Citation

Discussion Paper Details

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Title: Arbitration in International Trade

Author(s): Alessandra Casella

Publication Date: September 1992

Keyword(s): Arbitration, Institutions and International Integration

Programme Area(s): International Trade and Regional Economics

Abstract: The great majority of international contracts provide for arbitration in the event of dispute. Legal scholars argue that international arbitration is causing the development of a legal doctrine attuned to the needs of business and independent of national laws. This paper studies international arbitration as a prime example of private trade shaping international institutions. The provisions and the practice of international arbitration are reviewed, and a general equilibrium model of the relationship between the expansion of international trade and the adoption of arbitration is presented. The model focuses on the heterogeneity of 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 changes in trade. In addition, it shows how the legal services provided by the courts deteriorate in the presence of arbitration, predicting 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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Bibliographic Reference

Casella, A. 1992. 'Arbitration in International Trade'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=721