Advantages of Arbitration

Arbitration has long been a favored means of resolving commercial disputes. Compared with other methods of dispute resolution, arbitration has the following advantages:

Party Autonomy

In arbitration, the parties are free to appoint arbitrators of their own choice, to select the place and language of arbitration and to determine the applicable laws. The parties may also design the arbitration proceedings to meet their special needs by agreeing on the organization of hearings, submissions of proof, and presentations of arguments. If the parties fail to reach  such an agreement, it is largely left to the discretion of the arbitral tribunal of the case. As a result, arbitration is much more flexible than the often rigid procedures and timetables of national courts.

Final and Binding

Although parties to commercial contracts have a number of options to resolve their disputes, only litigation and arbitration can provide a binding and enforceable decision. Unlike the judgments made in litigation of first instance, arbitral awards  become final and binding on the parties as soon as rendered. Even though arbitral awards may either be set aside by courts in the country where the arbitral awards are made, or be denied recognition and enforcement by courts in the country where enforcement is sought, the grounds of challenge available against the arbitral awards are very limited and in international arbitrations usually could only be based on procedural matters.

Confidentiality

Arbitration proceedings are not open to the public. Thus, business secrets and the reputation of the parties can be effectively protected.

International Recognition and Enforcement of Arbitral Awards

Pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention of 1958), which has been acceded to by 144 countries so far, arbitral awards may be recognized and enforced in these contracting states. There are several other international arbitration conventions and treaties that may also help the enforcement. China acceded to the New York Convention in 1987 and its entry into the Convention is subject to commercial and reciprocity reservations.