Arbitration in International Business Transactions:

The Big Picture and Making it Work

Prepared by Mark Zamrij

Toronto Family and Divorce Lawyer

For Professor Reif

Dec 4, 2013

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“No one should really want to litigate in a foreign country if the parties are from countries

that are signatories of the NY Convention or a similar treaty that provides for

enforcement of foreign arbitral awards.”1

Introduction and Structure

This sentiment is alive and well and warrants a closer look at the merits of arbitration.

This paper explores the virtues, strengths, and weaknesses of arbitration in international

business transactions. It first considers the characteristics of arbitration. This is done

broadly, at a meta or big picture level. The paper then digs into the details of arbitration

at a micro level. Among other things, it explores what to address in an arbitration clause

or contract, how to prepare for an arbitration, and pitfalls to avoid in arbitration.

Thesis

The major argument is that arbitration is an entirely attractive and excellent means of

resolving disputes arising from international business transactions. At a big picture level

this is a true statement. Analysis of arbitration’s key features leads to the conclusion that

arbitration is an excellent and workable dispute resolution mechanism. Criticisms of

arbitration tend to focus on the inverse relationship between certain goals of arbitration.

For example, cost and due process are at odds with each other. This criticism is

rebutted on the grounds that users of arbitration choose to customize the arbitration in

order to gain what is important to them, at the expense of the things which are not. So

(Baker1)1

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arbitrations only forego virtues which are of lesser importance to their users. This makes

arbitration a more attractive option than this criticism would suggest.

The case for arbitration is enhanced as the paper delves into the specifics of how to

approach the arbitration at the micro level. The authors talked about various strategies,

tips and tricks, snares, traps, headaches, customer service, trouble shooting, and how

to prepare for an arbitration (I will refer to these as “strategies” going forward). These

could be addresses through an arbitration clause in a contract or through an arbitration

contract. These strategies serve only to make arbitrations more effective and suitable as

a dispute resolution method.

Research

All research sources were selected because they spoke to international business

arbitration, international arbitration, business arbitration, commercial arbitration,

transactions, or any combination of these. Or because they had some edgy and

interesting perspectives which were worth considering and applying to the international

business transactions context. As the practice of arbitration is still maturing, all research

was screened for its recency. This paper is based on various intriguing, edgy, practical,

and conventional approaches from practitioners, scholars, and researchers.

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1. Arbitration: Big Picture

Introduction

In writing about arbitration at a meta level, I decided to make a list of the pros and cons

of arbitration. As I encountered characteristics of arbitration in my research, I noted

them and added them to a list. Where I noted a characteristic more than once, I added

to the list of references which support the characteristic. I systematically read through

my research in compiling this. I also edited my list to remove overlap/redundancy and to

make it more manageable and readable. I placed contradictory points in immediate

proximity with each other in order to highlight the disagreement amongst authors. And I

applied headings to help organize the list. The result therefore provides a thorough

consideration of the pros and cons of arbitration.

Here is the compiled list of the big picture attributes of arbitration in international

business transaction. Immediately following the list is my analysis, titled “Analysis”.

Timeline and efficiency

Arbitration is touted as a cheap and effective means of resolving business disputes. 2

Arbitrations are expedient and the financial pressures which overburdened court 3

systems face are absent from arbitration. In contrast, some authors, including those 4

(Samra) (Lamm) (Chernick) (Doug Jones) (PWC) (Eiseman) (Rand) (Stipanowich) (Rothman) (Granoff) 2

(Park) (Stipanowich2) (Baker1) (Sussman)

(Samra) (Chernick) (Granoff) (Doug Jones) (PWC) (Eiseman) (Stipanowich) (Rothman) (Stipanowich2) 3

(Baker1) (Rand)

(Sussman)4

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who stated that arbitrations are cheap and effective, note that arbitrations still aren’t

cheap. In a survey of in-house counsel, the costs of arbitration were only prohibitive in 5

11% of cases. In contrast, a large international commercial firm, cites cost being of 6

concern in international arbitrations. 7

Arbitrations can drag on with lengthy discovery bordering on full-blown litigation.8

At times arbitration can approximate civil trials. However, many of those who make 9

these criticisms also identified expedience, cheapness, timeliness, and effectiveness as

salient features of the arbitration process. These are the more representative

characterizations of arbitration. The potential for arbitration to devolve into full-blown

trial with hardcore discovery is less common. In voicing this criticism, the authors were

clear to note this was a potential only.

