Arbitration is a form of private dispute resolution outside of state courts. Unlike in a classic court proceeding, the decision on a legal dispute is not made by a state judge, but by one or more independent arbitrators who are selected by the parties or appointed according to the rules of an arbitral institution.
Especially in international business, arbitration proceedings have become an important instrument for resolving cross-border disputes. Numerous international trade agreements, joint venture agreements, license agreements, distribution agreements, or company purchase agreements now contain arbitration clauses that exclude state courts and instead provide for the jurisdiction of an arbitral tribunal.

For companies from Germany, Austria, and Switzerland, however, participating in an international arbitration proceeding in the United States can involve significant legal, linguistic, and strategic challenges.

Arbitration is a private process for resolving a legal dispute. The parties agree, either before a conflict arises or after a dispute has occurred, that an independent arbitrator or arbitration panel will decide the case.
Depending on the agreement, the arbitration tribunal can consist of a sole arbitrator or a panel of multiple arbitrators. Three arbitrators are often appointed, with each party appointing one arbitrator and those arbitrators then jointly appointing the presiding arbitrator. Many arbitration rules intentionally provide for an odd number of arbitrators to avoid deadlock.
The decision of the arbitral tribunal is called an arbitral award and is enforceable in many countries worldwide.

Arbitration proceedings are used in various legal fields.

By far the most common form is commercial arbitration between companies. These typically involve disputes arising from:

• international supply contracts
• Joint Ventures
• License Agreements
• Business purchase agreements
• Sales and trade agreements
• Technology and software projects
• Investment project

The parties usually agree in the underlying contract that any disputes will be decided by an arbitration tribunal.

International arbitration refers to arbitration proceedings that involve multiple states or differing legal systems.

This is the case, for example, when:

• a German company enters into a contract with an American company
• Austrian investors are involved in a U.S. project
• a Swiss company licenses software to a US corporation
• Contracting parties from different countries agree on different national legal systems

International arbitration proceedings are regularly characterized by the fact that multiple legal systems can become relevant simultaneously. For example, while Californian substantive law may apply to the contract, the seat of the arbitral tribunal may be in New York, and the enforcement of the award may subsequently take place in Germany.

For European companies, this international complexity often presents a particular challenge.

In practice, contracting parties mostly focus on economic aspects such as price, term, scope of services, or liability issues during negotiations.
In contrast, the arbitration clause is often treated as a mere standard provision and receives comparatively little attention.
However, this clause in particular can have significant implications for the course of a legal dispute later on. Just a few phrases can decide this:

• which institution is responsible
where the proceedings take place
• what procedural rules apply
in which language negotiations are conducted
• how many referees are used
• which substantive law applies

If the arbitration clause is not carefully drafted, it can lead to significant costs, delays, or strategic disadvantages.

Companies from Germany, Austria, and Switzerland involved in international arbitration often face procedural conditions that differ significantly from the familiar processes in Europe. Typical challenges include, in particular:

The vast majority of international arbitration proceedings are conducted in English.
Not only oral hearings but also written submissions, expert opinions, documents, and witness testimonies are regularly conducted in English. This often leads to increased organizational and financial costs.

International arbitration often brings together parties from different legal traditions.
In particular, the differences between the continental European legal system and American common law can have a significant impact on litigation strategy. Expectations regarding the presentation of evidence, contract interpretation, or damage claims differ considerably.

Depending on the procedural rules, the taking of evidence can be significantly more extensive than in many European court proceedings. Document requirements, expert opinions, and witness examinations can tie up considerable resources.

Contrary to a widespread assumption, arbitration proceedings are not automatically cheaper than state court proceedings.

Especially in complex international economic disputes, costs can be considerable, as in addition to one's own legal fees, there are regularly also arbitrator fees, administrative fees of the institution, as well as costs for experts and translations.

A common misconception is that arbitration is generally faster, cheaper, and more efficient than state court proceedings. In reality, this depends heavily on the specific case.

While smaller or medium-sized disputes can often be resolved quickly, complex international economic disputes not infrequently develop into proceedings that last several years and incur considerable costs.

In particular, for extensive contracts, technical issues, or high dispute values, arbitration can even be more costly than proceedings before state courts.

Most problems in international arbitration arise long before a dispute even occurs.

When arbitration clauses are carefully examined during contract negotiations and tailored to the parties' needs, subsequent uncertainties and costly disputes can often be avoided.

When it comes to German-American business relationships, early legal advice is recommended regarding:

• the appropriate arbitral institution
• of the place of arbitration
• the language of the proceedings
• the number of referees
• applicable law
• Possible enforcement issues

Arbitration clauses should not be viewed as mere formalities. Early planning and sound legal advice can significantly help minimize risks and create the conditions for successful conflict resolution.