Arbitration is a dispute resolution process in which the disputing parties present their case to a third party intermediary (or a panel of arbitrators) who examine all the evidence and then make a decision for the parties. This decision is usually binding. Like court-based adjudication, arbitration is adversarial. The presentations are made to prove one side right, the other wrong. Thus the parties assume they are working against each other, not cooperatively. Arbitration is generally not as formal as court adjudication, however, and the rules can be altered to some extent to meet the parties’ needs.
As in court-based adjudication, arbitration outcomes are typically win-lose, not win-win. Thus, the arbitrator usually decides that one side was right and the other wrong. They do not often go out of their way to develop new approaches for meeting the interests of both sides simultaneously, as a mediator would do, though if a win-win solution is apparent, the arbitrator would probably recommend it.
In the United States, arbitration is most commonly used in labor-management, commercial, and consumer conflicts. In 1985, more than 95 percent of all collective bargaining contracts required that arbitration be used to resolve disputes (Goldberg, Green and Sander, 1985, p. 189.) There are several advantages of arbitration. First, it is more flexible than adjudication. The disputants can usually choose their own arbitrator, who can be an expert in the topic in dispute, which a judge seldom is. This makes arbitration especially useful in complex, technical commercial disputes. Second, arbitration is usually much quicker than litigation, especially since the result is binding and not open to appeal as litigation is. Third, arbitration is private. This avoids the disclosure of trade secrets and potentially embarrassing information.
Arbitration is a very common approach for resolving international commercial or business disputes, and a number of international organizations have been established for doing this. These include the International Chamber of Commerce (in Paris), the Arbitration Institute of the Stockholm Chamber of Commerce, and the International Court of Arbitration administered by the World Business Organization. Each of these bodies has its own procedures for arbitration which avoids the problem of one country having different procedures from another, thereby creating a conflict over which jurisdiction should hear a case.
It is common for international contracts to mandate that arbitration be used to resolve any disputes that arise. Sometimes, the contract specifies that one of these bodies be used. At other times the procedures to be used for such arbitration are spelled out in the initial contract itself.
While mediation also provides some of these advantages, it is a cooperative process, not an adversarial one. If the parties are so angry with each other that they cannot communicate effectively, even with help, or cannot cooperate at all, arbitration is usually more effective than mediation. It is also more effective when the problem involves the determination of facts or interpretation of law.
The disadvantages of arbitration stem from the same characteristics. Arbitration is adversarial, thus it generally does nothing to create win-win solutions or improve relationships. Often it escalates a conflict, just as court-based adjudication is likely to do. In addition, arbitration takes decision making power away from the parties. This results in a resolution of the current conflict, but does nothing to help the parties learn how to resolve their own conflicts more effectively in the future, as does mediation. Other people also fault arbitration for being too informal and potentially unjust. Only the courts, with their carefully regulated procedures can provide justice, some observers believe.
Important differences from a court proceeding:
- You create the contract that governs the arbitration process
- You get to pick an arbitrator who is experienced in the subject matter of the dispute
- You can choose to use more relaxed rules of evidence
- You usually get to much quicker resolution of the dispute
- You award is non-appealable, thus eliminating the often extensive and costly appeals process
Picking an arbitrator
Most of our trial court judges come from a background of working in the criminal justice system, not from a commercial, business, or family law background. Though they have often acquired extensive experience on the bench and in regional and national workshops, it is often advantageous to find a decision maker whose primary professional background has been in the area that is the subject matter of the dispute.Since arbitrators do not have to be lawyers, you can choose an arbitrator from a wide variety of professional backgrounds. Often arbitration panels are set up consisting of arbitrators with various backgrounds that have an impact on the subject matter of the dispute. Depending on the preference of the disputing parties, the panel can then base its award on a majority vote of the panel or on a unanimous decision.
"Conflict Management Policy Analysis"
byJay Rothman
Citation: Rothman, Jay. (1992). "Conflict Management Policy Analysis," in From Confrontation to Cooperation, by J. Rothman, Newbury Park, CA: Sage, pp.146-163.This article summary written by: Cosima Krueger, Conflict Research Consortium.
