The seat of arbitration refers to the place, country, or state where the arbitration was initially held. This is a crucial factor in any arbitration clause because it forms the basis of the regulatory framework for the process. By establishing a good seat of arbitration, the parties concerned will have substantial autonomy and authority to manage the process of arbitration. With a convenient seat of arbitration to both parties, the process will run fairly and effectively through the supplementation and reinforcement of national and international laws. This gives the parties confidence that there will be a reasonable method of recourse in the event of problems during international business transactions.
During the selection of the seat of arbitration, both parties must be present and in agreement. The main reason is to ensure that the arbitration seat is neutral to all the parties and does not favor any party during the hearing process. In the selection process, each party is cautious of the home-court advantage. Instead, the seat of arbitration should be flexible to tailor the dispute resolution to the needs of the involved parties. Being the first step in the arbitration process, it influences the decision-makers to decide whether the arbitration be carried out either by an international arbitral institution or by ad hoc where no institution is involved. Subsequently, this determines the rules of the arbitral institution or any other that the parties may initiate. With a neutral seat of arbitration, the international commercial arbitration will run smoothly as no party would be willing to be subject to the other party’s court system jurisdiction.
The enforcement of the award according to the treaty signed in New York is also another important factor to consider when selecting the seat of arbitration. It is easier to enforce an arbitration award internationally than a national court; hence the neutral selection of the seat of arbitration is preferred. Under the New York Convention, the courts are required to enforce an award unless there are issues with the procedure. Another merit of having a good seat of arbitration in place is that the procedures and the outcome of the award remain confidential. Many international companies would prefer their transactions to remain confidential and not exposed to the public for security reasons. Other factors that will influence the selection of arbitrary seats include the availability of experts to the subject matter. In addition, the parties will settle that less discovery is needed in arbitration the seat easily.
To avoid multiple appeals on the arbitration decision, the seat of arbitration should be convenient to all parties. This will ensure faster dispute resolution thus business continuation. With a good seat of arbitration, unnecessary expenses will be avoided, hence making the process of arbitration cost-effective. Being an expensive method of solving disputes compared to litigation, the seat of arbitration has to be considered keenly. This will ensure that both parties share the cost equally during the transaction. By doing this, the arbitrators will be chosen to depend on the subject matter.
An appropriate seat of arbitration will enable the establishment of substantive law. This will be initiated by the parties and used to interpret the contract, determine the benefits of the dispute, and finally decide on substantive matters. Finally, in choosing the seat arbitrarily, the New York convention treaty has to be considered as it governs the enforcement of the arbitration decisions and awards. Also, many countries are parties to the convention by that. However, these factors will ensure a smooth arbitration process, but the parties’ willingness, goodwill, and commitment.