A risk identified with the arbitration process is lawyers who are actually ignorant of the

arbitration process and lawyers who actively try to abuse the process to make it costlier,

lengthier, and more intricate if it is in their client’s best interests. This does not speak 10

to the nature of arbitration so much as it speaks to the potential for abuse of an

arbitration. It serves as a cautionary tale.

(Lamm) (Eiseman) (Rothman) (Park) (Sussman)5

(PWC)6

(Debevoise) (Rothman)7

(Samra) (Chernick) (Doug Jones) (Eiseman) (Stipanowich) (Rothman) (Baker1)8

(Samra) (Chernick) (PWC) (Eiseman) (Stipanowich) (Rothman) (Baker1) (Park)9

(Eiseman)10

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There is caution that many existing templates and customizable arbitration contracts

include procedures bordering on litigation. And it would therefore be wise to not take 11

exiting templates for granted.

Custom Procedure

Party autonomy is touted as a principle of arbitration. Flexibility, choice, and ability to 12

customize procedures of the arbitration process are also key features. Among the 13

major choices parties can make, they can choose the substantive law to be applied. 14

Even pre-arbitration procedures can be set. Among the processes used before 15

arbitration, mediation and negotiation are commonly used. The ability to customize 16

procedure applies to these processes as well.

Arbitration provides users with the option to affect the scope of discovery, a hot issue in

amongst many authors. There are options for limited and simplified discovery

mechanisms. There are many existing arbitration templates from arbitration providers 17

which provide clauses to expedite procedures including discovery. These can be

(Chernick) (Eiseman) (Rothman)11

(Samra) ((Lamm) (Stipanowich) (Stipanowich2) (Sussman)12

(Lamm) (Debevoise) (Eiseman) (Stipanowich) (Rothman) (Granoff) (Stipanowich2) (Samra) (Lamm) 13

(Granoff) (Park)

(Lamm) (Granoff)14

(Chernick) (Stipanowich2) (AAA)15

(PWC) (Debevoise) (Rothman)16

(Lamm) (Baker1) (Rand)17

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incorporated with ease. Further control of discovery can be exercised by allowing 18

arbitrators to award costs where one party abuses the discovery mechanism. Even 19

evidence is capable of being custom tailored and procedures can be implemented with

respect to even expert evidence.20

One study claims arbitration is a streamlined process. This is paradoxical given the 21

customization options and various arbitration providers in different regions.

Statutory attempts to control the arbitration procedure have intentionally left room for

variation which suits the broad needs of consumers of arbitrations. However, one 22

paper suggested legislated reforms have had a more significant impact on

streamlining. Nonetheless, the sheer mass of authors supporting party autonomy and 23

procedural customization would suggest legislatures would be hesitant to infringe on

this most welcome aspect of arbitrations. Customization remains an attractive feature of

arbitration.

(Chernick)18

(Chernick)19

(Doug Jones) (AAA)20

(Rand)21

(Stipanowich2).22

(Park)23

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Interpersonal factors

Arbitrations are recommended where parties would like to maintain a relationship. This 24

is disputed by one source, and it is recommended arbitration be avoided where there is

an ongoing business relationship, as in an ongoing contract. Arbitration is also 25

recommended due to its ability to keep affairs confidential and out of the public eye. 26

The interpersonal factors are positives which make arbitration more attractive.

