2. How arbitration works

This chapter explains how arbitration works in practice. Arbitration takes place if and only if parties have consented to it. Their consent needs to make clear how, specifically, arbitration is going to work for them. Parties in some situations may use courts and through them the executive apparatus to assist in arbitral proceedings. Under most arbitration agreements, once the arbitrator or arbitral tribunal has given the final arbitral award, arbitral jurisdiction comes to an end, and so there is no place for a party to turn to appeal against an adverse award. However, a losing party nevertheless may have opportunities to challenge an award, including in proceedings in national courts.

5. The politics of arbitration against governments

This chapter focuses on the most politically charged type of arbitration: arbitration between an investor and a foreign government. Investment arbitration marks a great step forward for rule of law in international affairs. A government does not escape responsibility by saying that its own law or courts have declared a given abuse against an investor to be lawful. Investment treaties set out substantive protections, such as fair and equitable treatment, full protection and security, and a guarantee against discriminatory expropriation. They give investors legal rights independent of domestic rules that an unfriendly government might have manipulated at the investor’s cost. The chapter then considers the emerging critique of investment arbitration.

6. Where is arbitration going?

This chapter reflects on the future directions that arbitration might take. The privatization of justice through arbitration no doubt has advantages. However, privatized justice all too readily looks like justice for hire. So is privatized justice to be promoted, or should it be restrained? A fair reply is, it depends. The answers one gives in the debate over arbitration, as in so many debates over institutions that affect the public interest, are often shaped by one’s ideological starting point. Ultimately, arbitrators and the parties who call upon them should remain conscious of both arbitration’s promise and its limits, if they mean this noble institution well.

1. What is arbitration and where does it come from?

This chapter traces the origins of arbitration. Arbitration initially developed in the absence of courts and later in opposition to courts, or at least as an alternative to them. The chapter then looks at the three episodes which illustrate the rise of modern arbitration. While arbitration takes many forms, all its forms share a core set of characteristics. Ultimately, arbitration is a procedure in which certain parties choose a decision-maker and grant the decision-maker the exclusive power to render a decision on a dispute between them—usually referred to as an arbitral award—following a procedure that complies with some standard of fairness also agreed by the parties.

3. The multiple lives of arbitration

This chapter describes some of the main types of cases in which parties use arbitration. First, there are disputes that pit two countries one against the other, which can be referred to as ‘interstate’ or ‘international’ or sometimes ‘inter-governmental’ disputes. Then there are disputes between private parties: individuals in dispute with one another; individuals in dispute with companies; or companies in dispute with other companies. Legal scholars call these ‘private’ disputes. And, third, there are disputes between a private party, such as an individual or a company, and a government. In the field of dispute settlement, these types of disputes are known as ‘mixed’ disputes.

4. Arbitration and the law

This chapter explores how arbitration relates to public courts, the law, and legal systems. Not all disputes are permitted to be arbitrated. The word lawyers use to describe disputes that the law permits parties to submit to arbitration is ‘arbitrability’. Disputes that the law does not permit parties to submit to arbitration are said to be ‘non-arbitrable’. The chapter then considers how parties can choose the law that applies in their arbitration. The typical arrangement is that the seat of arbitration is also the physical location where the proceedings take place—meaning that the law of the physical location is the procedural law of the arbitration.