The conduct of business between parties in different countries involves high risk. There are implicit concerns over compliance with custom regulations, obtaining governmental permissions and licenses, the hazards of international transport, different labor law regulations and regimes, and varying import-export regulations. Without an effective adjudicatory method, it is highly likely, according to the field respected Professor Thomas E. Carbonneau at Penn State Law, that without "effective adjudicatory mechanisms for resolving the basic problems of commercial contracts (defining breach, establishing performance, enforcing delivery, and other requirements)" that trans-border commerce would even exist.
International commercial arbitration or "ICA" has been established in order to allow parties to engage and pursue international commerce; it allows a safety net for the parties. To be worth the inherent risk of business, particularly between parties of differing governing legal traditions and systems, parties must have a functional system of adjudication for disagreements, performance, and contract disputes. ICA has created a transnational and trans-border rule of law making it a shaper of international law and its practice.
In its simplicity, a trans-country contractual dispute can raise problems such as choice-of-forum, venue, jurisdictional, choice-of-law, proof and interpretation of foreign law, and enforcement of judgment problems. The natural tendency is for parties, when a dispute arises, to file suit in their own national legal jurisdiction due to fear of judicial bias and foreign law. Occasionally, parties will even pursue the dispute in the two jurisdictions simultaneously and arrive at two opposing judgments which are equally unenforceable.
Part of what makes ICA so remarkable is the cooperation between sovereign states to create the process. The challenges of diversity, differing cultural, historical, religious, national, regional, economic, legal and political backgrounds were true challenges to creating a workable system that encompassed a range of international commerce disputes to create an enforceable adjudication system that was unequivocal and unqualified.
It has become standard contractual practice to note, in the contract, the arbitration rules and chamber the parties will subsequently adhere to should there be a dispute.
The cost of the American legal system is part of the influence that makes the judicial proceedings like ICA so successful. The cost of protracted legal proceedings, the costs of discovery and litigation are elements of what makes judicial justice inaccessible. ICA emphasizes functionality, finality, and fairness. ICA is a process of adjudication which is administered by experts, reasonably fair and professional. The awards are enforceable. ICA is neutral to nationality and legal tradition. ICA is a result of party choice. Frequently, parties agree to the place of arbitration and enforceable rules during contractual negotiations.
Trans-border arbitration services have become a business, which has allowed a number of traditional service providers to have control over the system.
The most established and well-known institution of ICA is the International Chamber of Commerce (ICC) headquartered in Paris, France. It offers an expensive administration over trans-border conflicts. The ICC charges a certain percentage of the value or amount in dispute between the parties, which is a sliding scale in accordance with the disputed amount. It is a highly professional organization and it is believed by some international lawyers to have a higher level of credibility before national courts.
Another important institution i
n ICA is the London Court of International Arbitration (LCIA). This is an important provision of arbitration services internationally. Although it has a similar outstanding reputation to that of the ICC, it is a far cheaper service. It charges by the hour as opposed to a percentage. However, it does less business than ICC. This is due to its perception of being linked to English arbitration and English courts and awards.
Another arbitration service provider is the International Centre for the Settlement of Investment Disputes (ICSID) (or World Bank arbitration). They tend to manage disputes between host States and private investors. Its particular mission is to give parties a location to come to a resolution, particularly related to international investments. However, it has had a very low case load in its time of operation.
The Swedish Arbitration Institute (the Institute) is an aspect of the Stockholm Chamber of Commerce which participates in the long tradition of Swedish arbitration. Swedish arbitration is very active and the rule revisions of 2007 reinforced the objective of flexibility and procedural economy.
Sweden has played a critical role in the growth of ICA. Particularly during the cold war era, it served as the seat between East-West arbitration's. However, with China's adoption of CIETAC arbitration, Sweden’s role greatly diminished. In 1999, the Swedish Parliament established the Swedish Arbitration Act. It was designed to update Swedish law on the subject and to help reaffirm its place as a venue for international arbitration.