Professionals

Arbitration provides opportunities to work with an existing and tested arbitral

institution. There is uncertainty, lack of faith, and non-predictability of new and certain 27

existing arbitration institutions. Users of these services should do their due diligence.28

Parties are able to retain their own local lawyers instead of being forced to retain the

services of lawyers certified in the region where the law is applied. They can also 29

choose their arbitrator. In contrast, you cannot choose your judge and appointed 30

judges in international litigation often lack expertise and knowledge of international

disputes. Additionally, the relevance of commercial, technical, professional and 31

(Samra) (Eiseman) (Rand) (Sussman)24

(Baker1)25

(Samra) (Stipanowich) (Lamm) (Debevoise) (Rothman) (Granoff) (Stipanowich2) (Rand) (Sussman)26

(Lamm) (Chernick) (Doug Jones) (PWC) (Rothman) (Granoff) (Stipanowich2) (Park)27

(Profaizer)28

(Lamm)29

(Lamm) (Chernick) (PWC) (Rothman) (Granoff) (Park) (Stipanowich2)30

(Rothman) (Sussman)31

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industry standards comes into play when selecting an arbitrator. The ability to choose 32

from amongst specialized and general arbitration institutions, and even arbitrators is a

selling feature. The fact that you don’t need to hire a local lawyer (but you can hire one)

is also welcome.

Character of the Arbitration

Arbitrations are considered neutral and fair. They are voluntary. This means that 33 34

arbitrations are consensual and initiated by both parties. However, they can also be

mandatory and part of a government regulatory scheme. Arbitrations are relatively 35

final, with limited right to appeal. They are also extremely enforceable internationally.36 37

One source evaluates the finality and enforceability of arbitration as a cause for concern

and recommends that there be greater scrutiny and regulation of the arbitration sphere

through appeals. Some arbitration providers have their own appeal procedures. 38 39

(Samra) (PWC) (Stipanowich) (Rothman) (Granoff) (Rand) (Park)32

(PWC) (Debevoise) (Eiseman) (Rothman) (Granoff) (Rand) (Park) (Sussman)33

(Eiseman) and “consensual” (Rothman) (Stipanowich2) (Rand)34

(Stipanowich2)35

(Samra) (Eiseman) (Stipanowich) (Rothman) (Granoff) (Park) (Stipanowich2) (Baker1) (Rand) 36

(Sussman)

(Debevoise) (Stipanowich) (Gee) (Granoff) (Park) (Baker1) (NY Convention) (AAA)37

(Stipanowich)38

(Chernick) (JAMS)39

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Legal Rights

There exists criticism that arbitrators try to find solutions that suit both parties, as

opposed to finding solutions that vindicate legal rights. There is also a suggestion that 40

arbitrators make “suitable” decisions rather than legally correct ones. This is actually

understood and desirable.41

An analogy has been drawn between arbitration and the courts of equity in their

capacity for creative and equitable solutions. One study claimed that the absence of 42

precedent for arbitrations is attractive. It is possible this is because it increases the 43

ability to have creative options which are not limited by case law.

Arbitration judgements are recommended as being consistent. As arbitrations become 44

more popular and as arbitration enforcement jurisprudence develops, arbitration results

become more predictable. One practitioner cautions that predictability of result is 45

predicated on practitioner knowledge of arbitration proceedings. Arbitrations are not 46

appropriate for where a legally correct result is desired and where the cost for such a

result is worth incurring. Arbitrations produce fair outcomes and have flexibility in

(Lamm) (Rand)40

(Eiseman)41

(Eiseman) (Granoff)42

(Rand)43

(Samra) (Rand) (Park)44

(Chernick)45

(Baker1)46

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producing them. The cost-effectiveness of arbitrations produces good results, just not

necessarily legally correct ones.

Some amount of due process is considered important. Several authors contends that 47

procedural fairness is in fact a goal of arbitration. Criticism is identified that arbitration 48

fails to provide full vindication of legal rights. However, often the full scope of due 49

process is undesirable by the parties in an arbitration.50

An issue is only arbitrable if authority to arbitrate it is granted in the parties’ arbitration

agreement. Arbitrators can interpret their mandate and jurisdiction. All issues which 51 52

were authorized to be arbitrated must be decided in the arbitration. 53

Analysis

The vast majority of points are virtues of arbitration. The characteristics under “Timeline

and Efficiency” explore the potential for arbitration to range from costly and lengthy to

short and cost-effective. Among the characteristics which were identified in the

literature, cost and time were most frequently referenced. Most often, lengthy and costly

