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Arbitration in International Trade

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  • Alessandra Casella.

Abstract

The great majority of international contracts provides that any disputes which may arise will be decided by arbitration. Legal scholars argue that international arbitration is leading to the development of legal doctrine attuned to the needs of business and independent of national laws. This paper studies international arbitration as a beautiful example of the role of private trade in shaping international institutions. We review the provisions and the practice of international arbitration, and present a general equilibrium model of the relationship between the expansion of trade and the adoption of arbitration. The model focuses on the heterogeneity existing among economic agents in terms of their legal needs. It shows how arbitration alters the size and composition of markets, while at the same time responding to exogenous change in trade. In addition, it shows how the legal services provided by the courts deteriorate in the presence of arbitration and predicts that the share of traders using arbitration should rise as markets expand. Overall, the model does remarkably well in generating results commonly discussed in the legal literature.
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Suggested Citation

  • Alessandra Casella., 1992. "Arbitration in International Trade," Center for International and Development Economics Research (CIDER) Working Papers C92-003, University of California at Berkeley.
    • Handle: RePEc:ucb:calbcd:c92-003
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    References listed on IDEAS

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    1. Paul R. Milgrom & Douglass C. North & Barry R. Weingast*, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, March.
    2. Alessandra Casella & Jonathan S. Feinstein, 1990. "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions," NBER Working Papers 3554, National Bureau of Economic Research, Inc.
    3. Barry Eichengreen., 1992. "The Political Economy of Fiscal Policy After EMU," Center for International and Development Economics Research (CIDER) Working Papers C92-004, University of California at Berkeley.
    4. Casella, Alessandra, 1992. "On Markets and Clubs: Economic and Political Integration of Regions with Unequal Productivity," American Economic Review, American Economic Association, vol. 82(2), pages 115-121, May.
    5. Frankel, Jeff & Phillips, Steve & Chinn, Menzie, 1992. "Financial and Currency Integration in the European Monetary System: The Statistical Record," Center for International and Development Economics Research (CIDER) Working Papers 233177, University of California-Berkeley, Department of Economics.
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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