RESOLUTION OF INTERNATIONAL
BUSINESS DISPUTES
By: David Williams Russell
A.
Introduction.
Alternative
dispute resolution clauses and techniques provide tools whereby parties to
various sorts of business agreements and deals pre-arrange to resolve full-blown
disputes in case they arise after such relationships have been severely or
irretrievably strained. Such
techniques can be designed to resolve all problems which may arise between
parties, or limited to specific aspects or subject matter.
Let
me start by briefly outlining for you some dispute resolution mechanics short
of litigation and arbitration.
Then I would like, again briefly, to outline for you some potential
advantages and disadvantages of arbitration versus litigation. Finally, I would like to discuss with
you, in somewhat more depth, some specific alternatives and concerns you may
wish to consider should you choose international arbitration as your ultimate
mechanism for resolving intractable disputes amongst parties to an
international business agreement.
B. Why
blocking provisions and provisions for shared spheres of control in the day-to- day management of international business
relationships may not always work.__________________________________________________________________
Probably
no issues involving any closely held business or bilateral business deal are
more complex or troublesome than questions of how to resolve the future course
of the business or deal if an indispensable party desires to withdraw or
refuses or is unable to fulfill its contractual obligations to the business or
other commercial relationship..
Such problems are exacerbated greatly when the closely-held business is
an international venture to be based in a foreign country or when the deal
parties are to perform their separate
responsibilities in different countries.
In
a domestic deal, it is often possible to plan for one party to buy out or
reassign the interests or duties and rights of the other or, subject to rights
of first refusal in the other parties, to sell its interest to a third
party. In principle, and in
practice, such provisions often are included in international agreements as a
dispute resolution device. Such
provisions often will not work in practice, however.
First,
a United States party might not, because of regulatory or practical business
considerations, be able to continue the venture or business deal without some
host country counterpart. Second,
the web of licensing, technology, transfer, supply and distribution and
marketing arrangements comprising the business relationship, each involving one
or more parties and possibly jointly owned companies as well, may not easily be
unraveled and attempts to do so may be tantamount to attempts to untie an
unseverable Gordian knot. Third,
once it has a United States party’s technology, the foreign party may not see
the need for this United States company to continue in the business, and thus
be intransigent. Rights of first
refusal may be meaningless, if the United States party cannot find a willing
buyer in the foreign country or one acceptable to the foreign party. Furthermore, it may be impractical or
legally impossible for the United States party to buy out the interest of its
foreign counterpart. In addition,
in a foreign country, it may be impossible to verify that a third party
received a bona fide offer (although by providing for price arbitration in the
event of a dispute, this problem might be resolved).
For
similar reasons, put-call options may be impractical, or legally
impossible. Furthermore, any
agreements not to compete by a party after exercise of such buyout or
termination rights by the other may be legally unenforceable for reasons of
United States and/or foreign antitrust laws.
By
all means, if you can devise a reasonable cross buyout, put-call option, right
of first refusal, or mutually acceptable termination language which will work
with your deal or contract and to which the parties will agree, do so.
However,
in many deadlock situations, provisions for the orderly dissolution and
liquidation of the business relationship may be the only viable
termination option.
Alternatively,
consider making no provision for termination. This may lock the parties together and force them at the
time of termination to negotiate a solution which can be tailored to the then
existing situation. This approach
is often used when a termination provision will not work.
As
a concomitant, consider providing for periodic review of the terms of the
agreement as regards feasibility every few years, with a view to buyout and/or
termination and liquidation if the deal is not working out from the parties’
mutual perspective.
Another
method to consider might be to pre-arrange for an outside management group to
be brought in in the event of a serious dispute amongst the parties to manage
the business until the parties have calmed down or otherwise come to an alternative
agreement.
Finally,
it should be possible to build into the contract documents creating the business
relationship mandatory procedures for non-binding mediation or conciliation
monitored and conducted by neutral advisors, mediators or conciliators -
possibly in the format of a mediated negotiation towards a contingent
settlement agreement. Such procedures
may narrow the issues in dispute, even should they fail to cause the parties
completely to resolve such issues.