(Samra)47

(Park) (Stipanowich2)48

(Stipanowich)49

(Eiseman)50

(Lamm) (Eiseman) (Rothman) (Granoff) (Stipanowich2) (Park)51

(Eiseman)52

(Stipanowich2)53

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arbitrations were spoken of as pitfalls to avoid. While authors spoke of the ability of

arbitration to approximate civil trials, none said that arbitration is generally this way. Only

that at times it is as bad as civil trials. Under the heading “Custom Procedure” the ability

to customize the procedure was always treated as a positive. More than anything, the

point that was made was that arbitration could customize these target areas. I think one

of the most interesting points was that statutory attempts to control arbitration leave

much room to customization.

Criticism

A repeat criticism in the literature is that arbitrations will always compromise in some

area. For example, arbitrations designed to minimize cost will compromise on

procedural fairness or on just outcomes. One author writes: “Each alternative approach

seems to spring its own trap. In particular, measures aimed at reducing cost can

diminish the litigants’ opportunity to present their cases.” There also exists adversity 54

between arbitration’s finality and due process. As due process relies on appeals to

higher authorities to exercise legal rights, limiting appealability will prevent the full extent

and accuracy of one’s legal rights from being recognized. And there are more. 55

Efficiency, simplification, cost, expedience, and timeframe, compete with thoroughness,

correctness, the full extent of legal rights, etc.

(Park)54

(Samra)55

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I would summarize the general trend as being between speed/cost and the ability to

produce exactly correct outcomes from the arbitration process. This opposition is based

on diminishing returns. As costs and time progressively increase, there is progressively

less benefit to be derived from more thorough procedures. For users of arbitration, this

is very important. Even the most affluent of businesses do not want to break the bank

for diminishing returns. Business is about dollar amounts, and as nice as vindication of

legal rights may be, it comes at a cost.

Responding to Criticism

I would also like to respond to these criticisms by noting the very consensual, voluntary,

and customizable nature of arbitrations. Parties have the ability to craft procedure. It is

true that arbitration will always compromise on something. It is even more true that

arbitration will uphold the things which parties value and compromise on the things

which parties do not value as much. This is so, as long as parties know what they are

doing and know the consequences of their customizations. Parties who are ignorant of

arbitration and who cannot get competent counsel are even more adversely affected by

litigation. After all, if you can’t handle the simplified rules of arbitration, how could you

possibly handle the more elaborate and complex rules of litigation?

Discovery

While authors state that arbitration is approaching the procedural and discovery

bottlenecks that plague the litigation process, they are not asserting that arbitration is as

problematic in these regards, merely, that it is sometimes as bad. Disclosure is an area

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where there are diminishing returns. Some is needed. The full scope of disclosure is not

needed and simplified discovery procedures address this diminishing return aspect of

discovery.

Other Factors

The confidentiality and ability to maintain business relationships are by and large

positive. The relevance of industry and technical knowledge and ability to choose the

arbitrator is an option unavailable in litigation. Arbitrations are neutral and fair and

voluntary. All good things. They are final with limited rights to appeal. Generally, if

retaining a right to appeal is important, litigation is the way to go. However, appeals are

expensive and arbitration keeps costs down by limiting appeal. Non-appealability also

offers peace of mind knowing that there is no appeal looming, or a new judgement

waiting for the parties several years down the road.

Arbitration is more about finding workable solutions rather than being about precisely

correct legal results. The fact that arbitrators tend to give suitable solutions might be

related to the need to preserve ongoing business relationships. Or it might be that

parties prefer solutions which are acceptable to both sides as opposed to litigated

solutions which might be unacceptable to either side, or even to both sides.

Arbitration’s creative and equitable options allow both parties to be satisfied in

international business arbitration. Legal precedent and fidelity to the law would only limit

this potential.

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Where litigation may be preferable to arbitration

Litigation may be preferable to a party where that party has some sort of advantage in

expertise, knowledge, or competence in the substantive or procedural laws that would

govern the dispute. In other words, where there is a power imbalance, the party with 56

the greater power advantage will want to litigate.

