International commercial arbitration is a consensual process of adjudication independent from a state’s executive, legislative and judicial powers by which the Parties to a cross border contract agree to submit a dispute to an arbitrator (or panel of arbitrators, usually three), nominated either directly by the Parties or for the Parties by an international arbitration institution (or more rarely by a national court), to resolve their dispute by way of issuance of a final and binding award in accordance with rules of procedure chosen by the Parties allowing them the opportunity to be heard.
International commercial arbitration is to be opposed to other processes which do not lead to a final and binding resolution of the dispute. For example, mediators and conciliators are neutral third parties who intervene within the Parties’ contractual relationship to facilitate and seek an agreement or propose a settlement solution, but lack the power to adjudicate the dispute.
International commercial arbitration is also to be opposed to an expert determination which is often provided for in technical and construction contracts in cases of disagreements relating to accounting, engineering, etc. whereby an expert renders a resolution binding upon the Parties after having conducted an investigation on the basis of his/her own expertise and knowledge. In this case, the research and investigation occurs independently of the Parties which do not have an opportunity to be heard in respect of the specific disagreement referred to the expert.
International commercial arbitration has become the dispute resolution mechanism of choice for many Parties to commercial contracts as its main advantages include neutrality, procedural flexibility and party autonomy, greater privacy and confidentiality than national court litigation and the submission of the dispute to a panel of experts. International commercial arbitration is different from national court litigation as it is intended to be less formal and more practical focused on the commercial substance of the dispute.
The foundation for the process of international commercial arbitration is the international arbitration agreement most often contained in the contract which records the Parties’ consent to refer the dispute to arbitration rather than national domestic courts and be finally bound by the final award rendered by the international arbitration tribunal constituted specifically to hear the dispute.