Draft a good arbitration provision
Choose (and use) the applicable rules
Choose experienced counsel and arbitrators
Keep cases succinct and focused
Arrange an early procedural meeting with the arbitrator
Beware of litigation-style document production
Eliminate evidentiary redundancies
International arbitration is often touted as a quicker, more cost-effective alternative to resolving international commercial disputes through litigation - and there is no reason that it should not be. The flexibility of the arbitral procedure should provide parties with the means to avoid the unpredictable and unforeseen costs and delays that are often associated with commercial litigation. However, such problems can creep into arbitrations, particularly where counsel and arbitrators follow litigation-style procedure, which can lead to unnecessarily lengthy hearings, overly broad litigation-style discovery and lengthy delays of decisions.
Parties can take a number of steps to prevent arbitration from taking on the undesirable characteristics of litigation.
A complete arbitration provision should include:
- the location of the arbitration (ie, its legal seat);
- the applicable arbitration rules;
- the number of arbitrators (eg, one or three), and potentially the method of appointment, if the method in the chosen rules is inconsistent with the parties' wishes; and
- if the parties speak different languages, the language of the proceedings.
The substantive law to be applied must always be included in the relevant contract, although it need not be part of the arbitration provision (and often is not).
If an arbitration provision is poorly drafted, the parties may waste time debating how to interpret it. They may even find themselves in court, asking a judge to decide whether the arbitration provision applies to the dispute.
The time to address potential procedural problems is during the drafting of the contract. Once arbitration has started, the options for remedying a poorly drafted arbitration provision are more limited.
Be cautious about multi-step or tiered dispute resolution provisions, which an unwilling party may use to try to delay the arbitration process.
Although it may seem counterintuitive, the parties should avoid specifying unrealistically short and inflexible deadlines in the arbitration provision. In some cases, failure to meet such deadlines may result in the arbitrator losing jurisdiction over a dispute or the arbitration provision itself losing effect.
Arbitration provides parties with an opportunity to choose their own procedural rules and to modify them to fit their specific circumstances. This represents an opportunity to avoid some of the rigidity, delay and burden of conducting cases under litigation procedures - parties should not lose it. When specifying a jurisdiction as the legal seat of arbitration, it is important to be aware that certain places may have international commercial arbitration rules that apply by default if no other rules are specified.
Most arbitration rules encourage efficiency and are intended to prevent delaying tactics. Parties should be aware of the applicable rules and the ways in which they may assist them in achieving their goals. For example, a party may wish to request a hearing with the arbitrator by telephone or in person in order to reduce costs and facilitate efficiency, or to apply for an order that a delinquent party comply with the applicable rules, the parties' previously agreed procedure or an earlier tribunal order.
Parties will benefit from having experienced counsel who are familiar with best practices and common pitfalls; this can help to avoid unnecessary expense and delay. Appointing experienced arbitrators will also better serve the parties and the process. Counsel and arbitrators who are unfamiliar with arbitration practice are more likely to revert to what is familiar to them. This often leads to an arbitration being conducted like a traditional lawsuit - the benefits of a flexible arbitration process are lost.
Parties should keep their cases succinct and focused on their strongest points, avoiding the 'kitchen-sink' approach that is more common in litigation-style proceedings. They should focus on the core issues and address them, leaving aside tangential and often distracting, non-probative issues. Although it can be tempting to load up an arbitration request or answer with all possible claims and defences, this is an inefficient, litigation-style approach. Keeping the request or answer succinct will result in a more efficient and cost-effective process. For example, it will reduce the number of documents, witness statements and expert opinions that are needed to prove or defend the case.
Even if the applicable rules do not require it, parties are well advised to request a procedural meeting with the arbitrator at an early stage and to ask that the results be committed to writing in a procedural order - this should set out clearly the timeframes and procedures to follow from document production to the hearing.
Once the procedural order has been issued, the parties should adhere to it, barring extenuating circumstances. This avoids the common problem of cases growing unnecessarily to fill the time allowed.
The document production stage of arbitration is much more limited than in litigation. The arbitration process is premised on parties producing the documents on which they rely to prove or defend their case, and making specific and focused requests for relevant and material documents. A focused document production process can reduce the significant costs and delays that often result from document dumps and endless document requests in litigation.
When confronted with counsel and parties that favour a litigation-style approach to document disclosure, parties should turn to the arbitrator for directions to limiting the document production. It is generally advisable to adopt a set of guidelines, such as the International Bar Association's Rules on the Taking of Evidence in International Arbitration, in the arbitrator's procedural order on process. These rules limit document production to specific documents or categories of document which are relevant to the case and material to its outcome, and require parties to provide clear reasons for requesting documents.
Eliminate evidentiary redundancies
Parties should avoid unnecessary rounds of pleadings. Those more familiar with litigation-style procedure are inclined to clutter the arbitration process with unnecessary pleadings, which adds to the cost and length of the process. Instead, parties should consider adopting best practices in arbitration and submit all evidence on which they intend to rely (eg, documents, witness statements and expert reports) in one submission, with a procedure which provides appropriate response times from each side.
Obtaining expert witness evidence can be an expensive and time-consuming process. Parties should consider whether the number of experts can be reduced - or whether experts are needed at all. They should confer about the expert evidence that may (or may not) be needed and whether a jointly retained or tribunal-appointed expert may be most efficient. Alternatively, experts (or even fact witnesses) may be cross-examined in panels or groups - a process often referred to as 'hot-tubbing' - in order to reduce hearing time and highlight key facts and areas where the expert opinions conflict.
Parties should consider whether cross-examination of witnesses is necessary and whether not cross-examining a witness may benefit their case.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.