Is International Commercial Arbitration Still Working? Arbitration Under Geopolitical Pressure

Few questions in international commercial arbitration are as contested now as the simplest one: is the system still working? The Finland Arbitration Institute’s 115th anniversary conference in August, which brought together some 290 participants representing 40 jurisdictions, took that question as its starting point. Gary Born opened with an unambiguous answer. Reflecting on the past quarter century, he offered an optimistic account of how arbitration has spread, matured and, in his view, proved its worth, including in comparison with national courts. The conference moderator, Tuuli Timonen, later framed it as a “story of hope”. The three panels that followed did not so much dispute that optimism as test it. They traced the pressure geopolitics now places on arbitration at three successive stages, from the contract to the hearing room to the award.

Born’s case rested on both breadth and principle. On breadth, he highlighted the continued expansion of the New York Convention and ICSID, as well as the steady spread of the UNCITRAL Model Law. This trend is of particular relevance to Finland, where, as the Blog recently touched on, the new arbitration legislation based on the Model Law is expected to enter into force in 2027. On principle, he pushed back on the charge that arbitration offers only an attenuated rule of law, arguing that party autonomy is itself a fundamental right, and that arbitration is its fullest institutional expression. He added that challenges to arbitrator independence and impartiality succeed far less often than critics imply.

Taken together, the panels that followed Born’s keynote pointed to something more than a list of separate problems. Geopolitics does not press on arbitration at a single point; it changes what party autonomy is worth at each stage, narrowing the practical value of a bargain, unsettling the neutrality of the process, and fragmenting the finality of the award. This post follows those three stages in turn. First the contract, before a dispute arises. Then the proceedings, once one is under way. Finally the award, when it meets the courts.

The Contract

The first pressure is felt upstream, at the drafting table. Sanctions, export controls and tariff regimes, part of a broader turn towards economic statecraft, increasingly subject ordinary questions of contractual performance to public-law constraints, and the widening gap between physical impossibility and regulatory illegality is where much of the difficulty now lies. Parties can no longer assume that a force majeure or sanctions clause drafted a few years ago will behave predictably when tested, and the proliferation of EU sanctions packages since 2022 has made that plain. One illustration is the UK Supreme Court’s decision in RTI Ltd v MUR Shipping BV [2024] UKSC 18, where a “reasonable endeavours” proviso in a force majeure clause was held not to require a party to accept payment in a non-contractual currency when sanctions impeded payment in the contractual currency. Much also turns on how a forum classifies a foreign sanction. On the Chinese approach described at the conference, foreign sanctions are treated as a matter of fact rather than law, so that their existence does not by itself render a contract or its performance unlawful before a Chinese court or tribunal, and a party cannot readily escape its bargain by pleading hardship.

Geopolitics has meanwhile added a further variable to the choice of seat. Alongside the lex arbitri and the supervisory courts, parties now routinely weigh a seat’s exposure to sanctions and the practical consequences that may follow. In the 2025 Queen Mary survey thirty per cent of respondents reported choosing a different seat for that reason. Much of the practical response lies in revisiting older clauses before they are tested, from sanctions wording to payment and currency mechanics. Party autonomy is therefore being reshaped by public law before a dispute even arises.

The Hearing Room

The second pressure is procedural, and perhaps the one that cuts closest to arbitration’s legitimacy. States and state-owned entities are significant participants in international commercial arbitration, and sanctions and polarised politics are testing the neutrality of the process directly, as parties question not just individual arbitrators but the neutrality of seats and institutions themselves. The strain often lies in perception, not fact. A process may stay neutral while a party’s confidence in it erodes. The sharpest question concerned nationality and belief, whether an arbitrator’s nationality, or the public expression of a view, can be treated as a proxy for bias. This is no longer hypothetical. Russian courts have refused to enforce awards on the basis of a presumption that arbitrators from states Russia designates “unfriendly” lack impartiality, a position most of the field regards as a departure from the premise that an arbitrator sits as an individual, not the representative of a state. The more considered view distinguishes nationality, which says nothing about how a case will be decided, from a public statement bearing directly on the parties or the issues in dispute, which may. Institutions are left with a genuine dilemma. On one view they are right to head off the risk by appointing arbitrators whose impartiality is less likely to be contested; on another, screening candidates for their views or their origins shrinks the arbitrator pool on grounds that may have little, if anything, to do with impartiality.