Should
all such dispute resolution mechanisms fail, the only choices left may be
arbitration or litigation of the disputes amongst the parties.
C. Advantages and disadvantages of arbitration
as opposed to litigation of international business disputes .____________________________________________
As a general rule of thumb, arguably
the worst possible windup to an international business relationship would
be for the United States party to spend years embroiled in complex litigation
conducted in the language and in courts of a foreign country, employing that
country’s laws in the interests of their own native party to the deal. No one wants to be forced to litigate
in the home courts of other party’s fatherland.
1. Dispute
resolution problems inherent in international business contracts.
The
obvious alternative is for the parties to elect to resolve any problems or
disputes they may have by international commercial arbitration. Such an election, however, brings with
it a host of other concerns, because the very nature of international business transactions
brings complexities which may not inhere in many purely domestic deals.
For
one thing, an international business relationship, because it is by definition
multinational, brings with it risks of multiple proceedings and forum shopping
by aggressive disputants.
Second,
because of their international character, disputes over international businesses
inevitably bring with them procedural complexities born of multiple
jurisdictions, laws and parties.
Furthermore,
international judgments may be difficult to enforce because their enforcement
may be subject to notions, articulations and enforcement of comity, fairness,
reciprocity, legal and procedural due process, jurisdiction, public policy and
sovereign immunity which differ markedly from country to country. Enhanced costs of dispute resolution
among multi- national parties to business ventures may be the result,
irrespective of whether arbitration or litigation is the mechanism chosen to
resolve such disputes.
2. Advantages
of arbitration of disputes amongst parties to international business deals.______________________________________________
In
light of these concerns, advantages of arbitration of international disputes
amongst international businesses include that, since arbitration is a
contractual remedy, the parties can in their agreement to arbitrate agree to
forego multiple proceedings and forum shopping. They can agree upon procedural rules and can choose the
applicable substantive laws to be applied. Generally speaking, arbitral awards are more easily enforced
internationally than are judgments in litigation, although, as we shall explore
briefly infra, arbitral awards may not be universally enforceable.
Among
other advantages of choosing an arbitral forum is that, particularly when
choosing an internationally recognized arbitral body to administer the
arbitration, the parties may be insulated from local bias which might exist in
a local or national court which is the home court of a non-United States business.
Procedurally,
international arbitration can be made very flexible and simple, potentially
eliminating some of the lengthy and technical procedural battles which can impede
conventional litigation methods.
Furthermore, the relative informality of arbitral proceedings may
promote closer involvement of the executives of teach participating business in
the proceedings, and thus encourage face-to-face settlement discussions.
Finally,
it is easier to keep arbitration proceedings confidential than to keep
confidential litigation proceedings held in public courts. Such confidentiality can avoid adverse
and potentially harmful publicity for the businesses, which could impede an eventual
sale or resurrection of the troubled business. This also could avoid the divisive possibilities of
suppliers, customers and lenders of the business, not to mention foreign
governments, taking sides, taking adverse actions or withdrawing from involvement
with the business, to the detriment of the business and each party.
3.
Disadvantages
of arbitration of disputes amongst parties to international business agreements.____________________________________________
As
indicated above, arbitration, its administrative, substantive and procedural
rules, is a matter of contract between the parties agreeing to arbitrate their
differences. As such, arbitration
has all the advantages of being as flexible and useful a tool as such parties
can agree to, or adapt to, or evolve by means of their agreements and conduct.
Unfortunately,
as a creature of agreement, arbitration works very badly, if at all, as
regards third parties which are not parties to the agreement to arbitrate. Consequently, in complex disputes with
many parties, many of whom are not in contractual privity with one
another, arbitration simply may not work to effect a full and fair resolution
of all controversies amongst or involving such parties.
For
example, businesses often involve third parties such as licensors, suppliers,
customers, bankers, contractors and insurers, any one or more of which may have
potential liability in a dispute involving an international business and its
parties - yet none of these third parties is likely to agree to be party to an
arbitration proceeding amongst the main players in the international business. In arbitration, common litigation
procedures for impleader, interpleader, joinder of third parties and
consolidation of multiple proceedings simply do not exist, absent an agreement
amongst all parties, or an international convention permitting consolidation of
multiple proceedings.
