Introduction to International Arbitration

International arbitration is the preferred method globally for resolving cross-border disputes.¹ The neutrality and flexibility it offers, together with the relative ease of enforcing arbitration awards (the equivalent of court judgments), can make it a more attractive forum for disputes than litigating in contracting parties' national courts. Its sophistication continues to develop and its popularity to grow. But how does it work? Who decides the dispute? And according to what laws and processes?

This Quickguide provides an introduction to international arbitration, its key characteristics and concepts, to explain how arbitration works in practice. It concludes with a comparison between arbitration and court litigation.

What is arbitration?

Arbitration is a method of dispute resolution that provides parties with a final and binding outcome. Generally regarded as an alternative to court litigation, the parties agree that they will submit their disputes to an appointed decision-maker (an arbitrator), or panel of arbitrators (the tribunal). This is typically done by providing for disputes to be resolved by arbitration in the parties' contract, or contracts, relating to a particular transaction (the arbitration agreement). The existence of a valid arbitration agreement means that state courts should refuse to hear disputes falling within the scope of that agreement and it may be possible to restrain a counterparty, which has agreed to arbitration, from seeking to resolve a dispute in another forum.

The arbitration agreement should contain a clear and unequivocal agreement by the parties to submit their disputes for final determination by arbitration. In order to be effective, it should also address issues including the number of arbitrators and how they are to be appointed, the legal place or 'seat' of the arbitration, and the procedural rules that will govern it. These issues are discussed further below.

The tribunal will generally give its reasoned decision (the award) following a hearing, at which each party will have the opportunity to present its case and test witness and expert evidence. If appropriate, arbitrations can be conducted on paper only, for example, where the sums or issues in dispute do not justify the time and cost a hearing will incur. Generally, the tribunal will decide the dispute in accordance with the law governing the relevant contract. 

The summary above applies to the resolution of commercial disputes by arbitration.

Separately, where an investor makes a cross-border investment and disputes arise in relation to that investment with the state in which it was made, the investor may be protected by a bilateral or multilateral investment treaty. Many of these treaties allow an investor to seek to enforce these protections directly against the host state in arbitration. Investment treaty arbitration differs from commercial arbitration in several key respects and is the subject of a separate Quickguide (see our Quickguide, International Investment Protection). The remainder of this Quickguide focuses on the resolution of commercial disputes. 

Why arbitrate

International arbitration and litigation differ in several respects, and dispute resolution lawyers will always advise clients to choose the method of dispute resolution that puts them in the strongest position, should a dispute arise in future. While each means of dispute resolution has its pros and cons, and the decision as to which one is best suited in a particular instance requires a fact-specific inquiry, users of international arbitration consistently identify several features as advantageous for resolving complex international disputes:

• the wide enforceability of international arbitral awards, with very limited rights for award debtors to oppose enforcement;
• the confidentiality and privacy that attaches to arbitration proceedings in many jurisdictions, and which the parties can also provide for by agreement;
• the ability to choose a neutral seat of arbitration;
• party autonomy and procedural flexibility, meaning that the arbitration process can be tailored to the parties and their transaction;
• the ability to appoint the tribunal, including selecting arbitrators with relevant sectoral expertise or particular experience, where appropriate; and
• the comparative finality of arbitration, which follows from the fact that arbitral awards are subject to limited rights of challenge (unlike court judgments, which may be subject to multiple levels of appeal).

Each of these topics is addressed in more detail below (see Key characteristics of international arbitration). An overview of the key differences between arbitration and litigation is also set out at the end of this Quickguide.

Key concepts

The seat of the arbitration

In order to understand how arbitration works, it is important to understand the significance of the "seat" or "place" of the arbitration. When parties agree to arbitration, they should specify the seat of the arbitration in their arbitration agreement. Typically, parties specify a city, for example, London, Paris or Singapore. The choice of seat anchors the arbitration to a particular jurisdiction and gives it a "nationality", so in our example, English, French or Singaporean. This is significant for various reasons, including the legislative framework, involvement of the national courts at the seat and the enforcement of awards. 

