What is International Arbitration?
International arbitration is an area of increasing concern for legal practice, business strategy, and government policy.
In an international arbitration, a neutral third party serves as a judge who is responsible for resolving a dispute. The arbitrator listens as each side argues its case and presents relevant evidence, then renders a binding decision.
The disputants can negotiate virtually any aspect of the arbitration process, including whether lawyers will be present at the time and which standards of evidence will be used. But international arbitration has led to some interesting intersections of disciplines.
The rapid growth in investment treaties, for instance, has led to a burgeoning number of international arbitration decisions that have applied and interpreted treaty provisions in disputes between investors and states concerning their respective rights.
One example comes from a conflict between Eureko, a Dutch insurance company, and the Polish government. After Poland announced plans to privatize the nation’s leading insurance group, PZU, Eureko acquired 30% of PZU’s shares for the equivalent of about $700 million with the goal of eventually gaining a controlling stake in the company. But the Polish government stalled on its promise to privatize PZU, and Eureko sued.
In a negotiated settlement, the Polish government promised to sell another 21% of PZU shares to Eureko, but movement stalled again.
Eureko eventually filed an international arbitration case against Poland, seeking reimbursement of its initial purchase payment plus damages.
New management at Eureko, however, determined the Polish government would not pay the damages it was likely to be fined—and the decision would be unenforceable. Eureko’s upper management abandoned the arbitration and opened up negotiations with Poland. The two parties ultimately reached a deal.
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