Similarly,
arbitration tends to lack effective mechanisms to compel comprehensive
discovery from non-parties, whereas such non-party discovery is commonplace in
complex litigation matters.
The
result may be arbitration of part of a dispute amongst the parties in an agreed
to arbitration proceeding, with the spectre of other, perhaps incomplete and
inconclusive, court proceedings for disputes involving third parties.
Another
risk is that, particularly in ad hoc or “do it yourself” arbitral
proceedings, the parties may be forced to spend inordinate amounts of time
“reinventing the wheel” to derive workable procedures for discovery, expert
testimony, presentation and argument of prehearing motions and briefs. Evolving such procedures, absent choice
by the parties of a comprehensive set of well-proven arbitration rules, as
discussed infra, may prove both time consuming and costly.
Remember,
in arbitration matters, the parties pay all the costs. In litigation, the parties get
substantial help from the taxpayers.
Another
area of concern is that of preliminary, injunctive and/or equitable relief,
including injunctive protection of confidentiality. If the parties do not make appropriate agreements as regards
such matters, courts may not be willing or able to provide such equitable
relief.
Other
problems with arbitration may involve the arbitrators themselves, who may not
be cognizant of the relevant subject matter in dispute, who may not be trained
or able to deal with complex legal issues, or, indeed, even to understand a
reasoned legal approach to resolving disputes.
4. Conclusion
as to arbitration versus litigation to resolve disputes amongst parties to
international business contracts._________________________
Notwithstanding
the foregoing, it is the writer’s conclusion that international arbitration
generally is the preferable means by which to resolve disputes amongst parties
to international businesses, although, as to domestic disputes, the writer
takes a decidedly opposite view.
Generally,
the litigation difficulties experienced by business parties in getting
jurisdiction over one another in their own domestic courts; problems of
enforcing foreign judgments; problems of adjusting to different litigation
rules and procedures abroad; foreign language problems; problems arising from
cultural differences; and possible biases in foreign courts all weigh in favor
of the arbitral resolution of disputes amongst parties to international business
agreements.
Furthermore,
in socialist countries, where one business party is likely to be an arm or
agency of the foreign government, arbitration may be the only possible
way to resolve disputes among the partners, since questions of sovereign
immunity, the “Act of State” doctrine and reciprocity may effectively act as a
bar to litigation.
D. Planning and contracting effectively to resolve
disputes amongst parties to international business agreements via transnational
arbitration.___________________
Arbitration
as a dispute resolution vehicle for international business contract parties is
almost totally a function of the written arbitration agreement amongst the parties. It is, consequently, important to draft
arbitration clauses and agreements amongst such parties which are comprehensive
and well-thought through, so that the arbitration will be comprehensive and
well thought through.
In
this section, we shall briefly consider the various choices the parties to an
international business deal should make as they prepare to arbitrate their
differences in what is to be hoped will prove the ever-receding future.
Among
the topics to be discussed on our admittedly far from exhaustive list of
possible topics shall be the following:
1. Appropriate rules to govern the international
arbitration.
2. Appropriate arbitral bodies to conduct the
arbitration.
3. Appropriate choices of substantive laws to
govern the arbitration.
4. Appropriate language in which to conduct the arbitration.
5. Number and qualifications of arbitrators.
6. Place to conduct the arbitration.
7. Enforceability of the arbitrator’s decision.
8. Currency of the arbitration award.
9. Reasoning of the arbitrators’ decision.
We
now shall touch upon each of these issues in turn, and, it is hoped, shall
provide you with some helpful comments to enable each of you to select and
design the most appropriate provisions for an agreement to arbitrate amongst
partners of an international business venture.
1. Appropriate
rules to govern an international arbitration amongst parties to international
business agreements._______________________________
There
have evolved a wide variety of arbitral rules promulgated by a number of
international and domestic bodies, any one of which could be adopted by
drafters of the documentation for an international business deal as a means of
resolving disputes amongst the partners thereof. Some are better than others, but in the interests of
completeness, let us enumerate and cite for you here some of the better known
sets of arbitration rules:
(A) International Chamber of Commerce (“ICC”) Rules
of Conciliation and Arbitration (as amended, in force as from January 1,
1988).