Introduction - The author says that it is often difficult to transfer knowledge and insights gained from conflict resolution training and intervention methodologies to public policy because those who possess such knowledge and insights are not always those in power. He says that although multilateral, interactive negotiation planning and conflict management policy-making are rare at high levels, it is still useful for policymakers on all sides of a conflict to use these approaches unilaterally. He adds that the most constructive solutions to intense conflict situations are those resulting from intrinsically motivated efforts by both sides to seek mutually satisfactory solutions. In this chapter, the author reviews the conflict between Israel and Egypt over the Taba area. He then shows how the ARI Conflict Management Framework can be used to analyze the way in which this conflict was handled, as well as alternative, more constructive, ways it could have been handled given different framing of the dispute.
History of the Taba Dispute - This dispute between Israel and Egypt was over the locations of border markers on 900 square meters of sand between the two countries. This dispute came in the wake of the 1979 peace treaty between Egypt and Israel in which Israel agreed to withdraw from Sinai and a bilateral commission was established to demarcate the new Israeli-Egyptian border. The Taba area, which is on the Red Sea along the Gulf of Aqaba, was one of several areas in which border marker locations were disputed. Negotiations between Egypt and Israel about the exact location of these markers failed. The original dispute was then bogged down in a further dispute as to whether arbitration or conciliation procedures should be followed, as provided in the Camp David peace treaty of 1979. Talks were suspended in 1982, and it wasn't until 1986 that the two countries finally agreed upon arbitration. In 1988, the arbitration commission finally decided in favor of Egypt, after many delays and mutual threats between the two countries. Israel then withdrew from Taba.
Adversarial Approach - According to the author, Egypt and Israel's adversarial approach to this dispute affected all phases of the negotiation over Taba and left both countries feeling dissatisfied with the settlement process as well as the settlement itself.
Adversarial Problem Definition - Egypt and Israel framed this dispute in terms of contradictory facts regarding the location of border markers. The conflict was framed as zero-sum and thus the arbitrated settlement was a win lose outcome in which Egypt won and Israel lost.
Adversarial Analysis of Causes - The conflict over Taba was framed as a competition between adversaries over a scarce resource. Each side attributed the dispute to the other's negative dispositional traits, while claiming that its own behavior was motivated by situation constraints. Egypt couldn't give up Taba without losing face both in the Arab world and within Egypt itself. Egypt saw the Taba dispute as unwarranted Zionist expansionism. Israel's invasion of Lebanon confirmed the Egyptian's distrust of Israel. The Taba dispute was seen by Israel as evidence that Egypt was greedy and not really interested in peace, since Israel had already given most of Sinai back to Egypt. Israel's view of Egypt was confirmed by Egypt's siding with other Arab states which were in conflict with Israel.
Adversarial Generation of Alternatives ("Distributive Bargaining")- The eventual arbitrated settlement was a function of adversarial framing of the dispute by Israel and Egypt. This kind of win-lose settlement is typical of results obtained by traditional diplomacy in such disputes. The initial negotiations were characterized by power-based, give-and-take bargaining ending in no compromise and leading to the necessity of arbitration. The arbitration commission had little choice but to work within this adversarial framework using precedents in international law to decide boundaries and then hand over a win-lose verdict. Adversarial Implementation & Implications - Although the Taba dispute was settled nonviolently, both Israel and Egypt were unhappy with the verdict. Israel threatened to seek to have the arbitration agreement canceled, but eventually honored the decision under pressure from the U.S. to do so. Egypt was dissatisfied because it felt that an undesirable precedent had been set for handling future disputes. The result was a residue of bitterness on both sides, causing cold Israeli-Egyptian relations in which one dispute was settled while the underlying conflict was left unresolved. Unfortunately, this arbitrated settlement process did not lead to increased motivation or skill on either side for pushing ahead with cooperative conflict management initiatives.
Reflexive Approach - The adversarial approach taken by both parties to this dispute did not yield a truly satisfactory solution for either country because it did not address either country' s underlying needs, fears, hopes, or constraints. The author speculates about how a more satisfactory outcome might have been achieved if the two countries had been able to broaden their range of options by taking what he calls a " reflexive" approach to framing the problem.
