The Difference Between Arbitration and Investment Dispute Resolution

international dispute resolution

There are many ways to resolve disputes in international trade and business today. And these methods are applicable to every type of dispute involving international business. One of the popular methods is Alternative Dispute Resolution (ADR), an alternative to litigation. Alternative dispute resolution has gained broad acceptance in the international community and the legal profession. ADR processes can streamline and quickly improve the dispute resolution process. Here is a simple guide to everything about it and its procedures.

international commercial arbitration

Alternative dispute resolution (ADR) is a means of settling a dispute and conflict in a peaceful manner. Generally, when a lawsuit is pending, the court advises litigants to use ADR methods to reduce the burden of court cases and resolve disputes amicably. Arbitration clauses in commercial contracts allow parties to resolve their cases in a cost-effective manner. Arbitration provides a lot of flexibility to parties. Arbitration is easy and conducted within a fixed time frame.

It gives complete freedom to the parties to choose an arbitrator for sessions. Arbitration dispute resolution helps individuals maintain their cooperation and social order and reduces hostility among parties or nations. However, depending on the nature of the dispute, there are different categories of arbitration. Let’s talk about arbitration and investment dispute resolution.

The Difference Between Arbitration and Investment Dispute Resolution

Investment arbitration is a part of investment agreements between a state and a foreign investor. When a dispute arises between host states and foreign investors, a foreign investor can bypass national jurisdictions to resolve the dispute in accordance with the different protections afforded under international treaties. However, a host state needs to give consent to investment arbitration in international investment agreements (IIAs) and multilateral agreements, e.g., the Energy Charter Treaty (ECT).

The legal frameworks for international commercial arbitration and investment arbitration are different. Arbitration only deals with the recognition and implementation of foreign arbitral awards, while in investment arbitration, treaties of public international law provide the basic framework. ADR includes a variety of methods like litigation, arbitration, and mediation.

commercial arbitration

Here are some alternative dispute resolution (ADR) methods

  1. Arbitration – Arbitration is a method of dispute resolution where an arbitrator takes a binding decision for the parties. Arbitration resolution is one of the popular methods. In fact, the International Court of Arbitration of the International Chamber of Commerce (ICC Court) statistics show a sharp increase in the average number of cases registered between January and October($184 million).

The parties seeking arbitration dispute resolution proceedings have total control over the issues and procedural aspects of the process. Also, it is not as formal as a court trial.

  1. Mediation – Mediation is another procedure that can take the help of a neutral third party to resolve a dispute. A mediator may offer suggestions to parties without enforcing a decision. Essentially, a mediator does not control the outcome of such processes. Mediation can get great results when family members, neighbours, and business partners are involved in a dispute.
  2. Negotiation – Negotiation is one of the simplest and most straightforward forms of dispute settlement. The disputing parties have to meet and explore different options to seek a solution to their problems. Here, there is no need for third-party intervention.
  3. Conciliation – It is a form of alternative dispute resolution in which the parties hire a conciliator to resolve their issues individually. They do this by reducing conflicts, strengthening coordination, identifying problems, and offering technical assistance to help find possible solutions to get a possible settlement.

It is a mutual process in which the parties are involved in reaching an agreement and resolving their disagreement. Parties can even choose the time, duration, and content of the procedure. However, the conciliation proceedings are private and can be conducted as per the legal and financial circumstances of the parties involved.

In conclusion

All the above processes are simple, confidential, and less stressful than traditional court proceedings. We can get creative and long-term outcomes with Alternative Dispute Resolution (ADR) methods. If you want to follow any of the ADR methods, you need to select a law firm that advises and assists you with types of investment and commercial disputes.

Rattsakuten is a boutique law firm known for its unique approach when handling complex disputes. If you need the best result, contact us today.

Fredrik Jörgensen

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