The choice of a particular seat does not mean that every stage of an arbitration must take place there. For example, the seat could be Singapore but the parties may agree (or the tribunal might direct) that hearings should take place in Hong Kong or indeed that the hearing should take place virtually.

Legislative framework

The law of the seat will determine the fundamental procedural framework of the arbitration (sometimes referred to as the "lex arbitri" or curial law). It will prescribe the key procedural foundations relating to arbitration in that jurisdiction and determine the outer limits of an arbitration, including the categories of dispute (such as criminal law matters), which are not arbitrable, that is, not capable of settlement by arbitration.

Most jurisdictions have specific legislation governing arbitrations seated there. Many of these laws are based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the Model Law). This instrument is intended to bring a degree of consistency and familiarity to arbitral practice around the world, and it has been a success in this regard. Arbitration laws modelled on, or influenced by, the Model Law have been adopted in over 125 jurisdictions worldwide.

Party autonomy and procedural flexibility on matters such as the appointment of the tribunal and the procedures to follow in the arbitration are at the heart of most sophisticated arbitration laws, including those based on the Model Law. It follows that these laws typically contain both mandatory and non-mandatory provisions. The former provide an essential core of rules from which the parties cannot derogate, including the more fundamental aspects of the process, such as procedural fairness and the duties of the tribunal, arbitrators' obligations to remain independent and impartial, and certain limited rights to challenge awards. Typically, they will also prescribe the essential form requirements for a valid arbitration agreement and formalities for an award. 

In addition, arbitration laws will set out a further, default framework for the arbitral process, which addresses the essential features of arbitration (such as the powers exercisable by the tribunal and how arbitrators may be appointed and removed), but from which the parties can depart by agreement. This allows the parties to tailor the process to their needs and preferences, whether on a bespoke basis in their arbitration agreement or through the adoption of a set of institutional or ad hoc arbitration rules (as to which, see our QuickGuide: International arbitration: Which institution?).

Support of the courts

A national arbitration law will also give powers to the courts of the seat in relation to certain aspects of the arbitration. Broadly speaking, these include issues such as the ability of the parties to seek the court's support (for example, an order to freeze assets or obtain evidence), the (limited) ability to challenge a tribunal's award, and provisions on enforcement. The national law, and the general attitude of the judiciary in a country, will determine how supportive or interventionist those courts will be. Interventionist jurisdictions, where courts interfere in the arbitral process to the detriment of its autonomy, are to be avoided. 

Enforcement

The "nationality" of the arbitration, determined by the seat, extends to the award. So, for example, an award rendered by a London-seated tribunal will be regarded as English. This is significant when it comes to enforcement. 

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958 (the New York Convention). is key when considering enforcement of international arbitration awards. An international treaty to which more than 170 countries are party, it requires contracting states to recognise and honour written arbitration agreements, and to recognise and enforce arbitral awards. 

In relation to enforcement, the New York Convention applies to awards made in the territory of a state other than the one where enforcement is sought. Essentially, the New York Convention operates as a "passport scheme" for awards, allowing for simpler enforcement processes and prescribing very limited grounds on which enforcement can be resisted by an award debtor. This is discussed further below. 

The choice of seat is, therefore, critical as it dictates the legislative framework within which the arbitration will proceed, the level of support the courts of the seat will provide and the enforceability of any award. The most popular seats selected in international arbitration include: London, Singapore, Hong Kong, Paris, Beijing, New York and Geneva.²

Institutional or ad hoc arbitraton?

While the seat of arbitration determines the fundamental legal framework for an arbitration, it is principally the procedural rules agreed on by the parties, together with procedural directions issued by the tribunal, that govern an arbitration's conduct. The process of drafting procedural rules for an international arbitration is complex and there numerous legal, procedural and administrative issues to consider. Various arbitral institutions exist worldwide, each of which offers its own set of arbitration rules and assists in administering arbitrations conducted under those rules. This is institutional arbitration. The alternative is ad hoc arbitration, where the arbitration process is managed and administered by the parties and the tribunal. 