Reflexive Problem Definition - According to the author, a reflexive approach to the Taba dispute would have revealed that the dispute was, in fact, being used by both sides to prevent a summit between Mubarak and Peres, the respective leaders of Egypt and Israel. According to his analysis, there were two reasons for this avoidance of a summit. First, the Egyptians felt that normalization of relations with Israel would have damaged Egypt's acceptance in the Arab world, thus threatening their national identity. Second, the Israelis felt that normalization of relations with Egypt would have made them look weak. According to the author, a reflexive approach to the dispute would have lead to an exploration of the fundamental values and important experiences of both sides. It would have helped both sides to look at ancient and modern historical precedents for mistrust. It would also have lead the two parties away from seeing the dispute as a legal battle over boundaries and toward an understanding by both sides of underlying psychological issues and motives.
Reflexive Analysis of Causes - When conflicts are defined in terms of mutual threats and frustrations based upon each side's unique history and experiences, it becomes possible to identify key issues on both sides. For example, in the Taba dispute one of Israel' s key needs was to insure national survival, whereas one of Egypt's key needs was to restore their national pride and sense of importance in the region. A transitional, reflexive dialog would have made it possible for both countries to gradually move away from mutual attributions of blame and evil intent and toward mutual understanding based upon situational attributions for their own and the other's aggressive actions.
Reflexive Generation of Alternatives - The author says that in order for disputing parties to begin to doubt the usefulness of adversarial approaches, they need to be able to consider the other's history, fears, needs, and values in problem-solving strategy discussions. He says that at this stage more emphasis should be placed on articulating goals than on generating concrete solutions.
Reflexive Implementation - According to the author, at the reflexive implementation stage the focus should be on identifying as many barriers as possible to successful implementation of problem-solving strategies.
Integrative Approach - In this section the author discusses how the integrative approach could have allowed Israel and Egypt to settle the Taba dispute in ways that were more constructive and mutually satisfactory.
Integrative Problem Definition - Israel and Egypt were engaged in five wars with each other between 1954 and 1979. When, in 1979, they finally sought to change their relationship to one of peace and cooperation, the relationship was already marked by a long history of negative attributions for the other's aggressive behavior. Their adversarial approach to the Taba dispute was therefore quite understandable and predictable. However, if Egypt and Israel had taken an integrative approach to defining the problem, they might have framed the Taba dispute as a dysfunctional relationship between the two countries which hindered a bilateral, creative problem-solving process. They might have recognized that the real problem lay not with "them" but with "us."
Integrative Analysis of Causes - An integrative analysis of causes could have revealed the unhealthy nature of the relationship between the two countries. Both Israel and Egypt felt their needs for security and recognition were being threatened by the other's insistence upon the importance of keeping the Taba area, and both countries were projecting their own exaggerated fears onto the other. If the Taba dispute had been framed in terms of a dysfunctional relationship between Israel and Egypt, it would have been possible for them to assess more accurately the true causes of the dispute. Only when the true causes of a dispute are recognized by both sides is it possible for them to work together to generate creative solutions that will adequately address these underlying causes.
Integrative Generation of Alternatives (" Integrative Bargaining" ) - When disputes like the Taba dispute are framed in adversarial terms, it is typical for the parties to persistently pursue unilateral solutions. Only when both sides attempt to understand the other's needs in relations to their own is it possible to generate alternative proposals that will satisfy the needs of both. Ideally, such proposals can take the form of cooperative, precedent-setting joint ventures which allow both sides to win and which offer ongoing opportunities for building a more trustworthy and productive relationship over time.
Summary - The author says that possible routes to this type of mutually beneficial paradigm shift may include: (1) problem-solving workshops, (2) controlled communication, (3) Track Two diplomacy, and (4) prenegotiation. He also says that the use of third parties to facilitate joint analyses of conflict tends to yield common definitions of problems and deeper understandings of the other party's needs and motives. This, in turn, allows disputing parties to eventually step out of combative roles and into more cooperative roles. He concludes that although the settlement of the Taba dispute was positive in that it was achieved without war, it was negative in terms of lost opportunities for greater mutual understanding, recognition, acceptance, cooperation, and trust between Israel and Egypt.