(B) International Center for Settlement of
Investment Disputes (“ICSID”):
(i) Rules of Procedure for the
Institution of Conciliation and Arbitration Proceedings (Institution Rules);
(ii) Rules of Procedure for
Arbitration Proceedings (Arbitration Rules);
(iii) Rules of Procedure for Conciliation
Proceedings (Conciliation Rules).
(C) American Arbitration Association (“AAA”):
(i) Commercial Arbitration
Rules;
(ii) Supplementary Procedures for
International Commercial Arbitration (in force as from February 1, 1986).
(D) London Court of International Arbitration (“LCIA”)
International Arbitration Rules (in force as from January 1, 1985).
(E) Arbitration Institute of The Stockholm Chamber
of Commerce Arbitration Rules (as amended, in force as from January 1,
1988).
(F)
The Euro-Arab Chamber of Commerce Rules
of Conciliation, Arbitration and Expertise (in force as from January 10,
1983).
(G) United Nations Commission for International
Trade Law (“UNCITRAL”) Arbitration Rules.
(H) Defense Research Institute (“DRI”) Rules.
(I) International Center for Letter of Credit
Arbitration Rules of Arbitration (based upon the UNCITRAL Rules of
Arbitration.)
Having
identified many of the commonly used arbitration rules, which should you
select?
Traditionally,
the ICC Rules have been preferred, because of world-wide familiarity with them
and because the ICC is famous for its International Centre for Technical
Expertise, which can supply technical experts for an arbitration if the parties
agree to this.
However,
about half of the parties submitting to arbitration under ICC Rules are from
non-western countries. While this
gives the ICC experience and expertise, it also suggests at least the
possibility of a non-western bias in the ICC. Furthermore, ICC (and AAA) procedures are expensive; these
bodies have limited experience with complex international arbitrations; and the
ICC (and AAA) Rules themselves tend to be vague and cumbersome, and to give the
parties themselves limited control over the process.
The
writer’s current favorite? The
UNCITRAL Rules. They have the
disadvantage of being fairly new, but they have the advantage of having
survived “trial by fire” when they were used by the Iran-United States Claims
Tribunal in the lengthy proceedings held at The Hague in The Netherlands.
In
fact, in recognition of the burgeoning ascendancy of the use of the UNCITRAL
Arbitration Rules in resolving international business disputes, the AAA has
recently promulgated its own procedural rules governing employment of the AAA
as the arbitral tribunal to administer an arbitration proceeding pursuant to
the UNCITRAL Arbitration Rules.
2. Appropriate
bodies to administer an arbitration amongst parties to an international business
deal._____________________________________
(a) “Ad Hoc” Arbitrations.
The
first point to consider is that, merely by providing that an arbitration of
disputes amongst parties to an international business agreement is to be
governed by a given set of arbitration rules, the parties are not bound
to arbitrate under the auspices of the arbitral tribunal promulgating
such rules.
It
is perfectly possible, and not unusual, for the parties to agree to an “ad hoc”
arbitration. The UNCITRAL Rules
are particularly popular for governing such arbitrations, since the UNCITRAL
has no administrative body of its own.
The
key question for the parties to ask themselves as regards “ad hoc” arbitration
is whether or not one or more of the parties might be in need of the
administrative support, supervision, and discipline which might be available
from an institutionalized arbitral tribunal.
Probably,
in this context, “ad hoc” arbitration would work best where the parties
are relatively equal in size and bargaining power and are relatively
sophisticated and where the issues likely to arise are fairly simple - for
example, establishing fair valuation for a machine contributed by a partner to
a business venture.
By
contrast, where one or more of the parties is from the third world, while the
other is from the United States, and/or where the matters involved are of
complex commercial and financial nature, “ad hoc” arbitration could
prove more costly and difficult than would an institutionally administered
arbitration.
(b) Institutionally
Administered Arbitrations.
If
you decide, as many disputants do, to have future disputes involving parties to
an international business contract administered by an existing arbitral body or
institution, the question then arises, by which one?