Litigation may be necessary where there are multiple parties who have not all agreed to

the same arbitration clause. In this case, there will need to be multiple arbitration

proceedings as opposed to a single litigation case. Litigation may be preferable where

extensive discovery is needed in order to win the case. In the financial sector for 57

international commercial disputes, litigation is far more favored to arbitration. Very 58

large scale disputes with high dollar amounts, or those where you want to retain a right

to appeal would suggest the use of litigation. These reasons do not speak to power 59

imbalances as a reason for pursuing litigation over arbitration. They do not embody the

exploitive strategies of the previous paragraph. Rather, they are nuanced reasons for

selecting litigation in select circumstances and industries. Arbitration is not the best

choice in these situations.

(Lamm) (Baker1)56

(Lamm).57

(PWC)58

(Baker1)59

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Enforceability of Arbitration

Enforceability is an often mentioned feature of arbitration, as noted above. The New

York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is the

key law to consider. 149 states subscribe to the New York Arbitration Convention. It 60

“requires courts to enforce foreign arbitral awards with very limited exceptions.” Under 61

the exceptions, the party seeking non-enforcement would have to prove: improper

notice, or inability to present the case, the arbitration agreement is unlawful, the award

is outside the scope of the arbitration contract, or beyond the scope of the submissions,

the arbitral authority or procedure was not consistent with what was contracted, or

where the home country of the award declared it invalid.62

However, courts have the freedom to interpret these exceptions. The purpose of the

international conventions is to increase the enforceability of international arbitration

awards. So courts which take the purpose into consideration want to enforce arbitration

awards. The court can refuse to enforce an arbitral award that is contrary to local public

policy. International arbitration awards are less prone to judicial review and not at all

prone to substantive review, unlike international litigation. Additionally, courts defer to

arbitration as it is a voluntary consensual process chosen by the parties. Usually

enforcement is controlled by an International legal document such as convention. One 63

practitioner warns that enforcement of arbitrable awards is more likely where the

(Contracting States)60

(Lamm)61

(NY Convention)62

(Lamm)63

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arbitrator is a neutral third party from an existing international organization. In 64

contrast, the enforcement of litigation awards is much less likely and idiosyncratic. 65

2. Arbitration: Making Arbitration Work.

More can be done to advance arbitration as a viable dispute resolution mechanism for

disputes arising from international business transactions by investigating arbitration at

the micro level. This is the level at which practice, experience, and practicality come

into play. Many authors examined the details of arbitration. They talked about strategies,

tips and tricks, snares, traps, headaches, customer service, trouble shooting, industry

specifics, and how to prepare for an arbitration (I will refer to these as “strategies” going

forward). This section demonstrates these intricate finding and offers prescient advice

on how to make an international commercial arbitration work. The major argument is

that, in its totality, these findings make arbitration more viable and therefore a more

attractive dispute resolution mechanism.

These strategies were compiled based on their ability to either make an arbitration work,

or due to the fact they identify potential and foreseeable problems. Authors did not

always offer solutions to these problems, but their cautions were nonetheless important

and relevant to increasing the probability of a successful arbitration. I organized this

sections under headings. The headings were chosen based on the content of the

(Baker1)64

(Lamm)65

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strategies. The number of headings was chosen in order to keep any given section from

becoming too long. I did not set out to collect overlapping references, as I did in the big

picture list.

Here are the various strategies which can be employed in order to make arbitration

work in the international business context.

Discovery and Evidence

As noted earlier, discovery is a hot issue in arbitration. Discovery procedures affect the

big picture attributes of arbitration in profound ways. Discovery is one of the best ways

to complicate the case, overwhelm your opposition, save money, expedite time frames,

and get justice. Ways in which to customize discovery procedures include: The length of

time and extent of relevant discovery can be extended and shortened. As noted 66

above, there are arguments in favor of both lengthening and shortening. Some

practitioners will actually employ rules of civil procedure for discovery. This is used

where there are large dollar amounts on the line or where the arbitrated decision is very

important. It is also used where a party wants to overwhelm the other party and there is

some sort of power imbalance. As stated above, thorough disclosure enables parties 67

to prepare for the arbitration. Beyond a certain amount of disclosure, additional

quantities yield diminishing returns.