Arbitration often allows you to resolve disputes more quickly and cheaply than by going to court. Instead of judges or juries, arbitrators decide if wrongdoing occurred and how to correct or compensate you for it.
When the arbitration is over, the decisions of the arbitrators are final and not subject to appeal. If you are unhappy with the result, you cannot go to court to try again. The arbitrators' decisions can only be challenged under very limited circumstances—for example, if you can demonstrate that an arbitrator was biased. If you want to challenge an arbitrator's decision you must do so within three months or less in a "motion to vacate.
If you have a brokerage account, you probably signed an agreement that requires you to settle any disputes with your broker through arbitration rather than the courts.
Time is of the essence. To take advantage of your legal rights, you must take legal action promptly or you may lose the right to seek a remedy or recover funds. Time restrictions, called "statutes of limitations," vary from state to state. For example, federal securities laws generally require that you bring a court action within two years of the date that you should have reasonably discovered the wrongdoing, but in no case later than five years from the date the wrongdoing actually occurred. Arbitrators look to either a federal or state statute of limitations, depending on whether your claim is a violation of federal or state law. You generally cannot pursue an issue through arbitration if it is more than six years old.
Simplified arbitration. If your claim is $25,000 or less, you generally will not have to appear in person at a hearing. In simplified arbitrations, the arbitrator will make a decision on your case by reviewing documents and written descriptions of what happened from you and your broker. This is a less costly alternative because you do not have to travel to a hearing and appear in person to give testimony and answer questions. You should carefully review the rules governing simplified arbitration before you file a claim.
Mediation. Mediation is also an option you should consider before going to arbitration. Mediation may allow you to save time and money because it is quicker than arbitration. Mediation also can be less confrontational than arbitration. If you can't reach an agreement through mediation, you can still go to arbitration. FINRA Dispute Resolution has more information about mediation.
Panel Selection. Certain arbitrations may require the selection of a panel of three arbitrators. FINRA rules provide investors in these arbitrations with two options for selecting this panel. Under the first option, the panel will be comprised of two public arbitrators and one arbitrator with a connection to the securities industry. Under the second option, the panel will be comprised of all public arbitrators. Investors electing to use the all-public option must affirmatively select the all-public option instead of the majority public option within 35 days of service of the Statement of Claim.
Caution. When deciding whether to arbitrate, bear in mind that if your broker or brokerage firm goes out of business or declares bankruptcy, you might not be able to recover your money—even if the arbitrator or court rules in your favor. That's one of the reasons why it is so important to investigate the disciplinary history of your broker or brokerage firm beforeyou invest.
How to Prepare an Opening Statement
by eHow Legal Editor
Introduction
Many people consider the opening statement to be one of the most important parts of a trial. It is used to introduce the case and the evidence that will be presented during the trial. The opening statement should be the jury's first exposure to the details of the case, so it's imperative to prepare properly before the trial begins.
Instructions
Steps
1
Step One
Practice delivering your opening statement with confidence and enthusiasm. Prepare rhetorical questions to ask the jury members that will encourage them to analyze the key issues of your case. Though you should avoid sounding overly rehearsed when you deliver your opening statement, practicing may help you address the jury with conviction and passion.
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Step Two
Organize your opening statement carefully to highlight only the most important facts of the case, repeating them at the beginning and the ending of your argument. Avoid focusing on specific details of the evidence, and try to stress the facts that will be proven by each of the major testimonies or exhibits. Introduce the names of the witnesses, and explain why they have been asked to testify.
3
Step Three
Address any weaknesses in your side of the case. Acknowledging the weak points of your argument will suggest to the judge and jury that you are honest, which is likely to boost your credibility. If you are frank about these weaknesses, you may lessen the impact of your opponent's opening statement concerning these points.
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Step Four
Discuss the flaws in your opponent's case briefly during your opening statement. Use a short amount of time to pose specific questions about the validity of the evidence that will be presented by your opponent. You will have plenty of time to address these flaws in detail, but it's a good idea to prepare the jury to view this evidence with your arguments already in their minds.
