Navigating international arbitration can be daunting for those who practice less frequently in this area. This program is designed to help private practitioners and in-house counsel better understand the nuances of this dispute-resolution process.
One advantage of arbitration is that it allows parties to bypass poor civil procedure in another country or the actual or perceived fear of corruption in such courts.
Identifying the Issues
As the world becomes increasingly globalized, disputes that require international arbitration become more frequent. These disputes typically involve issues relating to investment and transactions outside the home jurisdiction of the claimant.
The complexity and sensitivity of these disputes can often result in a complex set of challenges for arbitrators and counsel to work through. For example, corruption and money laundering issues are becoming more frequently addressed in commercial and investment arbitrations, and navigating these issues can be especially difficult in light of the complex legal and ethical issues involved.
Other challenging issues that can arise in international arbitration include differences in the language and cultural background of the arbitrators. These differences can sometimes lead to misunderstandings and miscommunication between the parties and arbitrators, leading to delays in the proceedings and inefficient processes.
Another challenging issue that can arise in international arbitration is the choice of the seat of the arbitration. Many interviewees indicated they would like to see more diverse options for chairs, including those based in regions with high levels of business activity and those with experience in the relevant law or industry. Interestingly, respondents also indicated that they might be willing to trust less well-known institutions if those institutions could offer them a pool of arbitrators that they may not find in the more highly-ranked collections available.
Identifying the Parties
Unlike domestic arbitrations, international arbitrations are often governed by the laws of multiple jurisdictions. While this translates into various challenges and complexities, it also allows for resolving disputes more efficiently and cost-effectively than traditional litigation.
Because of this, parties frequently include arbitration clauses in their commercial contracts. These clauses oblige the parties to arbitrate their disputes instead of going to court. International arbitration institutions like the AAA, SIAC, ICC, LCIA, or CIETAC typically administer international arbitrations. While each institution administers several arbitrations, specializing in specific regions and industries.
When considering arbitrators, it is essential to identify whether the potential appointees are suited to the case. A key consideration is the potential for an appointee to be a rubber stamp for positions advanced by the appointing party. This may lead to a sub-optimal result in the case.
Identifying whether the potential appointee has sufficient motivation and enthusiasm to participate in the case is also essential. Ideally, the arbitrator will be willing to dive deeply into the factual record and play an active role in drafting the award. Lastly, it is essential to consider the potential for cultural and language differences. A working knowledge of the relevant languages is helpful, but speaking fluently in a second language is preferable.
Identifying the Arbitrator
Most commercial contracts between companies from different countries contain dispute resolution clauses specifying that any disputes will be arbitrated instead of litigated in a court. Parties may also set the law for arbitration and the forum and procedural rules.
Disputes involving international parties and issues can be highly complex and require substantial expert evidence. Such evidence can result in significant time spent on hearings, causing delays and additional costs. However, skilled legal counsel and FINRA arbitration specialists have the experience to navigate such challenges and manage the process as efficiently as possible.
The selection of the presiding arbitrator or tribunal is a critical step in any arbitration and can have significant implications for the duration and cost of a case. The arbitration clause typically defines the selection process, or the parties may work it out in pre-arbitration negotiations. Generally, each party will receive one list of 10 chair-qualified public arbitrators from which to choose. After striking four names from the list, each separately represented party will rank the remaining arbitrators in order of preference.
The decision of an arbitral panel is final and binding, subject to a limited review by courts. As a result, it is essential to consider the prospects for enforcement in the arbitral award’s target jurisdiction when considering whether to opt for arbitration.
Identifying the Venue
The place where arbitration is held, also known as the seat, is critical to determining its procedural law. The seat selection will influence whether state courts can intervene in the proceedings and how the law will govern issues like vacatur and enforcement of an award. Moreover, the seat may have a significant impact on cost and logistics.
Respondents’ answers to our survey suggest several factors are essential in selecting the right seat for international arbitration. These include the location’s legal culture, track record of hosting arbitrations, and reputation for being neutral and trusted. It is also essential that the seat be accessible to parties and their counsel, which may require consideration of travel costs and the availability of support services, including interpreters.
Finally, the seat should be where parties can quickly obtain interim measures (monetary relief) to conserve and preserve their assets during the arbitral process. This is a common way of avoiding a Pyrrhic victory in the event of an adverse award and can be particularly useful in situations where disputes arise from investments or transactions outside of the claimant’s home jurisdiction.
While international arbitration is primarily a legal process, viewing it only in this light overlooks the strategic and tactical importance of enabling contending states to resolve their disputes outside their national judicial systems. In the case of the Red Sea Islands dispute between Eritrea and Yemen, for example, international arbitration provided a face-saving way to resolve a potentially dangerous military confrontation that threatened a vital trade route.