Some
commonly recommended arbitral tribunals are as follows:
(i) The International Chamber
of Commerce in Paris;
(ii) The American Arbitration Association in New
York;
(iii) The Defense Research Institute in Milwaukee;
(iv) The Stockholm (Sweden) Chamber of Commerce;
(v) The National Chamber of Commerce in Vienna;
(vi) The London Court of International
Arbitration;
(vii) The International Center for Settlement of
Investment Disputes (Note: ICSID handles disputes brought under the
Convention on the Settlement of Investment Disputes Between States and Members
of Other States).
Ordinarily,
your choice of an administrator for your arbitration should be an authority
having offices in the place the arbitration will take place, such as the AAA
for the United States, the ICC for Europe, the London Court of Arbitration for
the United Kingdom, and the like, although this is not an absolute necessity.
It
is wise, however, to check with the desired tribunal to ascertain whether or
not it will administer an arbitration under UNCITRAL Rules, if they are
selected, for example, since, as noted above, the UNCITRAL has no
administrative body of its own. (Note:
As indicated above, the AAA, and, the writer believes, the ICC, will administer
arbitrations under the UNCITRAL Rules, but it is worthwhile to double check
this prior to entering into a definitive agreement to arbitrate.)
3.
Appropriate
choices of substantive laws to be applied in the arbitration.____________________________________________________
It
is wise when drafting an agreement to arbitrate for the parties to pick the
substantive law which should be applied to interpretation of the contracts
involved, application of the facts thereto and determination of the rights and
liabilities of the parties thereunder.
In
this regard, it is often preferable to a United States business contract party
to pick the laws of that party’s home state, or else the current laws of
another commercial state of the United States, such as Illinois, Texas,
Florida, New York or California, where there is a well developed body of
commercial laws, as well as an appropriate body of statutes and decisions
involving the rights of parties to arbitration proceedings. (Note: But watch out! If you do this, and your contract
involves the sale of goods, you may also want to provide something to the
effect that,
“The United Nations Convention on
contracts for the International Sales of Goods shall have no application to
this Agreement or to any proceeding brought pursuant hereto,”
since this
Convention supersedes and overrides many important provisions of the Uniform
Commercial Code as adopted by most states. As a general rule of thumb, United States sales laws are
more favorable to buyers; whereas the United Nations Convention is more
favorable to sellers; although this could vary depending on the deal).
Alternatively,
one could strive to adopt laws of a former British Commonwealth country like
the United Kingdom, Canada or Australia, the laws of which would be more
comprehensible to a United States business contract party and its United States
counsel than would those of a country governed pursuant to civil or code law.
Lacking
that, some contracts have successfully provided for a “floating” choice-of- substantive-law/choice-of-forum
clause with the applicable law/forum being those of the country of the party
initiating arbitration, or even, to promote conciliation, those of the party not
initiating the arbitration. (Note,
however, that there is some case law overseas that suggests that such
“floating” choice of law/forum clauses may not be enforceable, because the
exact law and/or forum was not finally agreed to by the parties at the time the
contract was entered into -- a kind of “no meeting of the minds so no contract”
theory. See, e.g.,
Armar Shipping Co., Ltd. v. Caisse Algerienne d’Assurance et Reassurance,
2 Lloyd’s Rep. 450 (1980).)
It
is entirely possible, however, despite the best efforts of a United States party
to an overseas business contract, that the foreign parties and/or their foreign
governments may insist that the substantive laws of the country which is
the principal situs for the business relationship must be the governing
law.
In
such event, do not despair, but, as discussed infra, do negotiate for
the arbitration to be conducted outside the country of the party which
insists that its country’s substantive laws must control the contract.
4.
Appropriate
language in which to conduct an arbitration amongst parties to
an international business contract.__________________________________
Always
specify that the arbitration must be conducted in English, which still
is the international language of commerce. If it becomes imperative to conduct an arbitration in a
language other than English, provide for the arbitration to be conducted in
both English and the other language, and make sure simultaneous translators are
available. There is literally nothing
more Kafka-esque than being party to an arbitral proceeding in which you have
no clue as to what is taking place.