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Overall Tips & Warnings
· As you prepare an opening statement, keep in mind that it is not meant to be argumentative or overly suggestive. It is simply intended to introduce the facts of the case to the judge and jury.
The Commission on Arbitration aims to create a forum for experts to pool ideas and impact new policy on practical issues relating to international arbitration, the settlement of international business disputes and the legal and procedural aspects of arbitration. The Commission also aims to examine ICC dispute settlement services in view of current developments, including new technologies.
Task Forces
The ICC Commission on Arbitration and its Task Forces and Groups boast over 500 members from 90 countries, including partners in international law firms, in-house counsel, law professors, experts in different dispute resolution services, and trade executives in member companies and international organizations.
Co-chaired by Bruno W. Boesch (Switzerland) and Alexis Mourre (France)
This Task Force has been created further to the submission by ICC France of a report on “Trusts and Arbitration” to the Steering Committee of the Commission on Arbitration.
The task force shall have the following missions:
- study and identify specific issues related to “Trusts and Arbitration” and, if deemed appropriate, prepare a report with respect thereto; and
- study the possibility of suggesting a draft ICC model arbitration clause to be included in the trust deed, and, if deemed appropriate, to propose such a clause and to prepare an explanatory note with respect thereto.
- The Task Force is composed of over 35 registered members from 15 different countries.
INTERNATIONAL ARBITRATION
I. INTRODUCTION
A. Description of Arbitration:
With the rapid growth and expansion of the world financial and business communities, it is increasingly important for businesses to have an established method of resolving business disputes quickly, efficiently and constructively.
When disputes arise in the course of business, parties often prefer to settle them privately and informally, in a businesslike fashion that will enable them to maintain their business relationship.
Arbitration is designed for just such occasions, in that it can be designed for quick, practical and efficient resolution.
Arbitration is a voluntary process of dispute resolution where a neutral third party renders a final and binding decision after each side has an opportunity to present its view. This method is especially useful in international business transactions where parties are often unfamiliar with foreign legal systems.
Unlike a judicial process, arbitration is conducted outside the court system by impartial arbitrators who are selected by the parties based on criteria that best fits the nature of the contract. Arbitration is usually conducted by either one arbitrator or a panel of three arbitrators with the structure, format, site and scope of arbitration all decided by the parties and memorialized in the arbitration clause of their contract. The parties usually negotiate the arbitration clause at the same time they develop the initial contract. A properly structured provision will help establish a framework for expeditious resolution of contract disputes.
Arbitration allows the parties greater flexibility than a court proceeding. Parties can decide to have abbreviated time periods in which to respond to claims, where the arbitration will be conducted, how formal the process will be, or whether to involve lawyers in the arbitration.
B. Advantages of Arbitration over Litigation:
1. Impartiality of Decision Maker -- Where a party is concerned that a court in another country may not be neutral, arbitration allows parties chose the arbitrators who will decide the matter;
2. Enforceability of Arbitral Awards -- Arbitration awards are final and can be challenged only under very limited circumstances;
3. Confidentiality -- Where arbitration proceedings and awards are normally private, court proceedings and judgments are frequently public;
4. Expertise -- Parties may choose arbitrators with technical backgrounds who will understand the specific issues in the case;
5. Limited Discovery -- Because the parties may choose to limit discovery in their arbitration, arbitration can be less burdensome;
7. Brevity -- Arbitration usually produces a resolution more quickly than litigation; and,
8. Relationships -- Arbitration may be viewed as less adversarial, thereby preserving long-term business relationships.
C. Kinds of Disputes Subject to Arbitration:
Generally speaking, there is a two-step process to determine if a controversy is arbitrable:
first, parties should specify in an arbitration agreement or in an arbitration clause of a contract whether disputes will be subject to arbitration; second, the parties should consider that the law of the country in which the arbitration takes place may prohibit arbitration for certain types of disputes. Arbitration for commercial matters, however, is normally encouraged.
