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.
Roger Alford
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Roger, it is an interesting article, and my own division of GE (which is not US-based) already applies points 1-3 without difficulty. We also do our best with respect to point 8, and are considering 7.
But I would not say our approach is based on an “efficiency” argument alone, which risks oversimplification. There are also questions of quality and predictability of decision-making. For business disputes, we often have a preference for a procedural approach that is found in the civil law traditions, which gives priority to documents the parties already possess rather than potentially unreliable (or unavailable) witnesses.
Michael Mcilwrath
A very interesting post and thank you for the links to the other articles. I note your suggestion that parties “avoid U.S Counsel” – I can see where you are coming from on this, but it might be a little unfair, particularly when Debevoise have just taken a major step in issuing their Protocol to Promote Efficiency in International Arbitration…maybe not all U.S Counsel are guilty of “Americanizing” international arbitration….
Lucy Greenwood, Foreign Legal Consultant, Fulbright & Jaworski LLP
Roger,
I would suggest that an eleventh item be added to your list — the adoption of preliminary claim vetting procedures.
For reasons that I have addressed in greater detail elsewhere (see ASA Bulletin, Vol. 26, No. 4 (2008)), recognizing the possibility of threshold claim testing to allow an arbitral tribunal to dispose of claims that are without legal merit, even assuming the truth of the facts alleged (as is possible in treaty practice under existing procedures, such as ICSID Rule 41(5) and CAFTA Article 10.20.4), is one means to enhance arbitral efficiency. Assuming that basic procedural rights are respected, such as the right of any party whose claim is so challenged to be heard in opposition, and that the procedures comport with the parties’ intentions, vetting procedures arguably fall within the discretion granted to tribunals in major jurisdictions to manage arbitrations efficiently. In short, parties should have no “right” to pursue claims capable of leading nowhere.
The effect would be to leverage a tool of common law procedure in favor of arbitral efficiency. While the United States is by no means the only jurisdiction in which such procedures are practiced, increased consideration of threshold claim testing would offer a form of arbitration-friendly “Americanization”.
Aren Goldsmith*
*The views expressed here are those of the author alone and should therefore in no way be construed as expressed on behalf of Cleary Gottlieb Steen & Hamilton LLP or any of the firm’s clients.