5. Appropriate
numbers and qualifications of arbitrators of disputes amongst parties to
international business contracts._________________________
For
obvious reasons, it is essential that there be an odd number of arbitrators, so
as to avoid deadlock. For cost
reasons, it is generally advisable not to have more than three arbitrators. This leaves the typical panel at either
one or three arbitrators.
If
an arbitral tribunal is to pick the arbitrators, it is important to specify the
necessary qualifications of the arbitrators, particularly if complex
technological or intellectual property issues are to be arbitrated. For highly technical contract
interpretation matters, it may be well to specify an all lawyer panel, since
non-lawyers may not be inclined to give sufficient merit to excellent, but
technical, legal arguments - as to the existence or non-existence of rights or
breaches, for example.
One
common procedure in two-party arbitrations is for each party to pick its
arbitrator, and for those two arbitrators to pick a third arbitrator. This “championship arbitration”
procedure works best where the arbitration will take place in a neutral jurisdiction,
but may put undue pressure on a business venture partner which is remote from
the situs of the arbitration to find a friendly arbitrator familiar with the
rules and with the identities of possible third arbitrators available in the
arbitral forum. In addition, this
procedure becomes unwieldy when expanded to apply to multi-party arbitrations.
6. The
appropriate situs in which to conduct an arbitration amongst parties to an
international business contract.______________________________
The
first consideration in picking a site for an arbitration is to hold it in a
neutral location outside the home country of the non-United States business
contract party, so as to avoid possible local bias and inconvenience.
The
writer is aware, for example, of a business venture in China that provided for
arbitration of disputes in Beijing.
When a dispute arose, the cost to the United States company of
arbitrating in China was so prohibitive that the United States partner, which
had valid claims, simply defaulted and lost its interest in the venture.
The
second consideration is that a situs be picked in a jurisdiction from which the
award in arbitration will be “portable,” that is, enforceable both in the
United States and in the home countries of other business contract parties. Enforceability issues shall be
discussed in somewhat more detail infra.
Some
other tips as regards the arbitration site might include checking out the
availability of facilities and services at the chosen arbitration situs, such
as hearing rooms, translators, interpreters, and multilingual stenographers,
visa and passport requirements, privacy and confidentiality rights, and the
availability of unbiased, experienced local lawyers. Avoid arbitrating in unstable or turbulent countries.
7. Enforceability
of an award in an arbitration amongst parties to an international business agreement._______________________________
The
issue of extraterritorial enforceability of foreign judgments and arbitral
awards, in the United States and abroad, is a substantial one, beyond the scope
of this presentation. However, it
might surprise you to know that, according to the writer’s most recent
information, twenty-nine states, not including Indiana, have passed a version
of the Uniform Foreign Country Money-Judgments Recognition Act, although most
states unofficially are guided by its principles. Generally, in the United States, foreign judgments are
enforceable based upon comity principles of international and state common law;
not by reason of federal or state statutes or treaties.
With
respect to foreign arbitral awards, however, the United States is a
party to the 1958 United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, see 9 United States Code
Sections 201 to 208, commonly known as the “New York Convention.” The approximately one hundred thirty
nations which have ratified the New York Convention have agreed to recognize
arbitral awards made in all other nations which are parties to the New York
Convention.
In
addition, the United States is party to a number of bilateral and multilateral
treaties (for example, the Panama Convention) which provide for the bilateral
or multilateral enforcement of foreign arbitral awards, and a number of
countries, by statute, recognize foreign arbitral awards.
A
good rule of thumb, however, is that it is generally inadvisable to arbitrate
in a country which is not party to the New York Convention.
In
addition, when considering arbitration in a country outside the United States,
check the local law for such matters as what subjects are allowed to be
arbitrated, whether foreign arbitrators are allowed, and the time allotted for
arbitration.
Also
review local law as to whether or not there could be any allowable legal
grounds for setting aside an arbitral award. Typical grounds might include a major defect, lack of due
process, biased arbitrators, or a decision clearly contrary to the law. Some countries, such as Switzerland,
and some tribunals, such as the International Chamber of Commerce, permit a
full review of the facts and the law of a disputed arbitration result. Most, like the United States, permit
review only as to substantive legal matters.