(Chernick) (Rothman) (Baker1) (Sussman) (Stipanowich2) (Eiseman)66

(Eiseman) (Rothman)67

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Be alert that some parties will flood an arbitration with documents for the purpose of

drawing things out. Arbitrator approval can be required for additional discovery in order

to limit the sheer quantity. E-Discovery is a double edged sword. It can result in an

astounding amount of information. It can also expedite and make disclosure less 68

costly. An option is to hyperlink between documents where appropriate in order to 69

make things more expedient.70

In trying to limit discovery, you need to keep in mind that you need enough discovery to

make informed and reasonable settlement offers. And you also have to be prepared 71

for surprises by interviewing your clients where discovery is limited. If there is less

discovery, you will want to think about the other side’s position and what they might

bring so as not to be surprised. In sum, there is much which can be done in the way of 72

disclosure procedures. Discovery is necessary, but comes at a cost. Cost cutting is a

good thing, but there is a necessary amount of disclosure that is needed and it comes

down to balance. Knowing what to expect and knowing how to handle discovery through

these strategies ahead of time will make arbitration more viable.

(Rothman)68

(Rothman) Chernick) (Stipanowich2)69

(Debevoise)70

(Baker1)71

(Baker2)72

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Expert witnesses

This is an area that can run up costs and produce redundancies. There is much 73

practical advice for making expert witnesses more efficient and cost-effective. You can

require expert witnesses to testify and engage all at once. This is also known as

hottubbing.74

Draft reports should be exchanged between experts. Areas of expert agreement and

disagreement should be identified and their representations edited in order to avoid

redundancy in areas of agreement. Written statements should be favored over oral 75

evidence to focus the expert testimony. Furthermore, exhibits should be categorized by

their importance and necessity. Exhibits should be named by a combination of party 76

and number. Having two exhibits marked as the same number can lead to great

confusion. Joint exhibits can avoid redundancy. These strategies and cautions serve 77 78

only to make an arbitration more workable and as good as arbitration seemed at the big

picture, if these strategies are taken into account, it can only be more desirable due to

the ability to avoid pitfalls and to make the arbitration more effective.

(Doug Jones) (IBA)73

(Doug Jones) 74

(Debevoise) (Doug Jones)75

(Debevoise)76

(Eiseman)77

(Baker1)78

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Selecting the Arbitrator

It is recommended to screen arbitrators for availability, ability to meet a 3-month

deadline for judgment and their suggestions for customizing procedure to achieve that. 79

At times there is industry-specific desirability of expertise. You should screen your 80

arbitrators always. Arbitrators can be unqualified. Arbitrators can be challenged and 81 82

challenges should be used to ensure a fair process. You can incorporate procedures 83

for where selecting an arbiter fails. You can specify 3 arbitrators for very sensitive and 84

important issues, and keep it to 1 otherwise in order to keep costs down. One firm 85

believes the ability to select the right arbitrator is of great importance.86

A practitioner elaborates on why a particular arbitrator would be sought: “subject matter

expertise; reputation for competence; temperament; number of years of experience;

number of arbitrations chaired; availability; and commitment and ability to conduct an

efficient, cost-effective arbitration.” One survey identifies commercial understanding of 87

the industry, knowledge of the law which applies to the contract, and arbitration

experience as the top three factors in selecting a arbitrator for large international

(Baker1)79

(PWC) (Eiseman) (Rothman)80

(Baker1) (Baker2) (Sussman)81

(Stipanowich)82

(Moses)83

(Stipanowich2)84

(Chernick) (Debevoise) (Rothman) (Baker1)85

(Debevoise)86

(Sussman)87

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commercial disputes. One strategy for dealing with arbitrator inexperience is to 88

educate industry arbitrators on the law and educate legal arbitrators on the industry.89

Some arbitrators fear creative solutions which might be overturned. Others embrace

them. As addressed above, this is actually quite appealing in many cases and to 90

reiterate, an analogy was drawn between arbitration and the courts of equity in their

capacity to craft creative solutions. The various strategies outlined allow arbitrators to

be selected for relevant and important criteria. This only makes arbitration more

attractive.

