Saving Time and Money in International Arbitrations

Key tactics for managing the process to reduce the time and costs in an international arbitration.

August 14, 2013

Latham & Watkins partners Claudia Salomon, Philip Clifford and Daniel Schechter discussed techniques and strategies that companies can use to minimize the time and money spent during arbitration in “Winning Strategies for Reducing Time and Costs in Cross-Border Disputes,” a recent Latham & Watkins webcast.

Highlights of the webcast are featured in this Q&A interview. For more information, a recording of the full webcast is available here.

Why can arbitration be beneficial for companies facing cross-border disputes?

Claudia Salomon: The number one reason to use international arbitration is enforcement. Under the New York Convention, which has now been signed by 149 countries including the United States, an international arbitration award can be recognized in any of the countries that are signatories to that Convention, with limited grounds for challenge.

The US is not a signatory to any treaty recognizing court judgments. So if a US company uses its bargaining power during the negotiation to try to have the dispute resolved in a US court, and obtains a US court judgment, that court judgment may not be recognized or enforceable outside of the US. Parties seeking to enforce a US court judgment outside of the US will be immersed in issues of commodity, equity and reciprocity. Ultimately, the case may need to be retried in the court where enforcement is sought.

What are some of the tactics that can be used to manage time and costs in drafting arbitration provisions and during the arbitration  itself?

Daniel Schechter: There are a couple areas where you have some levers to pull in terms of managing time and costs. Disclosure is an area where we see a great deal of time and expense. Fortunately, international arbitration retains a general disposition against broad fishing expeditions. But even under the scope of disclosure permitted by most arbitral tribunals, the process of obtaining evidence can become quite time consuming and costly once you start dealing with emails and other electronically stored information (ESI). There are techniques and procedures that can be used even in that context — the parties can agree, and now typically do agree, on whose emails will be searched and what search terms will be used. It is ultimately a function of contract and negotiation once the proceedings start, but it is certainly one of the main opportunities you have to manage the time and expense.

The nature of submissions is another massive driver of expense in arbitration. Places to look to save time and expense: Can you dispense with multiple rounds of memorials and submissions? Can you dispense with post-hearing memorials? Page limits are always something to  consider. It is harder for the lawyers and clients if you are constrained by pages, but ultimately it can really help focus the parties and limit them to the most important arguments.

On witness submissions there are targeted places where you can make submissions without examination — you can find areas where there is not a great deal of factual dispute, or not a great deal to be found on examining the witnesses. An important issue is whether the parties will agree and/or the arbitrator will impose time limits on the duration of the arbitration, whether by pre-contractual time limit or by the parties’ setting forth what they think should be the time limit.

What questions should parties ask themselves when choosing arbitration rules?

Philip Clifford: You need to consider what sort of system you want. The first thing to ask is, do you want an institutional system with an administration standing behind the rules that can assist in the process, such as the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA) or American Arbitration Association/International Centre for Dispute Resolution (AAA/ICDR) systems? Or, do you just want a set of arbitration rules, such as those of the United Nations Commission on International Trade Law (UNCITRAL), which has no institution behind it?

For nearly all of our clients the answer is that they want an institutional arbitration system because of the assistance that the institution can provide. Historically, some parties chose the UNCITRAL Rules because they considered them to be more neutral that the institutions, which were perceived to have a western bias. However, that has changed over the years and now when parties choose the UNCITRAL Rules they often choose one of the institutions to administer them or to act as the appointing authority for the Tribunal, creating a hybrid system.

If institutional rules are preferred, do you want a heavily administered system such as the ICC, or a more lightly administered system such as the LCIA or AAA/ICDR? Do you want to have the extra procedural steps that come with the ICC system? Would Terms of Reference be useful? Do you want an institution to look over the draft award before it is finalized? Or, do you want a more streamlined process? Do you want to pay fees according to the amount in dispute, as with the ICC system? Or, do you prefer to pay on an hourly basis, as with the LCIA or (for the most part) the AAA/ICDR? Who would you most trust to select the Tribunal if needed?

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