21 Apr Ten Ways to Avoid the Americanization of International Arbitration
The ABA Journal has an interesting article on the Americanization of international arbitration. There’s nothing particularly new to our readers in this article. It’s a theme that my friend and colleague Tom Stipanowich has written about extensively. I’ve written a bit about the subject as well. But the fact that the story is being told in the largest legal publication in the United States is significant. The focus of the story is on transplanting American practices to the international arbitration arena, almost at the request of American counsel or arbitrators. Here’s a few choice quotes:
“If arbitration is to commit suicide, it will do so of its own choosing, because the parties have chosen to make it more expensive, time-consuming and more like litigation,” said Joe Profaizer of Paul, Hastings.
“The proliferation of electronically stored information is a major cost driver in U.S. litigation, and it’s becoming a major cost driver in international arbitration,” said Christopher Larus of Robins, Kaplan, Miller & Ciresi. “As more and more companies have to delve into their electronic records, it’s becoming more and more expensive.”
“The U.S. must recognize that international arbitration is international. The system must accommodate a wide variety of traditions and practices. It can’t just accommodate the American model, or people will stop using it,” says Glenn Hendrix of Arnall Golden Gregory.
So if the parties are so concerned about the Americanization of international arbitration, why don’t they fix it? That might mean (1) embracing mediation; (2) avoiding U.S. arbitrators; (3) avoiding U.S. counsel; (4) building in pre-dispute discovery limits into the contract; (5) vesting the arbitrators with greater discretion to limit discovery; (6) imposing more serious deadlines for the different stages of arbitration; (7) adopting expedited arbitration rules; (8) embracing advanced technologies for e-discovery; (9) selecting arbitrators who are particularly adept at case management; and (10) establishing more creative fee structures for resolving disputes.
These are just a few ways that one could avoid the increased costs and delays of international arbitration. I doubt that such concerns are paramount when a billion dollars is in dispute. I don’t accept the premise that the Americanization of international arbitration is always a bad thing. But for many disputes where cost and delay are significant priorities, there are ways to avoid the Americanization of international arbitration.
I am a US-trained, -qualified and -based lawyer specializing in development of major capital projects, primarily in emerging markets. My clients are principally non-US companies. Few of them have had much if any, contact with US-style discovery. What they know of it they loathe. Practically, few of your suggestions will have much effect. (1) Mediation is a waste of time on major issues. Sophisticated parties amenable to an amicable settlement will find it without a mediator. Otherwise, it is just a method for one side (or both) to impose delay and run up legal costs. (2) and (3). This I can foresee — not at the time of the dispute, but agreed as part of the original deal. The problem is that sophisticated parties want NY or London law (and London litigators these days are perceived as hardly better than US litigators). (4) Parties are not going to write discovery rules into their agreements. Period. Clients — rightly — hate the incomprehensible pettifogging legalism that muddies up their agreements; if I suggested detailed discovery procedures in an agreement, I would get fired on the spot. If I didn’t, I’d get fired thirty seconds after the other side made its first… Read more »
Dear Skeptic: Quick response: 1. Opinions differ on mediation. I just spoke with a GC at a major corporation who said the opposite. She always try to resolve the dispute through negotiation/mediation early, and usually does. 4. I didn’t mean they would write discovery rules into the contract. I meant they could incorporate discovery rules by reference that are more of a hybrid civil/common law approach, such as the IBA Rules of Evidence. The market also could create a menu of discovery approaches that could be incorporated by reference in a contract. Similar to Incoterms. 6-7. Fair point. But the deadlines could be in the contract initially and then modified in the early stages of the proceeding. The absence of deadlines puts no limits, which is not a good thing. 8. I assume you are not serious. There are a growing number of companies that are making e-discovery software that can search digital business documents. 9. Some arbitrators are chosen because they have wonderful reputations in resolving the dispute, but that doesn’t mean they are good at managing the case. 10. I disagree. There is no reason that the traditional billable hour is the only viable means paying for arbitration. … Read more »
1. Mediation is great as a seed around which to settle minor or uncomplicated disputes. It’s good for a dispute that can be settled if a third party gives an unjaundiced view of a few disputed facts or legal principles, or can give an opinion on an ambiguous point. In my experience, those sorts of disputes rarely invite American discovery (and discovery abuse). In the disputes that arise in what I do — major engineering projects — it’s useless, other than to confirm what the other side has for facts and argument. 4. We agree, and (as I said before) I believe that this is the only realistic tool. However, the rules need to be much tighter and much more rigorously enforced. They need to be written into the arbitral organizations’ rules. General counsel need to know about them and make sure that they get into agreements. Their deal lawyers don’t know and don’t care about them. To a deal lawyer, an arbitration clause is incomprehensible jargon that goes in the back of the agreement with the integration clause. 6-7. Obviously, deadlines are necessary. They are also ignored. One of the things that drives non-litigators nuts is litigators’ constitutional inability… Read more »