International Logistics

One source on mediation raised several logistical points. It is fair to apply them to

arbitration. These include: travel may be an issue as not all parties will be allowed into a

country. Booking flights may not be done in a timely manner. Parties may fear to enter

countries due to fear of criminal proceedings. Electronic video conferencing can be

used. Exchange of emails, draft agreements, information sharing and use of electronic

technology to share information can provide cost savings in a timely manner. A warning

was given that confidentiality may be a problem when electronic communication is used.

Furthermore, where electronic communication is used, interpersonal factors suffer and

the ability of the arbitrator to listen, understand parties, and appreciate nonverbal factors

suffers from distance mediation. Parties can meet in neutral locations without any ties to

(PWC)88

(Baker2)89

(Eiseman) (Rothman)90

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the dispute. Lastly, bilingual mediators and interpreters can conduct the mediation in a

third language foreign to all participants in order to ensure fairness. Videoconferencing 91

of select witnesses is also an option. Distance doesn’t have to be a liability without any 92

potential workarounds. Knowledge can go a long way. Being able to work within the

limits of international logistics will help make arbitrations more viable.

Procedure

There are many ways to customize procedure. Here are some of the more commonly

used ones. You can limit or expand the scope of arbitrable issues. You can also hold a 93

pre-arbitration conference. There you can set out procedures and timelines. While it

costs more initially to travel and meet before an arbitration, it pays for itself. This is the 94

time and place to address potential hiccups in the process. Arbitrators plays a pivotal 95

role as do the parties/their counsel in this pre-arbitration conference.96

Consider an expedited schedule. There is the possibility to pre-determine an issue or 97

provide preliminary opinions as well as to use fixed time limits like a chess clock. You 98

(Cullen)91

(Debevoise)92

(Chernick) (Rothman) (Baker1)93

(Debevoise) (Eiseman)94

(Eiseman)95

(Eiseman) (Rothman)96

(Debevoise) (Rothman) (Baker1) (Sussman)97

(Debevoise) (Rothman) (Baker1)98

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can also have massive amounts of time if an issue is just that important. Compliance 99

conferences can be scheduled in order to ensure compliance with deadlines.100

Despite the fact that confidentiality was a major selling point of arbitration (discussed

above), one source recommended specifying the extent of confidentiality. Often 101

confidentiality is of supreme importance where corporations have trade secrets, their

reputation is on the line, intellectual property is at stake, or they simply want to keep

their affairs private. Consider submission of documents and telephone hearings. If 102 103

really desired, you can use civil procedure rules. Incorporate existing procedures 104

from existing arbitration groups. All of these procedural modifications present 105

opportunities to make the process work, to troubleshoot problems that might arise and

allows one to prepare for the arbitration and anticipate problems which might come up.

Miscellania

Practitioners should have knowledge of ADR. Clients should not be expected to know

ADR or what they have signed, so it is important to review all ADR contracts. Arbitration

procedures by arbitration providers change and are specialized to the type of dispute. 106

(Rothman)99

(Eiseman)100

(Stipanowich2)101

(Sussman)102

(Baker1)103

(Rothman)104

(Chernick)105

(Baker2f)106

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Being prepared with knowledge of arbitration, and being equipped with the willingness

to educate consumers will allow practitioners to make arbitration more successful.

In the category of ADR procedures prior to arbitration, problems can emerge with

parties who try to delay and engage in empty processes with no intention of coming to

an agreement. It is recommended that mediation and negotiation be used before 107

arbitration as well as other ADR methods. Mediation can even be done during an 108

arbitration. Confidential settlement offers should be used to make the pre-arbitration 109

dealings more effective. 110

There is a whole spectrum of ADR available. Processes range from arbitration-

mediation to non-binding arbitration to mediation-arbitration and there are many others.