Therefore, the parties have a fundamental choice at the outset: whether to opt for institutional arbitration, where they entrust the administration of their arbitration to an arbitral institution applying its rules and procedures, or ad hoc arbitration, where the process goes ahead without institutional backing and support. While some particular sectors have an established practice of using ad hoc arbitration, institutional arbitration will generally be preferable, as explained below.

Institutional arbitration

Institutional arbitration involves incorporating the rules of an arbitral institution into the parties' arbitration clause by reference. That institution will then administer the arbitration under its rules. Although less comprehensive than civil procedural rules in national courts, institutional rules are designed to set out a detailed framework for the proceedings from beginning to end. The support offered by an institution in administering an arbitration under its rules takes a, potentially significant, administrative load off the tribunal and the parties. It may also be particularly useful where a counterparty is refusing to co-operate in the arbitral process, as the institution can assist with matters such as constituting the tribunal. 

There are many institutions around the world to choose from. Popular institutions include the:

• International Court of Arbitration at the International Chamber of Commerce (ICC).
• Singapore International Arbitration Centre (SIAC).
• Hong Kong International Arbitration Centre (HKIAC).
• London Court of International Arbitration (LCIA).
• China International Economic and Trade Arbitration Commission (CIETAC).³

Arbitral institutions charge for their services and maintain cost and fee schedules, setting out their fees and also the fees that will be charged by the tribunal (often determined by reference to the amount in dispute). This brings a degree of certainty and transparency to costs, which may be absent from ad hoc arbitrations.

The choice of a particular institution and its rules does not mean that the arbitration must be seated in the jurisdiction where that institution is headquartered, nor that events such as hearings need to take place there. For example, the ICC, which is headquartered in Paris, administers arbitrations seated, and taking place, in jurisdictions around the world.

Ad hoc arbitration

Ad hoc arbitrations are conducted without the involvement of an arbitral institution. The parties can rely simply on the framework provided by the arbitration law at their chosen seat of arbitration, and leave it to party agreement and the arbitral tribunal (once constituted) to determine all aspects of the procedure. In theory, they can even draft the arbitral rules themselves (although this is rare, creates its own risks and is not generally advisable). Another common option is for the parties to adopt a set of non-institutional rules, specially written for ad hoc arbitration. The UNCITRAL Arbitration Rules,⁴  are widely used for this purpose. In addition, there are various sets of arbitral rules designed for ad hoc arbitrations in particular sectors, such as the London Maritime Arbitrators Association (LMAA) Terms for maritime disputes

Ad hoc arbitration lacks the "support net" of an institution and depends for its full effectiveness on a spirit of co-operation between the parties, which may well be lacking by the time disputes arise. The potential challenges that may arise in arbitration more generally, such as the ability of a recalcitrant party to delay proceedings, are more likely in ad hoc arbitration, which in turn will likely increase costs. The parties will also have to deal with additional administrative issues, such as negotiating arbitrators' fees. In addition, certain jurisdictions only recognise institutional arbitration, potentially making enforcement of awards rendered in ad hoc arbitration harder to enforce. 

Although the use of ad hoc arbitration avoids the need to pay institutional fees, the lack of administrative support, meaning that the tribunal will have to undertake more case management functions, and the greater opportunity for a party to disrupt or delay proceedings, means that the potential for cost savings may be illusory.

Unless the parties are sophisticated users of arbitration or trade practice in a particular sector dictates the use of ad hoc arbitration, institutional arbitration is generally preferable.

Key characteristics of international arbitration

Party consent

Arbitration relies on party consent. Unlike national courts, an arbitral tribunal has no inherent jurisdiction to decide a dispute. Instead, the tribunal derives its jurisdiction from the parties' agreement to submit their dispute to it. Only if all parties to the dispute have agreed to submit their disputes to arbitration, and the dispute that has actually arisen falls within the scope of that agreement, will the tribunal have jurisdiction. Parties will usually provide for this by inserting an appropriately drafted arbitration clause into their agreement. For further guidance, see our Ashurst Quickguide on International Arbitration Clauses.

