ARBITRATION IS CONFIDENTIAL.
In these days of global competition, you do not want to advertise your disputes by disclosing sensitive corporate information made public during a trial in court, or even before that when parties file documents in a court action. Arbitrations are not open to the public and the information the parties reveal to have their cases decided is kept strictly confidential. Even if the opposing parties learn certain proprietary information, they are not free to divulge it to anyone else. Research shows that corporate clients find this to be one of the main attractions of arbitration.
IF YOU NEED TO, YOU WANT TO FIGHT ON NEUTRAL GROUND.
Often your disagreement will be with a corporation, customer or individual who resides somewhere else than where you are located. In such a situation, they may sue you in a court in their home country where standards of justice may be different, even hostile to foreigners. Or, you may find that you cannot bring the case at home but must file suit in their country, often because a judgment obtained at home may not be enforceable in their home country where they have their assets. In arbitration, you can choose and agree with your contracting party where the case will be heard, thereby avoiding potential disputes related to venue.
YOU CAN CHOOSE YOUR OWN JUDGES.
You can choose who will decide your case. In a multi-panel arbitration, each party may choose its own arbitrator, and both selected arbitrators will hear the case together with a third neutral Chair-person chosen together by the two arbitrators who the parties selected. Or, both parties may decide to have only one arbitrator resolve the matter. Arbitrators are neutral and impartial, and have extensive experience with disputes often in your own industry. Who to choose as an arbitrator is a very important decision, like choosing a jury, and clients consult with experienced arbitration counsel who can assist and guide them in this process.
IT IS MORE EFFICIENT AND INEXPENSIVE THAN GOING TO COURT.
Arbitrations are relatively quick and therefore less costly than comparable court litigation. Moreover, arbitrations are far less formal and designed to get to the point quickly. There is no expensive and time consuming motion practice, and instead involve limited and targeted disclosure – unlike United States court proceedings where disputes may entail extensive discovery procedures, such as review and production of hundreds of thousands of documents, time-consuming depositions, and interrogatories. In short, the procedure is designed for efficiency. As a result, a similar case in court would often take much longer and be far more costly.
THERE IS NO APPEAL.
In court, even if you win, be it as a defendant or plaintiff, the case may drag on – and so will the costs – for many years to come. The other side may appeal, then if it loses the appeal, it may appeal again to a higher court, and the case may then be sent back to the lower court, and so on. On the other hand, an arbitration award is final. And while it can be challenged on very limited narrowly prescribed statutory grounds (for example in cases of fraud), this is extremely rare.
AN ARBITRAL AWARD IS ENFORCEABLE VIRTUALLY ANYWHERE IN THE WORLD.
While you may prevail in court, if your opponent is abroad or the assets you want to take to satisfy your judgment are located outside the jurisdiction of the court, chances are that you will not be able to enforce the judgment. Court judgments are good only in the country where they are given, unless there is a recognition and enforcement treaty in place between the two countries, which are rare. The United States does not have a single such treaty. As a result, United States judgments are generally unenforceable abroad, and the same is generally true for foreign judgments in the United States. However, an arbitration award is enforceable almost anywhere in the world, as arbitration treaties cover almost any country, including the United States. Even if you are a defendant this is an advantage, because once you have arbitrated a case and won, your opponent cannot pursue the same claim again.
ARBITRATION CAN PROTECT YOUR VALUABLE BUSINESS AND CUSTOMER RELATIONSHIPS.
Disagreements arise from time to time even among the best of friends, long-time business partners, or with customers. It is a reality of life. Much as you would like, often you cannot ignore your differences because there is just too much money at stake. It may also be a matter of principle, and what are friends if you cannot frankly discuss and resolve your disagreements? But for most people, a barrier is crossed and a relationship can break once the dispute is taken to court. Filing a lawsuit can be damaging for both parties and unnecessarily destroy mutually beneficial relationships that took years and much effort (and expense) to build. Arbitration is designed to resolve business disputes in a civilized and professional manner. The process is private and far more respectful of the parties than can be accomplished in court. Those involved in the arbitration process are aware of this and work to make it a reality. As a result, many parties who arbitrate their disputes remain on good terms and are often able to repair their relationship. While many lawyers may do some arbitration from time to time, experienced arbitration lawyers keep this aspect firmly in mind, and even suggest additional measures to protect your business relationship if that is what you desire.
WHAT IS ARBITRATION?
