Arbitration can be conducted either ad hoc or through an established arbitration institution, with advantages and disadvantages to each.
1. Institutional Arbitration
Parties may choose to take advantage of the established mechanisms/procedures offered by one of the many arbitration institutions. These institutions have formal procedures and rules designed to assist parties. The institution chosen may administer the arbitration according to its own rules or, in most cases, according to other rules if requested.
a. Advantages of Institutional Arbitration:
( 1 ) Availability of pre-established rules and procedures;
( 2 ) Administrative assistance from institutions with a secretariat or a court of arbitration;
( 3 ) Lists of experienced arbitrators, often listed by fields of expertise;
( 4 ) Appointment of arbitrators by the institution if the parties request it;
( 5 ) Physical facilities and support services for arbitrations;
( 6 ) Assistance in encouraging reluctant parties to proceed with arbitration; and,
( 7 ) An established format that has proven workable in prior disputes.
b. Disadvantages of Institutional Arbitration:
( 1 ) Institutions charge administrative fees for services and use of facilities. Expenses may be high in disputes over large amounts, especially where fees are related to the amount in dispute. For small amounts in dispute, institutional fees may be greater than amount in controversy;
( 2 ) The institution's bureaucracy may lead to delays and added costs; and,
( 3 ) Parties may be required to submit responses in abbreviated time periods.
c. Issues to Consider in Selecting an Arbitration Institution:
( 1 ) History of the institution's administration of international arbitrations.
( 2 ) Experience:
- How many international disputes has the organization handled and from where did the disputing parties come?
- Has the institution handled disputes similar to the subject of the contract?
( 3 ) Selection of Arbitrators:
- Are the parties involved in the selection of arbitrators?
- Will the institution automatically select arbitrators from neutral countries, or will they do so only on request?
- Does the institution maintain a roster of arbitrators?- Can parties select arbitrators outside the roster of the institution?
- Does the institution have arbitrators with experience in the subject matter of the contract?
( 4 ) Procedures:
- Does the institution permit flexibility in the conduct of the arbitration?
- Can parties opt out of certain rules or procedures?
- What are the rules regarding time limits in the arbitration?
- Are time limits enforced?
- Does the institution limit the procedural rules selected by the parties?
- Are the institution's rules clear and neutral for all parties?
( 5 ) Cost:
- What administrative fees are charged by the institution?
- Are these fees fixed or based on the amount in dispute?
- Are the arbitrator's fees based on time spent or amount in dispute?
( 6 ) Services:
- Does the institution's staff have experience with international disputes? How large is the
- Does the institution have any affiliations within the region that may facilitate administration of the arbitration?
2. Ad Hoc Arbitration
Ad hoc arbitration refers to a process by which the parties select the arbitration format and structure without using an arbitration institution. The ad hoc approach allows for greater specificity in the design of a mechanism for the particular contract. Parties may select ad hoc arbitration to reduce costs, to accelerate the process and/or to structure proceedings to suit their particular needs.
When choosing ad hoc arbitration, parties must specify in the arbitration clause all aspects of the arbitration, including applicable law, rules under which the arbitration will be carried out, the number of arbitrators, the method for selecting the arbitrator(s), the language in which the arbitration will be conducted and the place of arbitration. Parties may either develop their own rules or select established arbitration rules to govern the arbitration. Parties may use the rules of an arbitration institution without submitting the dispute to that institution.
3. Here is the main international arbitration institutions
The Commercial Arbitration and Mediation Center for the Americas (CAMCA )
- CAMCA is designed to provide commercial parties involved in the free trade area of NAFTA with an international forum for the resolution of private commercial disputes.
The Inter-American Commercial Arbitration Commission (IACAC)
- The IACAC established and administers a system for settlement, by arbitration or conciliation, of international commercial disputes in the Western Hemisphere.
International Centre for the Settlement of Investment Disputes
- Pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1966), ICSID provides facilities for the conciliation and arbitration of disputes between member countries and investors who qualify as nationals of other member countries.
International Court of Arbitration, International Chamber of Commerce (ICC)
- An international arbitral institution composed of members around the world.
Permanent Court of Arbitration (The Hague)
- The Permanent Court of Arbitration (PCA) is an international organization providing services for resolving disputes between States, including disputes between States and private parties and those involving intergovernmental organizations. The PCA site contains information about its services, model clauses, and rules. The parties to the 1899 and/or 1907 Conventions for the Pacific Settlement of International Disputes comprise the members of the Permanent Court of Arbitration.
China's CIETEC is also an international arbitration institution.