Underneath all of this runs a more basic pressure of whether a sanctioned party can arbitrate at all. Sanctions can disrupt the instruction of counsel, the payment of fees, and the banking on which the process runs. In the same survey, a quarter of respondents reported difficulty finding counsel or arbitrators able to participate. That points to a more fundamental access-to-justice problem. If the process is closed to one side, the neutrality of the forum is beside the point.

Alongside concerns about neutrality sit other difficulties peculiar to disputes involving states. Before a national court, sovereign immunity may operate as a defence to suit. In arbitration, a logically prior question is often whether the state has agreed to arbitrate at all. This may introduce a threshold stage of its own before the merits can be reached. A 2025 decision of the Swiss Federal Supreme Court (4A_163/2023 and 4A_490/2023, 16 January 2025) illustrates the point. In proceedings to constitute a tribunal against a state that had not signed the arbitration agreement, the Court held that the state retained its immunity. Absent a written agreement to arbitrate of the kind Article 17 of the UN Convention on Jurisdictional Immunities of States and Their Property requires, taken as a statement of customary international law, the condition for setting immunity aside was not met, and no arbitrator could be appointed on the state’s behalf. A state may also open a parallel criminal investigation, typically into bribery or corruption, leaving the tribunal to decide whether to stay or to proceed, with consequences that may surface at enforcement. Evidence poses difficulties of its own. Armed conflict raises barriers of a more basic kind, cutting off physical access to state records and regional archives when a party most needs them. A related but distinct question is when missing documents justify an adverse inference against the state from which they are sought. A state or state-owned entity may, for example, invoke national security or special political sensitivity to resist production. Here guidance may perhaps be drawn from the five-part test derived from the jurisprudence of the Iran-United States Claims Tribunal, which asks, among other things, whether the missing records were relevant and genuinely within the state’s reach before an inference is warranted.

The Award

The third pressure sits downstream, where the award meets the courts, and here the recurring theme is that finality is conditional. One concern, put sharply on the panel and pressed further by the wave of disputes that sanctions since 2022 have produced, is that public policy is increasingly invoked as a sword rather than a shield: not as a narrow safeguard but as a route to reopen the merits, whether at enforcement or in set-aside proceedings. The debate drew on cases including Belokon v Kyrgyzstan and Corporación Mexicana de Mantenimiento Integral v Pemex-Exploración y Producción. What blunts this pressure is the decentralised shape of the system itself. Because enforcement can be sought in many jurisdictions, a single hostile forum rarely ends the matter, and an award refused in one place may still be enforced in another. Sanctions that arise after an award complicate matters further, and even a lawful payment can stall when cautious banks decline to move the money.

In practice, the panel’s counsel was strategic rather than doctrinal, focusing on locating assets first, favouring historically pro-enforcement jurisdictions, avoiding a state’s home courts where possible, and treating an award as an instrument with a long shelf life, to be held until the landscape shifts. One speaker offered a counterweight from the Nordic market, where awards are rarely set aside and voluntary compliance remains the norm.

What emerges across the three stages is a system under real pressure but adapting to it, whether through more careful drafting, closer attention to neutrality and access to justice, or more strategic enforcement. If geopolitics changes what party autonomy is worth at each stage, it has not displaced it. Resilience in arbitration has rarely come from insulation against geopolitics, which was never on offer, but from its capacity to adjust, and from the fact that no single state or forum controls it. Finland’s pending Model Law reform, and the Finland Arbitration Institute’s rules revision alongside it, belong to that same process of adjustment. On the evidence of Helsinki, the story of hope still holds, reinforced by the system’s ability to absorb pressure at each point where it enters.

This post reflects the authors’ own analysis of discussions at the conference, written in their personal capacity. It should not be understood as an official position of The Finland Arbitration Institute, or as an endorsement or rebuttal of the views of individual speakers.