One important consequence of the consensual nature of arbitration is that, unlike national courts, arbitral tribunals are often unable to join additional parties to the dispute resolution procedure or consolidate related arbitral proceedings. Many arbitral institutions have revised their rules to in an attempt to address this limitation. However, absent consent, it is not possible to join true third parties, who have not submitted to arbitration, and can still be difficult to join a additional parties or consolidate multiple arbitrations. By comparison, in court litigation third-party defendants can, in appropriate circumstances, be joined to a proceeding without their consent, provided they fall within the relevant court's jurisdiction.

Neutral

Arbitration can offer dispute resolution in a neutral forum. The seat of arbitration can be a jurisdiction independent from either of the parties and, although the courts of the seat where the arbitration is situated may have some role to play in supporting and supervising the arbitration, it is generally left to the arbitrators to determine their jurisdiction, the process to be followed and the merits of the dispute. Often, tribunals comprise arbitrators of different nationalities, which adds to the neutrality of the process and the ultimate decision. 

Choice

The parties to an arbitration have considerable choice in determining how, where, by whom, and in what language their dispute is resolved. Of particular importance to the parties is the choice of decision-maker. Unlike commercial litigation, where disputes are resolved by state-appointed judges, parties to an arbitration can require (through their arbitration agreement) that individuals have particular qualifications or experience to be eligible for appointment as arbitrator, and also play a role in selecting the arbitrators appointed to resolve a particular dispute. 

This is especially advantageous in the context of technical matters, which require particular expertise, or where parties are from different jurisdictions and each wants to appoint an arbitrator from either their own jurisdiction or one they perceive as neutral.

Privacy and confidentiality

Arbitration is particularly advantageous for commercial parties because of the privacy and confidentiality that it can offer. Hearings generally take place in private. Parties can agree that the hearing and evidence, and any other material created or disclosed in the proceedings, will be kept confidential, and that they (as well as the arbitrators and any institution involved) will not disclose any information about the arbitration, including the final award. In comparison, court documents, judgments and hearings are generally public.

Finality

Most arbitral laws do not allow for any appeal against the award, providing for only limited circumstances in which an award can be challenged. Permissible grounds of challenge typically focus on the tribunal's substantive jurisdiction and alleged procedural irregularities that impact parties' due process rights. In addition, the choice of certain institutional rules can further limit the parties' scope to challenge the award. This means that parties may avoid the cost of protracted appeal processes, which can be a feature of court litigation.

Enforceability

The ease of enforcement of arbitral awards is viewed as a key advantage of arbitration. Enforcement is facilitated by the New York Convention, which obliges each contracting state to recognise arbitration awards rendered in another jurisdiction as binding and to enforce them in accordance with its procedural rules. With over 170 signatory countries to the New York Convention, including most of the world's leading trading nations,  this is a very significant instrument. 

It is to be noted that some contracting states only apply the New York Convention on a reciprocal basis to awards rendered in the territory of other contracting states, while some apply the so-called commerciality reservation, meaning they will only recognise and enforce awards relating to differences arising out of legal relationships considered to be commercial under their national law.

Crucially, the New York Convention starts from the presumption that awards will be enforced and does not permit any substantive review of the award by a court considering an enforcement application. Instead, the Convention provides an exhaustive set of grounds on which a court may refuse to recognise and enforce an award rendered in another jurisdiction. At the request of the party opposing enforcement, a court may refuse enforcement, where it is proved that:

• a party to the arbitration agreement was under some incapacity;
• the arbitration agreement was not valid;
• a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
• the award goes beyond the scope of the submission to arbitration;
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; or
• the award is not final and binding or has been set aside.

A court may also refuse enforcement of its own motion, if it is satisfied that:

• the subject matter of the award was not arbitrable under the law of the state where enforcement is sought; or
• enforcement would be contrary to that state's public policy.

These provisions are incorporated into the national law of New York Convention contracting states.

Analysis shows that arbitral awards are often complied with voluntarily. Where enforcement proceedings are necessary, however, the New York Convention greatly assists award creditors, although it should be noted that not all states have a good track record of complying with their obligations under the Convention.