These are emerging and less is known about them than mediation and arbitration. 111

These further include: neutral evaluation, mini trial, non-binding arbitration, final offer

arbitration, and bracketed arbitration. Practitioners would be wise to familiarize 112

themselves with the range of ADR options available so that they can make use of these

procedures.

(JAMS)107

(Rothman) (Stipanowich)(Stipanowich2) (Baker1)108

(Martinez)109

(Debevoise)110

(Stipanowich2)111

(Farmer)112

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Overarching concerns

Many of the tips involve customizing procedure. This could be done either through an

arbitration clause or in an arbitration contract. There are two overarching problems with

custom procedure:

1. Custom arbitration procedures that deviate from existing third party providers of

arbitration services can red flag opposing parties. 113

2. This is my own concern. As custom procedures deviate from existing templates, they

are less streamlined. I would anticipate some problems and inefficiencies with

implementing custom procedure. However, the authors did not identify this as an

area of concern and most, if not all, were convinced of the value of customization or

offered ideas on how to customize the process. I imagine some less common

procedures might be prone to this problem.

Nonetheless, customization and control of the process is the selling point of

international commercial arbitration and many fantastic ways of doing so have been

identified, recommended, and criticized.

Primary Surveys

2013 PWC Arbitration study.

This survey of 82 questions was completed by 101 corporate counsel. The focus was

on international commercial arbitration and business transactions. 52% of respondents

prefer arbitration to litigation or mediation as their go-to means of dispute resolution.

62% of claimants prefer arbitration and 60% of respondents prefer arbitration. This

(Rothman)113

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suggests arbitration is neutral between respondents and claimants. 57% of cases are

settled through mediation and negotiation. For international disputes which could not be

amicably resolved, equally as many cases were referred to arbitration as were referred

to litigation. The financial services sector overwhelmingly prefers litigation to arbitration

by a large margin. In construction and energy, arbitration is far more favorable to

litigation. Corporations are using in-house counsel in order to manage their costs and

case management. 73% of in-house corporate counsel believe arbitration is well suited

to their international disputes.114

RAND study

121 corporate counsel were surveyed. They excluded international commercial disputes

because it is already known that arbitration in that setting is very well liked by corporate

counsel and corporations. However it was a study on domestic business to business

commercial disputes. 52% of respondents favored arbitration to litigation. 26% found

arbitration worse than litigation. 18% had no opinion or found no difference. 44%

reported that previous experience with arbitration made them favorable to arbitration

clauses. 34% reported it made them less favorable to arbitration clauses. 71% of

corporate counsel believe that arbitrations lead to awards that are compromised

between parties. 67% agree that confidentiality leads them toward arbitration. 9%

disagree. 63 % believe that finality of arbitration discourages the use of arbitration. 47%

(PWC)114

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believe preserving a good relationship with the opposing company is served by

arbitration. 8% believe it discourages.115

These surveys support the argument that arbitration is an attractive dispute resolution

mechanism for international business transactions. The desirability is industry-

dependent and even within industries which favor arbitration, there are counsel who

have had bad experiences with arbitration. A risk which was identified earlier was

parties who abuse the process and parties who are unfamiliar with arbitration. This

explains some of the negative experiences with arbitration. The kinds of strategies I

discussed above should help to make arbitration more viable. But overall the findings

supported that arbitration is a very good dispute resolution option. It’s just not for all

cases and won’t please all parties all the time and arbitration is industry specific in its

application to international business transactions.

Conclusion

Arbitration is an excellent method of resolving disputes arising from international

business transactions. This is true at the big picture level and was shown in exploring

the characteristics of arbitration. At the micro level, the strategies which were explored

serve only to make it more viable. Criticisms of arbitration need to appreciate that

arbitration is voluntary and customizable by both parties. Parties gain what is important

to them, at the expense of the things which are not. Though arbitration is an excellent

means of resolving international business disputes, it is not perfect. There are

(Rand)115

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circumstances, industries, and particular needs that support litigation over arbitration.

Drawing on the strategies of practitioners, scholars, and researchers, this paper

increases the potential success of an arbitration and makes arbitration more attractive

as a solution to disputes arising from international business transactions.

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