Arbitration is an alternative dispute resolution method to litigation in state courts. It is generally considered as the most effective means of resolving both domestic and international commercial disputes. Any dispute that can be settled by agreement between the parties may be referred to arbitration for final decision.

Arbitration has many advantages over litigation in state courts:

  • Speed. Arbitration is faster than litigation.
  • Flexibility. Arbitration is based on party autonomy. Parties may choose their arbitral tribunal. Further, they are free to tailor the arbitral proceedings to best suit their individual needs.
  • Expertise. Parties and FAI may select arbitrators with optimal expertise, experience and other qualifications to resolve a specific dispute.
  • Confidentiality. Contrary to court litigation, arbitration is a confidential method of settling business disputes.
  • Finality and enforceability of the award. An arbitral award constitutes a legally enforceable decision. It is binding on the parties to the arbitration, and cannot be appealed on its merits. Pursuant to the New York Convention of 1958, arbitral awards are recognized and enforced in most countries in the world.

Parties may agree to submit to arbitration by inserting an arbitration clause in their main contract, or by entering into a separate arbitration agreement. In addition, an arbitration clause may be included in the bylaws of a limited liability company or other corporate entity.

The Arbitration Institute recommends the use of its model clause

The Arbitration Institute recommends the use of its model arbitration clauses in commercial contracts to ensure the validity, enforceability and effectiveness of the arbitration agreement.