A
possibly unrelated thought concerning enforceability is that, where a business
venture partner is an agency of a foreign government, as in some eastern
European countries and in the former Soviet Union, it may prove difficult or
impossible for the United States business venture partner to obtain political
risk insurance against partner defaults of the type afforded by the United
States Overseas Private Investment Corporation (“OPIC”), for example. However, OPIC might be willing to
insure over the risk that such foreign governmental entity, having agreed with
its United States business venture partner to resolve disputes via
extraterritorial arbitration in a situs foreign to the venture, will in fact
honor its agreement to so arbitrate such disputes in such foreign situs.
Furthermore,
if the only issue in dispute is the failure of the foreign government to invest
in a project or venture, an International Center for Settlement of Investment
Disputes, or “ICSID,” arbitration may be an alternative. But be careful. The foreign government entity must consent
to such an arbitration and must have been authorized by its government
to so consent. ICSID arbitrations
are of limited use, and are fairly rare, in part because their initiation is
fairly technical, the scope narrow, and the process slow.
For
the reasons set forth above, when drafting the arbitration clause, it is a good
idea expressly to provide that the arbitration award is to be enforceable by
the courts and that the parties shall be free to seek interim injunctive and
equitable relief as appropriate during the pendency of the arbitration.
8. The
appropriate currency for an award in an arbitration amongst parties to an
international business contract.________________________________
The
agreed currency in which monetary awards are to be made generally should be
specified in the arbitration agreement.
Stable currencies are best.
Volatile currencies, such as rubles, are risky.
9. Reasoning
of the arbitrator’s decision in an arbitration amongst parties to an
international business contract.________________________________
Many
civil law countries (such as France and Spain) require as a condition to the
enforceability of arbitral awards that the decision state the reasons for the
award. Because of this, most ICC
awards are “reasoned” and the UNCITRAL rules require that the arbitrators
express their reasons, unless the parties agree otherwise. Note, however, that the AAA rules do not
require “reasoned” awards, and most AAA awards are not accompanied by an
opinion of the arbitrators.
E. Conclusion.
Briefly
to summarize these remarks, allow me to review with you the essence of the
foregoing discussion.
First,
you do not want to have to litigate in a foreign jurisdiction. Arbitration is by far the preferable
alternative to resolve a dispute amongst parties to an international business contract.
Second,
consider specifying what the rules of arbitration are to be (e.g.,
American Arbitration Association Rules, Defense Research Institute Rules,
International Chamber of Commerce Rules).
The UNCITRAL Rules are recommended.
Third,
consider whether or not the arbitration should be conducted under the auspices
of a body like the International Chamber of Commerce, or merely pursuant
to their rules. It may be very
expensive to use an arbitration group like the American Arbitration
Association, for example, actually to conduct the arbitration at their standard
rates with their arbitrators, but “ad hoc” arbitration may not be appropriate
to resolve complex disputes.
Fourth,
consider whether you should agree in advance what body of commercial laws
should be used by the arbitrators in their decision. The commercial laws of a state of the United States might be
a good choice, but remember to opt out of the United Nations Convention on the
International Sales of Goods if your business contract involves the sale of goods.
Fifth,
provide that the arbitration must take place in the English language.
Sixth,
pick an odd number of arbitrators and consider whether they need special
competence.
Seventh,
try to arrange for arbitration to take place in the United States, or, if you
cannot, in a neutral jurisdiction such as Switzerland or The Netherlands.
Eighth,
provide that arbitration is to be binding on the parties and enforceable by the
courts and leave room for the parties to seek interim injunctive or equitable
relief from the courts while the arbitration is pending.
Ninth,
provide that any monetary awards should be paid using a stable, specified
currency.
Tenth,
consider whether or not expressly to require the arbitrators to render a
written opinion stating the reasons for their decision in light of the fact
that an “unreasoned” decision may not be enforceable in some civil law
countries.
Thank
you for your kind attention. I
hope that the foregoing comments may prove useful to you as you plan for
resolution of disputes amongst parties to international business contracts,
transactions and ventures.
