Tech companies often provide in their contracts for local courts to resolve their commercial disputes. While this may be sensible for a purely domestic dispute, there are good reasons to consider alternatives—especially international arbitration—for those disputes that have a significant international dimension. Unlike domestic litigation, only international arbitration can achieve all of the basic objectives of dispute resolution for international contractual relationships, including enforcement. Here are five reasons why international arbitration often makes sense and five key steps to make it work.

1. Ensuring you get paid and the decision is honored: If your counterparty has a presence and significant assets in the U.S., local litigation may work for you. But if your counterparty has its operations and assets overseas, beware. The U.S. is not a party to a treaty with any other country that provides for the recognition of U.S. judgments. Therefore, U.S. judgments must be enforced pursuant to local procedures or general principles of international comity. These proceedings typically give the local judge broad discretion and, where they are not ineffective (which they often are), can be complex and painfully protracted. This key fact seems vastly underappreciated in the tech industry.

In contrast to U.S. court judgments, international arbitration awards are readily enforceable worldwide. The New York Convention, a multilateral treaty that 156 countries have joined, requires each member country to convert a foreign arbitration award into a local court judgment and to enforce agreements to arbitrate. Enforcement of an international arbitration award is subject to only a limited number of narrow exceptions and does not allow for an appeal on the merits of the award. Even if a company never is forced to enforce the award under the New York Convention, the fact it has the ability to do so can have a meaningful impact on ensuring the losing party complies.

2. Obtaining a neutral forum: Generally, tech companies want to avoid their foreign counterparty's courts, and the foreign counterparty is eager to avoid courts foreign to it, due to perceived local bias, unfamiliar procedures and language barriers. Non-U.S. companies are especially nervous about key features of the U.S. court system such as broad and intrusive discovery, the jury system and punitive damages. International arbitration provides a neutral, international forum that effectively plays the role of an international court. This is a key reason it has become the default mode of dispute resolution in cross-border transactions in many sectors.

3. Finality: There are no appeals from an arbitration award. While a court may review the award when a party seeks to enforce it or set it aside, the laws in arbitration-friendly jurisdictions prevent the judge from reviewing the award on the merits and the percentage of awards that are actually vacated by courts in these jurisdictions is low.

4. The right to choose the right decider: Arbitration gives you the ability to nominate an arbitrator who is commercially savvy, perhaps someone who has experience in the tech industry, understands the ecosystem and the legal conventions, and knows the governing law.

5. Procedural flexibility: Parties have wide freedom to determine how much and what type of procedure they want. Typically, international arbitration is not procedurally complex, compared with court proceedings, which can be a significant benefit. However, the parties are free to determine the nature and pace of the procedure and what procedural elements (if any) to import from national court systems allowing them to craft a tailor-made approach. They can also provide for confidentiality, where that is important, and for clauses that ensure the parties have attempted to amicably resolve their dispute before they pull the trigger on an arbitration.

Because arbitration is a creature of consent, and is not subject to appeal, it is important to get the basic framework right. Here are some important steps:

1. Get the right clause: Arbitration tribunals have only the power that the parties give them expressly. This means the language of the arbitration provision must be clear and unequivocal. Otherwise dysfunctional clauses can send the parties to the very courts they intended to avoid. Also, consider the “scope” of the clause and whether you want to encompass all conceivable disputes (disputes “in connection with” the contract), only those “arising under” the contract, or wish to carve out certain disputes. All of the major arbitral institutions have tried-and-tested clauses that should be your first stop. Unnecessary complexity is the enemy here. Resist the temptation to leave this important term to last-minute drafting.

2. Get the right arbitrator: This goes hand in hand with the benefit of choosing your decider. Because post-award recourse is limited, casting is critical. At the outset, consider the issues in your dispute and potential points of conflict. Since the downside of procedural flexibility is the potential for procedural laxity, find an arbitrator who can run a proceeding and make sound rulings on the process (and the merits). Where there are three arbitrators, cooperativeness and persuasiveness are also important attributes.

3. Get the right place: The real estate rule of “location, location, location” applies to international arbitration. The place (or “seat”) of an international arbitration can have critical and even decisive legal implications since the mandatory arbitration laws of that jurisdiction determine the powers of the tribunal and role of the courts. The U.S. is generally pro-arbitration, but other jurisdictions may be better choices in different circumstances. Look for a jurisdiction that has a modern, pro-arbitration legal regime that is a party to the N.Y. Convention, and has an able, noninterventionist judiciary. Resist the temptation to choose a place of arbitration because you fancy sampling the local cuisine or sunning yourself on the beach.

4. Get the right type of arbitration: Specifying institutional arbitration rules, which provide a general procedural framework and are incorporated by reference into the contract, is the best practice. In the absence of rules, the tribunal is forced to create procedural rules from scratch (or choose which existing rules to adopt) and there is no institution to step in if there is a challenge or a failure to make an appointment (meaning the parties will probably have to go to court for relief). International arbitration institutions should be considered (such as the ICC, the ICDR, the LCIA, and the SCC) or perhaps the international rules of CPR or JAMS.

5. Get the right substantive law: Although not strictly an arbitration issue, ensure that the law governing the contract is one that achieves your objectives. Be cautious about switching to another governing law if the contract is based on a U.S.-drafted form: The terms may be based on principles that do not readily “translate” into foreign law. Remember that the substantive law of the contract and the law of the place of arbitration need not be the same. Resolving a dispute under California law in Singapore, London, Paris or New York is perfectly natural in the world of international arbitration.

Finally, international arbitration raises unique legal (and cultural) issues so finding an experienced international arbitration practitioner to assist in drafting or dispute resolution is advisable.

Arbitration is not a perfect institution and not right for every deal. But it has certain distinct advantages over litigation in the international context and should be carefully considered by tech company lawyers as a useful implement in their legal tool box.

Mark Beckett, Rachel Thorn and Marc Suskin are partners at Cooley. They focus on international commercial arbitration, investment treaty arbitration and arbitration-related litigation in the U.S. courts. In addition, they regularly advise on drafting effective dispute settlement clauses in cross-border transactions and structuring international operations to maximize investment protections under international law.