How arbitration works

Agreement to arbitrate

As arbitration is a consensual dispute resolution mechanism, a necessary pre-cursor to any arbitration is a valid agreement to arbitrate. This is commonly dealt with by inserting a clause into the principal contract between the parties, obliging them to finally resolve any dispute arising "out of, relating to or in connection with" that contract by arbitration. There are several key aspects of the arbitral process that should be agreed in the arbitration clause itself, including: 

• the place or seat of the arbitration, and the language that will be used in the arbitration;
• the number of arbitrators and how they are to be appointed;
• the law applicable to the arbitration agreement (which may be different from the law governing the contract containing it); and
• the procedural rules that will govern the arbitration.  

Drafting an effective arbitration clause is key. There should be an unequivocal and clearly defined submission to arbitration. If a dispute falls outside the scope of the clause, or if the clause is invalid for uncertainty, parties could find themselves before the very national court they sought to avoid. 

An arbitration clause in a contract operates as a separable, self-contained contract. This means that, even if the main contract is invalid, the clause will still stand, binding the parties and allowing the arbitral tribunal to determine the dispute that has arisen (unless the arbitration agreement is itself invalid for some reason). 

For more information on drafting arbitration agreements see the Ashurst Quickguide on International Arbitration Clauses.

Appointment of the arbitrators

Arbitrators will be appointed in accordance with the terms of the parties' arbitration agreement or, if the agreement is silent on this, the chosen arbitral rules (if any) or the national arbitration law of the seat. It is standard for disputes to be referred to one or three arbitrators. Where three arbitrators are to be appointed, typically, each party nominates one arbitrator and the two party-nominated arbitrators, or the administering institution, nominate the third arbitrator, who will act as president of the tribunal. If a sole arbitrator is to be appointed, absent party agreement, it is usual for that appointment to be made by the institution or, if ad hoc, a designated appointing authority.

The powers and duties of the tribunal

Arbitrators must be independent, impartial or both (depending on the applicable national law and rules), and will be required to disclose to the parties any circumstances that may give rise to justifiable doubts as to their independence or impartiality. That duty of disclosure will continue throughout the arbitration.

The principal duties of the tribunal are to determine the dispute fairly and efficiently, adopt suitable procedures for the particular case, and ensure that time and costs are not expended unnecessarily. In order to discharge their duties, the arbitrators have a broad range of powers deriving from:

• the arbitration agreement;
• the procedural rules; and
• the applicable national law.

The procedure

The procedural rules of the different arbitral institutions vary. In general terms, they provide the procedural framework for the arbitration from start to finish and, in particular, address the procedure for commencing arbitration, the constitution of the tribunal, conduct of the proceedings, issuing of awards, and the determination of costs. Tribunals are typically afforded a broad discretion to determine the detailed procedure best suited to the circumstances of a dispute, and will consult the parties on this before giving directions.

Arbitral institutions periodically revise their rules to keep pace with the perceived needs and desires of arbitration users, with a particular focus on reducing the cost and duration of arbitrations. Certain institutions provide a fast-track or expedited mechanism for disputes under a certain value, and many provide for the appointment of emergency arbitrators, who can grant urgent, interim relief before the full tribunal is constituted. Increasingly, institutions are revising their rules to provide for the early determination of issues or summary disposal of claims or entire cases.

While procedures vary between institutions, they all provide the parties with a reasonable opportunity to put forward their respective cases via written submissions, together with any documentary, witness and expert evidence. Certain institutions, for example the ICC, favour a memorial approach, which requires a party to provide legal submissions and evidence at the same time. Others, for example the LCIA, prefer a staged approach, which requires exchange of submissions, followed by exchange of documentary evidence and then factual and expert evidence. However, it will ultimately be for the parties to agree, or the tribunal to direct, which format of pleadings and evidence is adopted.

Where appropriate, there will be interim procedural hearings to agree timetables and other directions, as well as interlocutory hearings, which may address issues such as interim measures or the tribunal's jurisdiction. 

The arbitration will usually conclude with an adversarial hearing, either at a venue in the seat chosen or at a different location, if agreed by the parties or directed by the tribunal. Virtual hearings, which take place remotely using video conferencing and other technology solutions, are also common.