The types of disputes that are considered arbitrable varies among countries. In the United
States, courts have strongly favored arbitration in the resolution of international business disputes. They have held that almost all civil disputes can be arbitrated and have denied arbitration only where Congress has expressly stated that the provisions of a specific law can be enforced only in the courts.
D. The Agreement to Arbitrate
Arbitration agreements are formed at one of two points in time: during the negotiation of a contract, or after a legal dispute arises. Because the contract negotiation process offers greater opportunity to develop an arbitration format without the acrimony that can develop after a controversy arises, inclusion of an arbitration agreement as a clause in a contract is preferable and can streamline the dispute resolution process. The arbitration agreement is generally incorporated into the contract governing the transaction.
E. Comparing Ad Hoc to Institutional Arbitration
Arbitration can be conducted either ad hoc or through an established arbitration institution, with advantages and disadvantages to each.
1. Institutional Arbitration
Parties may choose to take advantage of the established mechanisms/procedures offered by one of the many arbitration institutions. These institutions have formal procedures and rules designed to assist parties. The institution chosen may administer the arbitration according to its own rules or, in most cases, according to other rules if requested.
a. Advantages of Institutional Arbitration:
( 1 ) Availability of pre-established rules and procedures;
( 2 ) Administrative assistance from institutions with a secretariat or a court of arbitration;
( 3 ) Lists of experienced arbitrators, often listed by fields of expertise;
( 4 ) Appointment of arbitrators by the institution if the parties request it;
( 5 ) Physical facilities and support services for arbitrations;
( 6 ) Assistance in encouraging reluctant parties to proceed with arbitration; and,
( 7 ) An established format that has proven workable in prior disputes.
b. Disadvantages of Institutional Arbitration:
( 1 ) Institutions charge administrative fees for services and use of facilities. Expenses may be high in disputes over large amounts, especially where fees are related to the amount in dispute. For small amounts in dispute, institutional fees may be greater than amount in controversy;
( 2 ) The institution's bureaucracy may lead to delays and added costs; and,
( 3 ) Parties may be required to submit responses in abbreviated time periods.
c. Issues to Consider in Selecting an Arbitration Institution:
( 1 ) History of the institution's administration of international arbitrations.
( 2 ) Experience:
- How many international disputes has the organization handled and from where did the disputing parties come?
- Has the institution handled disputes similar to the subject of the contract?
( 3 ) Selection of Arbitrators:
- Are the parties involved in the selection of arbitrators?
- Will the institution automatically select arbitrators from neutral countries, or will they do so only on request?
- Does the institution maintain a roster of arbitrators?- Can parties select arbitrators outside the roster of the institution?
- Does the institution have arbitrators with experience in the subject matter of the contract?
( 4 ) Procedures:
- Does the institution permit flexibility in the conduct of the arbitration?
- Can parties opt out of certain rules or procedures?
- What are the rules regarding time limits in the arbitration?
- Are time limits enforced?
- Does the institution limit the procedural rules selected by the parties?
- Are the institution's rules clear and neutral for all parties?
( 5 ) Cost:
- What administrative fees are charged by the institution?
- Are these fees fixed or based on the amount in dispute?
- Are the arbitrator's fees based on time spent or amount in dispute?
( 6 ) Services:
- Does the institution's staff have experience with international disputes? How large is the
staff?
- Does the institution have any affiliations within the region that may facilitate administration of the arbitration?
2. Ad Hoc Arbitration
Ad hoc arbitration refers to a process by which the parties select the arbitration format and structure without using an arbitration institution. The ad hoc approach allows for greater specificity in the design of a mechanism for the particular contract. Parties may select ad hoc arbitration to reduce costs, to accelerate the process and/or to structure proceedings to suit their particular needs.
When choosing ad hoc arbitration, parties must specify in the arbitration clause all aspects of the arbitration, including applicable law, rules under which the arbitration will be carried out, the number of arbitrators, the method for selecting the arbitrator(s), the language in which the arbitration will be conducted and the place of arbitration. Parties may either develop their own rules or select established arbitration rules to govern the arbitration. Parties may use the rules of an arbitration institution without submitting the dispute to that institution.
