1. Commercial vs investment arbitration

Broadly, international arbitration is divided into commercial and investment arbitration. There are also other domains, such as state-to-state arbitration, sports arbitration, and religious arbitration, as well as separate but interrelated domains, such as public international law.

Commercial arbitration

Commercial arbitration is the use of arbitration to resolve a commercial dispute. Parties will generally include an arbitration clause (known as the arbitration agreement) in a commercial contract between them, or, in rarer instances, decide to arbitrate a dispute only after it arises.

Commercial arbitration will often be between legal entities, or legal entities and natural persons. Sometimes it will be between natural persons, but generally acting in a commercial capacity.

The most popular institutions dealing with commercial arbitration are, as of 2021, the International Chamber of Commerce, Singapore International Arbitration Centre, Hong Kong International Arbitration Centre, London Court of International Arbitration, and China International Economic and Trade Arbitration Commission.

Investment arbitration

Investment arbitration, also known as investor-state arbitration or investor-state dispute settlement, generally takes place between a legal (or sometimes natural) person and a state. It usually arises out of a public instrument such as a bilateral investment treaty (that is a treaty between two countries as to investment between them) or a multilateral treaty (a treaty between more than two countries), such as the Energy Charter Treaty. It is always initiated by the investor relying on its rights under such a treaty. As such, the investor is always the claimant and the state the respondent, although more recently, states have been able to countersue investors.

Investors’ legal bases for claims often revolve around a breach of fair and equitable treatment, expropriation, or both. There are certain other legal bases, and whilst these are frequently used in practice, it will often be in addition to breach of fair and equitable treatment and/or expropriation.

The main institutions dealing with investment arbitration are the World Bank’s ICSID, and to a far lesser extent, the PCA. Ad hoc proceedings are often brought under UNCITRAL Rules.

2. Institutional vs ad hoc arbitration

Institutional arbitration

Institutional arbitration involves arbitration administered by a specific institution, usually following the rules of that same institution. Whilst the extent of institutional involvement differs between institutions, they are in any case there if need be, able to break the deadlock or take care of procedural matters. Their rules will often provide structure to the arbitration or help fill any gaps.

Ad hoc arbitration

In ad hoc arbitration, the parties and arbitrators independently determine the procedure, without the involvement of an arbitral institution. This allows for more flexibility, which may be especially useful where the proceedings are ‘unusual’ in some manner. What this means is that:

• The parties choose the tribunal themselves, without reference to an arbitral institution.

• There is no supervision or support from any institution in relation to the conduct of the proceedings.

• There is no review of the award by an arbitral institution.

Nonetheless, to save time and money, ad hoc arbitrations often incorporate or adapt existing rules of procedure rather than setting out a tailor-made procedure. The United Nations Commission on International Trade Law (UNCITRAL) Rules is a stand-alone set of arbitration rules that are the most frequently adopted in ad hoc arbitration. However, within certain sectors, parties will follow the rules of professional bodies tailored to the trade or industry of their members. These notably include the shipping, construction, and commodity trading sectors.