International Commercial Arbitration or State Court: What to Choose in Cross-Border Disputes

Choosing between arbitration and a state court is one of the key decisions in resolving cross-border disputes. This choice affects not only the duration and cost of the process but also its overall efficiency. In this article, we analyze when it is appropriate to choose international commercial arbitration, and when a national court may be the better solution.

International Commercial Arbitration: Key Advantages and Features

International commercial arbitration is a form of resolving cross-border disputes outside the public judicial system, based on an agreement between the parties. The main advantages of arbitration include:

  • neutrality and flexibility of the process;

  • confidentiality of hearings;

  • the ability to select arbitrators and the seat of arbitration.

Arbitral proceedings are especially effective when the parties are from different countries and want to avoid a national court’s jurisdiction. This is often used in the context of international trade and external economic activity.

National Court: When Is It the Better Option?

Despite the popularity of arbitration, a state court may be more appropriate in some situations. This applies when the parties want access to a multi-tier appeal system, formal procedural safeguards, or prefer a public hearing. In addition, if a party’s assets are located within the court’s jurisdiction, a national court decision may be easier to enforce without the need for recognition procedures.

A court proceeding may also be preferred in cases involving standard supply contracts or where the dispute is closely tied to the place of performance.

Recognition and Enforcement of Decisions Abroad

One of the critical factors in choosing between arbitration and litigation is the enforceability of the decision in another country. For arbitration, the 1958 New York Convention applies, ratified by over 160 countries. This makes international arbitration a practical tool for recovering funds in a foreign jurisdiction.

By contrast, national court decisions are harder to enforce abroad unless there is a bilateral treaty or favorable case law in the relevant country. This limits the universality of court proceedings in disputes with foreign companies.

Arbitration or Court: What to Consider in Terms of Time and Cost

Arbitration proceedings are often seen as more expensive due to arbitrators’ fees and institutional costs. However, with proper strategy, arbitration can be faster and even more cost-effective than litigation, especially due to the lack of mandatory appeals and flexible procedures.

Court proceedings may cost less upfront, especially in countries with fixed state duties. But delays often occur due to overburdened courts and multi-level appeal systems.

Legal Clauses: Decide in Advance

To avoid uncertainty, it is crucial to specify in the contract how any future cross-border disputes will be resolved. This may include an arbitration clause referring to an institution (such as LCIA, ICC, VIAC, etc.) or a jurisdiction clause indicating a specific national court.

A well-drafted clause brings clarity, reduces risks, and can be decisive in any future court or arbitration proceedings.

Legal Support in Cross-Border Disputes

The legal team at DTK Partners has extensive experience handling cross-border disputes both in international arbitration and in state courts across various jurisdictions. We help select the most appropriate dispute resolution mechanism, draft arbitration clauses, and represent clients from filing to foreign enforcement.

📞 Contact us if you’re deciding between arbitration or court. We provide reliable legal support in all types of disputes with foreign companies.