II. DRAFTING THE ARBITRATION CLAUSE
The optimal way for parties to ensure a successful arbitration is to draft an appropriate arbitration clause that specifically meets their needs. Although a model clause may be used in standardized contracts, in complex international transactions the parties should tailor the arbitral provision to the needs of the specific contract.
A. Examples of Model Clauses Recommended by Institutions
1. UNCITRAL Arbitration Rules:
"Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force." UNCITRAL notes that "Parties may wish to consider adding:
(a) The appointing authority shall be... (name of institution or person);
(b) The number of arbitrators shall be...(one or three);
(c) The place of arbitration shall be...(town or country);
(d) The language(s) to be used in the arbitral proceedings shall be...."
2. ICC Arbitration Rules:
"All disputes arising in connection with the present contract shall be finally settled under the Rules of [Conciliation and] Arbitration at the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules." Parties should also designate the place of arbitration in the clause, otherwise, the ICC will choose."
3. NAFTA Advisory Committee on Private Commercial Disputes:
"(a) Any dispute, controversy or claim arising out of, relating to, or in connection with, this
contract, or the breach, termination or validity thereof, shall be finally settled by arbitration. The arbitration shall be conducted in accordance with [identify rules] in effect at the time of the arbitration except as they may be modified herein or by mutual agreement of the parties. The seat of the arbitration shall be [city, country], and it shall be conducted in the [specify] language. The arbitration shall be conducted by [one or three] arbitrators, who shall be selected in accordance with [the rules selected above]."
(b) The arbitral award shall be in writing and shall be final and binding on the parties. The award may include an award of costs, including reasonable attorney's fees and disbursements. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the parties or their assets."
B. Elements of the Arbitration Agreement
The following elements should be considered for inclusion in any arbitration agreement:
1. Scope of Arbitration - The parties should explicitly state the matters that they want the arbitration agreement to cover. However, they should be aware that local law may restrict issues that may be subject to arbitration.
2. Choice of Arbitrator(s)
a. The clause must specify the selection process, otherwise statutes and rules may fill any gaps;
b. If institutional rules are used that provide for selection of arbitrators, no further reference to selection may be necessary;
c. A panel of three arbitrators is standard for international commercial arbitrations, with the parties each appointing one, and the parties or arbitrators selecting a third. In some circumstances an appointing authority will designate any missing members (e.g. where one of the parties refuses to select an arbitrator as a dilatory tactic);
d. A sole arbitrator may be preferable for disputes involving smaller amounts; and,
e. If an arbitrator must have a special skill, it should be specified in the arbitration agreement.
3. Choice of Law
a. The parties should designate the substantive law that will be applied in the arbitration;
b. The parties may select a procedural law. If they do not, the procedural law of the place where the arbitration occurs will apply; and,
c. Absent an express choice of applicable law, the law of the place of the arbitration will be applied.
4. Choice of Location
a. A forum country should be selected that is a signatory to an international arbitration convention (i.e., the New York or Panama Conventions);
b. The location determines the extent of potential assistance, or even interference, by national courts during an arbitral proceeding and it may affect enforcement of the award;
c. Practical features such as facilities, communications and transportation systems, freedom of movement of persons, documents and currency, and support services should be considered; and,
d. The choice of location in the arbitration agreement should include the name of both the city and country.
5. Choice of Language - Parties may designate one language as the official language of the
proceedings and allow simultaneous interpretation into another language.
- 6. Choice of Rules - Parties should specify the rules of procedure that will govern the arbitration process.
provide for:
a. The selection of a site where it is not specified in the arbitration clause;
b. Assessment of costs, including allocation between parties;
c. Selection of arbitrators;
d. Powers given to the arbitrator;
e. The language in which the proceeding will be conducted;
f. The substantive law to be applied;
g. The use of experts;
h. The time allowed to arbitrators to make awards;
i. The power of any administering authority over the awards;
j. The availability of provisional relief; and,
k. Flexibility to allow parties to opt out of certain provisions.
If the parties do not use institutional rules, the following items should be included in their own ad hoc rules:
a. Procedure to initiate arbitration proceedings;
b. Means for dealing with the refusal of a party to proceed with arbitration;c. Scope and limitation of discovery;
d. Outline of hearing procedures, including notice and form of the award (whether it must be written out with reasons for the decision); and,
e. Procedures for enforcement of the award.
