International Arbitration: history and modern realities

With the growth of international trade and economic relations between entrepreneurs from different countries, the need to resolve disputes arose. This led to the creation of the first arbitration forums, which, however, differed from modern ones: they could not address future disputes, and priority was given to state courts. Modern international commercial arbitration (ICA) took shape only in the mid-20th century.

History:

The earliest forms of arbitration appeared in antiquity, for example, in Ancient Rome, where the compromissum sub poena mechanism allowed parties to enter into arbitration agreements. In the Middle Ages, arbitration developed within guilds and consular courts, but it was not until the 20th century that it acquired its modern features. In 1912, at the Congress of Chambers of Commerce in Boston, it was decided to develop international rules for resolving trade disputes through arbitration. In 1919, the International Chamber of Commerce was established, and in 1923, the International Court of Arbitration was founded.

Modern international commercial arbitration (ICA) has become a key tool for resolving disputes in international trade.

Advantages of arbitration:

• Flexibility, confidentiality, and ease of enforcement.
• Parties can independently choose the applicable law, language, venue, and arbitrators, making the process more tailored to their needs.
• Arbitrators are typically experts in specific industries, which enhances the quality of dispute resolution.
• Arbitration awards are easier to enforce in other countries thanks to the 1958 New York Convention, which has been ratified by 172 states.

Disadvantages of arbitration:

• It can be significantly more expensive than state courts. For example, proceedings at the Hong Kong International Arbitration Centre may cost around 5.5 million rubles, while at the International Commercial Arbitration Court, the cost is approximately 3 million rubles.
• The lack of strict rules can lead to abuses and delays, undermining one of arbitration’s key advantages—speed.

Enforcement of Decisions nowadays: 

The enforceability of arbitration awards can also pose challenges. In some countries, courts may refuse to enforce awards, citing public policy.

Since 2022, Russia has seen a decline in the recognition of arbitration awards due to the concept of “unfriendly countries.” Russian courts have traditionally viewed arbitration awards with suspicion, creating additional risks for businesses.

Despite this, the popularity of arbitration continues to grow. From 2012 to 2022, the number of cases handled by arbitral tribunals increased by more than 1.5 times, and in 2023, the number of applications to arbitration centers rose by a third. Arbitration is particularly in demand in the energy, construction, and maritime transport sectors.

ICA remains a convenient tool for resolving international disputes, but businesses must be aware of the risks, such as high costs, difficulties in enforcing awards, and potential delays in the process.