In most cases, commercial arbitration can be seen as international if there are two or more states involved considering the parties, the seat of arbitration and the place of the contractual performance. Moreover, the parties to arbitration proceedings can conclude an agreement to have their proceedings governed by the provisions concerning international commercial proceedings, provided that the agreement does not conflict with any mandatory provisions of the lex loci arbitri.

Last modified: Sunday, 30 August 2015, 9:38 PM