Arbitration VS. Litigation
In practice, generally, arbitration instead of litigation is chosen as the dispute resolution in the commercial agreement, especially, in the international business agreement. Some people may be wondering why we choose arbitration instead of litigation, which is handled in the court, and seems more trustworthy. Let’s start with this.
1. Professional
Arbitration, compared with litigation is more professional regarding to the resolution of commercial disputes. Unlike some judges, arbitrators mostly have practice experience in the area which the disputes arise. They themselves are professionals in such area. This happens in many countries, especially in China.
2. Flexibility
There is a legal term “autonomy of will” which means, arbitration is more flexible since it is based on the bilateral agreement. As you may have known, the place of arbitration, the language, procedures, choice of law, and arbitrators of the arbitration could be decided by the both parties based on their agreement.
3. Enforcement
Many people may think that the judgment made by a court is more enforceable than an arbitration award. In fact, it is true to some extent and in some circumstances, as some arbitration award may be withdraw, however, in general cases, the arbitration award could be enforced directly by a competent court upon application, just as the court judgment. Moreover, as regarding to the disputes of an international business agreement, if the parties belong to different countries, the arbitration award will have an advantage of enforcement compared with the court judgment. Since the award made by a widely recognized international arbitration institution could be enforced in most countries, while, generally, a court judgment can’t be directly enforced in another country. It depends on the agreements of the both countries.
Effective Arbitration Agreement
4. Disputes
In fact, not all the disputes could be solved by arbitration. Generally, disputes involve personal relations and administrative disputes may not be solved by commercial arbitration. Therefore, if both parties agreed to solve such disputes via arbitration, it may not be effective.
5. Agreement on Arbitration
Unlike litigation, application for arbitration will not be accepted without the mutual consent of the both parties of a dispute. There should be an agreement shows that both parties agreed to settle their dispute by arbitration, whether verbal or in written.
6. Arbitration Institution
Both parties shall not agree on settle their dispute by arbitration, but also agree on settled by which arbitration institution. If you just set forth in your contract that each party could file a lawsuit to the competent court or arbitration institution, it means that you have not reached an agreement on arbitration. The arbitration institution shall be specific in your contract.
Our Lehman, Lee & Xu has a long time experience in the commercial disputes resolution, especially in arbitration. So please don’t hesitate to contact us if you want to know anything more about solving disputes by arbitration in China.