Why Do Businesses Choose International Arbitration to Resolve Cross-Border Disputes?

International arbitration has become the overwhelmingly preferred method for resolving cross-border commercial disputes, with 87 percent of legal professionals and business users favoring this approach according to the 2025 International Arbitration Survey conducted by Queen Mary University of London. This mechanism offers neutrality, enforceability, and flexibility that national court systems often cannot provide when parties come from different legal traditions and jurisdictions. Understanding why international arbitration dominates cross-border dispute resolution, how the process works, and what developments are shaping its future helps businesses make informed decisions when structuring their international agreements.

What Makes International Arbitration Preferable to Litigation?

Several fundamental characteristics explain the persistent preference for arbitration in international commercial matters.

How Does Neutrality Benefit Disputing Parties?

When companies from different countries enter into disputes, neither party wants to litigate in the other's home courts. Concerns about perceived bias, unfamiliar procedures, language barriers, and unpredictable outcomes make domestic litigation unappealing for foreign parties. Arbitration provides a neutral forum where neither side operates on home turf.

Parties can select arbitrators with relevant expertise and backgrounds that neither favors nor disadvantages either side. This perceived fairness encourages parties to accept arbitral outcomes even when decisions go against them.

Why Is Enforceability So Important?

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ratified by over 170 countries, provides a framework for enforcing arbitration awards across borders. This treaty makes arbitral awards significantly more portable than court judgments, which may face substantial obstacles to enforcement in foreign jurisdictions.

A party that obtains a favorable arbitration award can enforce that award in any New York Convention signatory country where the losing party has assets. This global enforcement mechanism provides security that court litigation cannot match for international transactions.

What Flexibility Does Arbitration Offer?

Unlike court litigation, where procedures are fixed by law, arbitration allows parties to customize the process to suit their needs. Parties can specify the governing law, select the language of proceedings, choose the location of hearings, and establish procedural timelines. This flexibility proves particularly valuable when parties come from different legal and cultural backgrounds.

The International Chamber of Commerce provides one of the most widely used sets of arbitration rules, offering established procedures while allowing significant procedural flexibility.

Which Arbitration Seats Are Most Preferred Globally?

The choice of arbitration seat affects the procedural law governing the proceedings, the availability of court support for the arbitration, and potential challenges to awards.

What Are the Top Five Arbitration Seats?

According to the 2025 survey, the five most preferred seats for international arbitration are London, Singapore, Hong Kong, Beijing, and Paris. London and Singapore rank among the top five preferred seats across all six regions in which respondents practice, demonstrating their truly global appeal.

These seats have developed reputations for court systems that support rather than interfere with arbitration, experienced legal communities familiar with international disputes, and predictable legal frameworks for addressing procedural issues that may arise.

How Do Regional Preferences Vary?

While London and Singapore maintain universal appeal, other seats show stronger regional popularity. Beijing has risen substantially in Asian preferences, while Paris remains particularly important for European parties. Emerging seats including Riyadh and Vancouver are gaining attention in their respective regions.

The choice of seat involves strategic considerations beyond simply selecting a convenient location. Parties must consider the local arbitration law, court attitudes toward arbitration, and enforcement environment when making this important decision.

Which Arbitration Rules Are Most Popular?

Institutional arbitration rules provide procedural frameworks that reduce the need for parties to negotiate detailed procedures in their contracts.

What Rules Do Parties Most Frequently Choose?

The five most preferred sets of arbitration rules are the ICC Rules, HKIAC Rules, SIAC Rules, LCIA Rules, and UNCITRAL Rules. The ICC Rules rank in the top three choices for each of the six global regions surveyed, demonstrating their widespread acceptance.

Each institution offers somewhat different procedures, fee structures, and approaches to case management. Parties should consider these differences when selecting rules for inclusion in their arbitration agreements.

When Are Ad Hoc Proceedings Appropriate?

Some parties choose to conduct arbitrations without institutional administration, creating their own procedural framework. This approach may reduce costs but places greater burden on the parties to manage procedural issues and increases risks of delay or disruption if disputes arise about procedure.

