, 10 2011, 14:04:15

Arbitration is one of the most commonly used means of resolving disputes in the international business arena. Compared with the traditional lawsuit, arbitration has more autonomy and freedom for the parties, it is more flexible and has less complex procedures, and it offers the advantage of privacy.
Arbitration has a long history, dating back to medieval Europe and the emergence of a merchant class that engaged in commercial activity across borders. Rather than making use of the court systems in their own countries ― which were undeveloped, procedurally backward and cumbersome ― traders preferred to set up their own tribunals, consisting of their own representatives who were familiar with the types of disputes that arose. In this way, areas of recognized expertise could be developed without excessive legal formality.[p.513]
The term international in describing arbitration is used throughout this paper in a broad sense, namely to refer to any arbitration with a foreign element. For example, the parties may have their places of business in different countries and choose to arbitrate in one of those countries or a third state, or they may reside in the same country but choose to arbitrate elsewhere. It is clear that in recent times a strong trend has emerged toward the reduction of differences in national arbitration laws. This process of harmonization has largely occurred due to a growing consensus as to the proper underlying philosophy of arbitration: namely, as a method of dispute resolution, the content and form of which should be primarily left in the hands of the parties.
Before discussing examples of harmonization of laws in the arbitration context, a brief explanation of the concept of harmonization is required. In legal literature harmonization has been defined as a mechanism for making the regulatory requirements or government policies of independent nation states with no shared political or economic authority identical or similar. The process of harmonization is often justified on the ground that it creates stability and certainty in international trade by enabling parties to predict in advance the rules that are likely to apply to them.
The goal of harmonization has been pursued with some success in a number of areas of international trade law, including general principles of contract law, international sale of goods, finance, transport and intellectual property, as well as arbitration. While the process of harmonization has been challenged by some scholars on the ground that it is insensitive to cultural and economic diversity, such concerns have had little impact in the area of international commercial arbitration where, as will be seen, the philosophy of party autonomy is deeply entrenched.
The key aspect of arbitration has always been that it is based on agreement between persons. Unlike national court systems, which are provided by the state, no arbitration panel exists unless two parties contractually undertake to create one. The result is that the arbitration agreement becomes the primary source of the rights, powers and duties of the arbitral tribunal.
The centrality of the parties agreement to arbitration has also been an important factor in encouraging uniformity in international arbitration law. Most nation states now realise that there are substantial benefits in providing a legal regime that facilitates and encourages international arbitration and respects the parties agreement as much as possible. Not only does a country benefit economically from becoming a host site for international arbitration business, but also those citizens who engage in trade and commerce benefit generally from having a flexible and neutral system of dispute resolution. This development in turn encourages the flow of international business on a global level as increased certainty exists at the dispute resolution stage.
Instead of placing procedural barriers in the way of parties proceeding to arbitration or allowing excessive intrusion by national laws and courts in the process, the principle of party autonomy is now firmly established as the benchmark for international arbitration law worldwide.
The influence of party autonomy and the movement away from national regulation of the arbitral process can be seen in the range of international codifications and agreements that exists in the field of international arbitration. Perhaps the most spectacular example is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)that has now been adopted by 125 countries and clearly represents a form of customary international law on the subject.
In the context of the arbitral process as a whole, the New York Convention has only limited coverage. That is, it only deals with agreements and awards. It was therefore recognised soon after the enactment of the New York Convention that, to maintain the momentum toward unification of international arbitration law, the issue of harmonizing and standardising arbitral procedural law would also have to be addressed. A brief word of explanation is required about the meaning of the concept arbitral procedural law. Generally speaking, in the context of an international arbitration, a number of different laws can be involved. For example, where enforcement of an arbitral agreement or award is sought, the law of the enforcing country is applied (which, as was discussed above, will almost certainly be the New York Convention). However, during the currency of the arbitration itself, other laws will be relevant.[3,p.361]
Overall, the developments in arbitration law can be seen as part of a trend towards unification and harmonization of international commercial arbitration generally, given that tribunals are applying increasingly similar legal principles. While arbitration is fundamentally a process for resolving a dispute between individual parties and must accommodate their needs and wishes, the goal of party autonomy has proven to be surprisingly consistent with harmonization: first, because most national laws have adopted the party autonomy approach, and have therefore rendered it a harmonized principle, and secondly, because of the growing use of institutional arbitration. The time may not be too far away when one will be able of a single law of international commercial arbitration.

2. Indiana Journal of Global Legal Studies Vol. 1 6 #2 (Summer 2009), p.513