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Arbitration is a binding form of dispute resolution in which disputes are resolved privately rather than in court. Arbitration is founded in the consensual agreement of the parties, but is regulated and enforced by the state. National laws generally recognize arbitration as a mutually exclusive alternative to litigation, and the great majority of the countries require parties to honor contractual obligations to arbitrate and support the enforcement of arbitral awards.
Arbitration is becoming an increasingly attractive means for the resolution of many corporates, particularly in emerging markets. Unlike most court proceedings, arbitrations are generally confidential, which can help protect reputation, proprietary information, and client identities. And because arbitrators are often specialists chosen by the parties on the basis of their industry experience, arbitrators may be better suited than generalist judges to resolving disputes involving complex business relationships or sophisticated investment products.
Arbitration almost always provides parties with some degree of choice over the decision-maker (or decision-makers), so parties can choose arbitrators with expertise or experience relevant to the dispute at hand. While some jurisdictions, including New York and the UK, have specialist courts for business disputes, in other instances parties run the risk of judges with little or no relevant experience deciding their disputes.
Arbitral awards are often much easier to enforce against assets in foreign countries than court judgments. The1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) stands out among several enforcement conventions, with more than145 party countries agreeing to enforce arbitral awards (subject to very limited grounds for objection). Court judgments are not recognized by a similar enforcement regime and enforcing a domestic judgment in a foreign country (or converting a domestic judgment into a foreign judgment) can be a difficult task.
