COMMERCIAL ARBITRATION: ADVANTAGES IN RESOLVING COMMERCIAL DISPUTES
When commercial disputes arise, the parties have the right to choose between resolution by a Court or by a commercial arbitration. Dispute resolution by arbitration may only proceed if the parties have a valid arbitration agreement, which may be established either before or after the dispute arises. Pursuant to Clause 1 Article 3 of the Law on Commercial Arbitration 2010, “Commercial arbitration means a mode of dispute settlement agreed by the parties and to be conducted under this Law.”
In other words, commercial arbitration is a non-governmental dispute resolution mechanism, where independent arbitrators, selected and entrusted by the disputing parties, adjudicate the case. This method balances the parties’ freedom of contract with the binding legal effect of arbitral awards.
1. Ensuring confidentiality and protecting business reputation and trade secrets
One of the outstanding advantages of commercial arbitration is its ability to protect business secrets and the professional reputation of the parties. According to Article 4 of the Law on Commercial Arbitration 2010, dispute settlement by arbitration shall be conducted in private unless otherwise agreed by the parties. In the context where commercial disputes often involve sensitive information, this constitutes a significant advantage over the principle of public hearings applied in court proceedings.
2. Flexible procedures
Unlike the rigid procedural framework of court litigation, commercial arbitration proceedings are structured on the principle of maximum respect for party autonomy. The parties are free to agree upon procedural matters, including the language of arbitration, the seat of arbitration, and the applicable law in cases involving foreign elements, as stipulated under Articles 10, 11, and 14 of the Law on Commercial Arbitration 2010. This autonomy enables the parties to tailor the dispute resolution mechanism to suit the specific characteristics and complexities of their dispute.
3. Finality and Binding Effect of Arbitral Awards
In contrast to multi-tiered judicial systems, arbitral awards are final and binding upon issuance. Pursuant to the law, an arbitral award has the same legal effect as a court judgment and is enforceable against the parties to the dispute. No appeal or review may be lodged against an arbitral award, except for limited circumstances where annulment is permitted under the applicable legal provisions.
4. Preservation of Business Relationships
Arbitration proceedings often foster a cooperative environment, encouraging the parties to engage in negotiations, express their respective interests, and reach mutually acceptable agreements during the arbitral process. As a result, commercial arbitration is widely regarded as a constructive dispute resolution mechanism that mitigates adversarial tensions, unlike the confrontational nature of litigation.
5. International Recognition and Enforcement of Arbitral Awards
Thanks to international instruments such as the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, arbitral awards enjoy broad recognition and enforceability across most contracting states. This provides significant advantages for enterprises engaged in cross-border trade in an increasingly globalized economy.
In conclusion, commercial arbitration constitutes an effective dispute resolution mechanism that harmonizes party autonomy with binding enforceability, while simultaneously preserving the stability of commercial relations between the parties. Compared to negotiation, mediation, and litigation, commercial arbitration continues to demonstrate its superior advantages within the modern business environment.
In other words, commercial arbitration is a non-governmental dispute resolution mechanism, where independent arbitrators, selected and entrusted by the disputing parties, adjudicate the case. This method balances the parties’ freedom of contract with the binding legal effect of arbitral awards.
1. Ensuring confidentiality and protecting business reputation and trade secrets
One of the outstanding advantages of commercial arbitration is its ability to protect business secrets and the professional reputation of the parties. According to Article 4 of the Law on Commercial Arbitration 2010, dispute settlement by arbitration shall be conducted in private unless otherwise agreed by the parties. In the context where commercial disputes often involve sensitive information, this constitutes a significant advantage over the principle of public hearings applied in court proceedings.
2. Flexible procedures
Unlike the rigid procedural framework of court litigation, commercial arbitration proceedings are structured on the principle of maximum respect for party autonomy. The parties are free to agree upon procedural matters, including the language of arbitration, the seat of arbitration, and the applicable law in cases involving foreign elements, as stipulated under Articles 10, 11, and 14 of the Law on Commercial Arbitration 2010. This autonomy enables the parties to tailor the dispute resolution mechanism to suit the specific characteristics and complexities of their dispute.
3. Finality and Binding Effect of Arbitral Awards
In contrast to multi-tiered judicial systems, arbitral awards are final and binding upon issuance. Pursuant to the law, an arbitral award has the same legal effect as a court judgment and is enforceable against the parties to the dispute. No appeal or review may be lodged against an arbitral award, except for limited circumstances where annulment is permitted under the applicable legal provisions.
4. Preservation of Business Relationships
Arbitration proceedings often foster a cooperative environment, encouraging the parties to engage in negotiations, express their respective interests, and reach mutually acceptable agreements during the arbitral process. As a result, commercial arbitration is widely regarded as a constructive dispute resolution mechanism that mitigates adversarial tensions, unlike the confrontational nature of litigation.
5. International Recognition and Enforcement of Arbitral Awards
Thanks to international instruments such as the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, arbitral awards enjoy broad recognition and enforceability across most contracting states. This provides significant advantages for enterprises engaged in cross-border trade in an increasingly globalized economy.
In conclusion, commercial arbitration constitutes an effective dispute resolution mechanism that harmonizes party autonomy with binding enforceability, while simultaneously preserving the stability of commercial relations between the parties. Compared to negotiation, mediation, and litigation, commercial arbitration continues to demonstrate its superior advantages within the modern business environment.
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