7. Interim Relief -- Some arbitration rules specifically address matters of interim relief, i.e., whether the parties may apply to a court for a preliminary injunction, an order of attachment or other order preserving the status quo until the arbitrator(s) decide the case. The rules of most arbitration institutions provide that resorting to a court in such circumstances is not incompatible with, or a waiver of, the right to arbitrate under their rules. Moreover, most rules allow the arbitrators to order such relief.
8. Costs -- The arbitration agreement should provide for the allocation of costs.
9. Award of Tribunal -- The agreement should specify that a majority of the arbitrators must agree on an award and that it must be based on applicable law. The agreement should also specify the currency for payment of the award. If the award is to be recognized and enforced internationally, it may need to state reasons and legal basis, including reference to the process by which the legal basis was selected. Some awards contain no reasoning or written report.
III. Enforcement of Arbitral Awards
A. Court Enforcement of Arbitral Awards
The effectiveness of arbitration in providing final and binding resolution of international commercial disputes depends upon the ability to obtain court recognition and enforcement if a party refuses to satisfy an award. When entering into an international business contract, parties should consider whether the country where they expect to enforce an award (usually the country where the losing party is located) has a domestic legal framework in place for the enforcement of arbitral awards and whether that country is a signatory to a treaty that obligates it to enforce arbitral awards.
B. Conventions for Enforcement of Arbitral Awards
1. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958 (entered into force in the United States in 1970) [For full text of Convention, see International Legal Materials at 7 I.L.M. 1046.] The New York Convention is the most widely-recognized convention for enforcement of arbitration awards. There are currently 120 parties to the New York Convention. A list of parties can be found on the Internet at:
The Convention provides that each country must "recognize [arbitral] awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied on." This means the party only needs to supply the local court with an authenticated original or duly certified copy of the award and the original or a certified copy of the arbitration agreement in order to apply for enforcement.The New York Convention obligates each country that is a party to enforce arbitral awards subject to a limited number of defenses (which are discussed in Section C below).When the United States ratified the Convention, it incorporated two reservations, that U.S. Courts will only enforce arbitral awards where (1) the subject matter of the award is considered to be commercial in nature; and, (2) the award was rendered in a country that is also a party to the New York Convention.2. Inter-American Convention on International Commercial Arbitration ("Panama Convention"), Jan. 30, 1975 (entered into force in the United States in 1990), [For full text of Convention, see International Legal Materials at 14 I.L.M. 336.]The Panama Convention is an agreement among certain members of the Organization of
American States providing for the reciprocal recognition and enforcement of international commercial arbitration agreements and awards.There are 17 state parties to the Panama Convention. A copy of the Convention as well as a list of the parties can be found on the Internet at http://www.sice.oas.org/dispute/comarb/iacac/iacac2e.asp
C. Grounds for Refusal to Enforce Arbitral Awards
Generally, a court must comply with a request to enforce an arbitration award. The grounds upon which a court can refuse to enforce an award are very narrowly defined. Generally, there are seven grounds for refusal to enforce, which fall into two categories:
1. Problems with the conduct of the arbitration itself. The party against whom enforcement is sought must furnish proof that the award is flawed due to:
a. Incapacity of a party;2. State sovereignty issues
b. Failure to give proper notice to a party, or the inability of a party to present his/her case;
c. The award fell outside the scope of the arbitration agreement;
d. The selection of the arbitrators violated the agreement; or, if the agreement did not address selection, the selection process violated the law; or
e. The award was set aside or annulled.
a. The law of the country in which enforcement is sought prohibits arbitration on the subject matter of the issue in dispute; or
b. The recognition or enforcement of the award would be contrary to the public policy of that country.
| International Arbitration in Latin America today |
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Members of the ICC International Court of Arbitration, including its Chairman, John Beechey, and also actual and previous members of the Secretariat of the Court, will expose the practice of ICC in cases involving Latin-American parties.
The seminar will be also the opportunity to unveil the 2012 ICC Rules of Arbitration.
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