Most sophisticated international transactions use institutional rules to provide established frameworks and administrative support, reserving ad hoc approaches for situations where cost sensitivity outweighs these benefits.

What Issues Create Inefficiency in Arbitration?

Despite its advantages, international arbitration faces criticism regarding cost and duration.

What Practices Harm Efficiency?

Survey respondents identified opposing counsel tactics as the most significant source of inefficiency, cited by 24 percent of participants. Arbitrator failure to move cases forward efficiently was the second most common complaint at 23 percent, followed by excessive lawyering at 22 percent.

These findings suggest that arbitration efficiency depends substantially on participant behavior rather than inherent process characteristics. Selection of efficient arbitrators and commitment to reasonable litigation conduct can substantially improve outcomes.

Which Mechanisms Promote Efficiency?

Expedited arbitration procedures received the strongest endorsement as an efficiency mechanism, supported by 50 percent of respondents. Early determination of manifestly unmeritorious claims or defenses was nearly as popular at 49 percent.

These procedures allow tribunals to dispose of weak arguments quickly rather than allowing them to consume resources throughout full proceedings. However, implementation requires tribunals willing to make decisive procedural rulings, which some arbitrators remain reluctant to do.

How Do Sanctions Affect International Arbitration?

Economic sanctions increasingly complicate international arbitration when one party or their country is subject to restrictive measures.

What Challenges Do Sanctioned Parties Face?

Survey respondents reported significant difficulties conducting arbitration when sanctions apply to either party. Thirty percent of participants indicated using alternative arbitration seats when sanctions affected their proceedings, while 27 percent experienced administrative and payment difficulties.

Sanctions may prevent banks from processing payments related to arbitration, complicate engagement of counsel, and create uncertainty about whether participating in proceedings could expose parties to sanctions liability.

How Are Practitioners Responding?

Arbitration institutions have developed guidance for managing sanctions-affected proceedings. Some practitioners recommend including sanctions-specific provisions in arbitration agreements that address how proceedings will continue if sanctions are imposed after contract formation.

What Role Is Artificial Intelligence Playing?

The 2025 survey revealed surprisingly strong acceptance and growing reliance on artificial intelligence in international arbitration.

How Are Practitioners Using AI?

AI tools are being deployed for document review, legal research, translation, and drafting tasks. The international arbitration community expects AI use to grow rapidly in coming years, with practitioners increasingly comfortable leveraging these capabilities.

Survey results indicated that respondents predict arbitrators themselves will begin using AI tools, raising questions about disclosure obligations and appropriate limits on AI assistance in decision-making.

What Concerns Exist About AI in Arbitration?

Some practitioners express concern about AI reliability, particularly for legal research where AI systems may generate inaccurate citations or misstate legal principles. Questions about data security when using AI tools with confidential arbitration materials also require attention.

The arbitration community continues developing guidelines for appropriate AI use that leverage efficiency benefits while maintaining accuracy and confidentiality standards.

How Are Third-Party Funding and Costs Being Addressed?

High costs remain a significant concern for parties considering international arbitration.

What Is Third-Party Funding?

Third-party funding arrangements allow outside investors to finance arbitration costs in exchange for a share of any eventual award. This model enables parties, particularly smaller companies, to pursue legitimate claims without bearing the full financial burden of proceedings.

Third-party funding has become increasingly common in international arbitration, with sophisticated funders evaluating cases for investment based on their merits and potential recovery.

How Can Parties Control Arbitration Costs?

Parties can reduce arbitration costs through careful attention to case management, limiting discovery to truly necessary materials, using efficient hearing procedures, and selecting arbitrators known for decisive case management. Streamlined procedures for lower-value disputes can also improve cost proportionality.

Maximizing the Benefits of International Arbitration

International arbitration remains the dominant dispute resolution mechanism for cross-border commercial relationships due to its neutrality, enforceability, and procedural flexibility. Businesses benefit from careful attention to arbitration clause drafting, thoughtful selection of seats and rules, and proactive management of proceedings to control costs and duration. Understanding current trends including AI adoption, sanctions complications, and efficiency concerns helps parties and practitioners navigate the evolving international arbitration landscape successfully.