Globalization is the process of interacting with people, companies and governments across the globe leading to the integration of markets in the global economy thus increasing the interconnectedness of national economies. An increase in cross-border trade in goods, services, technology and flows of investment, people and information has created a growing interdependence of the world’s economies, cultures and populations. Fueled by globalization, this interaction between people on an international level has led to the formation of business contracts and partnerships between companies and individuals not residing in the same location. So, when disputes arise, there is always a question of jurisdiction that comes up. With litigation, courts with competent jurisdiction are usually decided based on factors such as place of residence, place of work, place where dispute arose etc. but with Alternate Dispute Resolution (ADR) mechanisms, parties have the freedom to choose the procedure, place of resolution and the neutral third party who facilitates the discussion. With arbitration – one of the methods of ADR, there needs to be an arbitration clause in the contractual agreement between parties which refers all future or existing disputes to arbitration. When this contract is between parties from around the globe, the rules of International Commercial Arbitration come into play.
International commercial arbitration is a means of resolving disputes arising under international commercial contracts and it is used as an alternative to litigation, much like other methods of ADR. The terms of an arbitration proceeding are usually pre-decided and controlled by the guidelines in the arbitration clause rather than national legislation or procedural rules. This is especially useful when the contract is of a cross-border nature because it avoids further disagreements relating to application of domestic law and procedure which would create a delay in resolution.
When the whole world realized the need for speedy disposal of cases relating to business matters, many Conventions and Protocols were discussed and ratified at an international level. In 1923, the Geneva Protocol on Arbitration Clauses recognized the validity of the arbitration clause which is now the quintessential element of arbitration on the international platform and under various domestic laws, and three years later in 1927, the Convention recognized the enforceability and binding nature of an arbitration award. With domestic arbitration being recognized and legally enforceable, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, allowed for the acknowledgement of non-domestic arbitral awards or foreign awards to be given the same enforceability as domestic arbitral awards or judgements proclaimed in that jurisdiction. The New York Convention was an important milestone for international commercial arbitration as it gave foreign arbitral awards the same recognition as domestic awards, thus making foreign awards enforceable in any jurisdiction.
The guidelines under all these Conventions were worked upon and consolidates by the United Nations, in 1985, with the adoption of the UN Commission on International Trade Law (UNCITRAL) that provided a model law for international commercial arbitration and since then, numerous countries, including India, have given recognition to the Model in their respective domestic legal systems.
With the advent of international commercial arbitration, a new avenue was created for individuals governed by different jurisdictions to resolve a dispute on their own terms, more or less, and not be burdened by the backlog of cases that make the traditional route for resolution a struggle.
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