The award itself should ideally be delivered within six months, although this can take longer. Many institutions have amended their rules in recent years to provide timeframes for issuing awards (typically between three and six months) following the final submissions from the parties. Some institutions will penalise arbitrators in their fees if they do not comply with these timeframes. Even where the rules do not expressly provide a deadline for issuing an award, institutions can add value by encouraging the tribunal to deliver the award promptly.

Interim measures and urgent relief

There will be instances in arbitration, just as in court litigation, where a party may require urgent relief, for example to maintain the status quo pending appointment of the tribunal, or interim measures, such as security for costs or for the preservation of evidence. 

Where relief is required before the tribunal has been constituted, many institutional rules allow parties to apply for the appointment of an emergency arbitrator, who will be appointed quickly (typically within a 24-48 hours) and render a decision on the application in a short timeframe, often around 10-14 days. However, emergency arbitrator applications are usually made on notice to the opposing party (although institutions are increasingly introducing without notice procedures into their rules) and the procedure, while quick, does not move as fast as some national courts can.

In addition to emergency arbitrator regimes under various institutional rules, both ad hoc and institutional rules typically grant arbitral tribunals, once constituted, with broad discretion to grant interim measures. For example, the SIAC Rules 2025 empower a tribunal to grant "any interim or conservatory relief it deems appropriate."

However, the limitations on the powers of arbitral tribunals (and emergency arbitrators) to grant relief that would bind a third party, mean that many arbitral rules and national arbitration laws preserve the rights of parties to apply to a competent national court for relief. Sometimes this is limited to, for example, situations prior to the constitution of the tribunal and, thereafter, in cases of exceptional urgency only, so it is important to carefully consider the provisions of the selected rules.

Common situations where a party may apply to a national court, rather than to the tribunal, include applications for anti-suit injunctions to restrain breaches of an arbitration agreement or freezing injunctions.

Fees and costs in arbitration

The fees of the arbitral tribunal, or at least a portion of them, will usually be paid up-front upon appointment of the tribunal by way of a deposit. Where the arbitration is being administered, the institution will typically request an advance on costs, covering both a portion of its fees and those of the tribunal. Further advances may be requested as the arbitration progresses. Failure to pay an advance or deposit may lead to the arbitration being suspended or, potentially, discontinued.  

In institutional arbitration, the fees payable will depend on the provisions of the relevant rules and the institutional costs schedules, while in ad hoc arbitration it will depend on the arrangements made between the parties and the arbitrators. Typically, the fees are calculated either according to the time spent on the case by the arbitrators (whether expressed as an hourly or daily rate) or ad valorem, by reference to the amount in dispute. The latter is the more common approach under institutional rules.

Tribunals generally have power in their final award (or separate costs awards) to allocate costs between the parties. Often, this is done on the basis that costs will follow the event, that is, the unsuccessful party will be liable for the costs of the arbitration and those of the successful party. However, the tribunal will take a range of factors into account in making this determination, including the parties' relative success on different issues, their conduct during the proceedings and the reasonableness of the costs claimed.

Awards and challenging awards

The award in an arbitration is equivalent to a judgment in litigation. It is "final and binding", and subject to limited rights of challenge. Generally, the award must be in writing, signed by all the arbitrators and contain reasons for the decision, as well as state the seat of the arbitration and the date the award was made. Once the tribunal has issued its award, it is functus officio, meaning it has discharged its duties and has no further authority to act.

Unlike court judgments, awards cannot generally be appealed and are subject only to limited challenges in certain circumstances. These include where there has been a serious irregularity affecting the tribunal, the proceedings, or the award, which has caused substantial injustice to one or more of the parties. So, for example, where the tribunal exceeded its powers, failed to conduct proceedings in accordance with the agreed procedure, or where the award is ambiguous or was obtained by fraud. A party will usually also be able to challenge an award on the basis that the tribunal lacked jurisdiction to make it. However, appeals on the merits are generally prohibited. All challenges to awards are heard by the courts of the seat of arbitration.

At a glance: Arbitration vs. litigation