In an arbitration, the parties agree to have their dispute decided by arbitrators they choose themselves (one or more arbitrators) instead of by a court. The parties can agree to arbitrate before any dispute arises by including an "arbitration clause" in their contract or after a dispute arises between them in a so-called "submission agreement."
The arbitration clause sets forth when, how, where, and under what rules the parties will "arbitrate" their dispute. It can also determine a number of other important issues, such as how many arbitrators there will be. As a result, it is important to pay close attention to the arbitration clause. Unfortunately, the arbitration clause is often neglected because at the time of the contract nobody wants to think about disputes or simply because people are unfamiliar with how to draft a solid arbitration clause. Often, a standard arbitration clause is inserted, which is unwise because if things go wrong it will matter a great deal how the dispute will be resolved. Moreover, a properly drafted arbitration clause can often prevent potential disputes from growing into real ones by including "preventative measures," such as a cooling-off period or other dispute prevention methods. The same way you may ask tax counsel for an opinion or input when you negotiate a contract even if you are already being assisted by your regular in-house or outside counsel, it often makes sense to ask specialized advice when drafting an arbitration clause.
WHAT KIND OF ARBITRATION?
There are two different kinds of arbitration: "institutional" and "ad hoc" arbitrations. The difference between the two types are whether the arbitration is "administered" by an arbitration organization (the institution) or not. If not, the parties themselves take care of all administrative duties and it is called an "ad hoc" arbitration.
In an "institutional" arbitration, an arbitration organization such as the LCIA, ICC or ICDR takes care of the administration of the arbitration, such as receiving the documents and filings, distributing them to the arbitrator(s), maintaining files and records, providing lists of potential arbitrators if requested by the parties, selecting the arbitrator if the parties cannot agree, and a score of other useful administrative duties. In a "non-administered" arbitration, called "ad hoc," the parties are responsible for the administration of the arbitration. Almost all arbitrations are "administered" because assuming such cumbersome and time-consuming duties detracts from the efficiencies gained in choosing arbitration, especially since parties are already preoccupied and focused on far more important matters.
WHAT RULES APPLY TO ARBITRATION?
This question often leads to confusion because the rules that govern the "arbitration process" – in other words, how the actual arbitration works – are not the same as the law that governs the contract or the laws and rules that may apply to various other aspects of the arbitration, such as the enforcement of the arbitration award. When it comes to the rules that determine how the arbitration itself will work, the parties are free to agree on any set of rules. In practice, this means that the parties choose the rules formulated by one of the well-known arbitration organizations (such as the LCIA, ICC, or ICDR) or the rules formulated by the United Nations (such as the UNCITRAL Arbitration Rules).
Far too often, parties choose a set of arbitration rules based on the general reputation of the organization that formulated them, without paying close attention to whether the specific rules satisfy their special needs and requirements in resolving the dispute. To do so is a mistake, as virtually all organizations' rules allow the parties to modify the rules as they wish. Moreover, sometimes a knowledgeable discussion and review of the available rules, in light of the particular facts of a specific case or situation, can be of great advantage to a party. The rules determine how the arbitration proceeding will be conducted, and there may be aspects that may be particularly helpful or undesirable. While depositions are virtually unheard of in arbitrations, some rules allow for them. Similarly, some rules allow the parties to come up with "terms of reference" determining the scope of the dispute, while others permit limited review of the award after it is rendered - all aspects that may or may not be desirable depending on a party's situation and views. To ensure that proceedings do not go against you, it is best to arbitrate your dispute under rules that suit you by planning ahead and obtaining specialized advice at the outset, in the same manner that one would review a transaction with tax counsel to structure the deal as best as possible to avoid future liabilities. There are many good arbitration rules (see the tab "Arbitration Rules"), but determining which one to pick depends on many factors
HOW DO I FIND AN ARBITRATOR?
Finding the "right" arbitrator for your case is as important as choosing a jury or, if you were able to, choosing a judge to decide your case. While many arbitration institutions will provide lists of potential arbitrators if asked, sophisticated clients rely on experienced arbitration counsel who are familiar with the leading arbitrators and can sit down with the client to review who is best suited to resolve their dispute. Each case, each situation, and indeed each client, may be better served by some arbitrators than others depending on their expertise, experience, legal background, industry knowledge, and a score of other relevant factors.
IS THERE GOING TO BE A TRIAL?
Yes, there is but it will be called a "hearing" and will differ in many respects from what happens in court. Then again, that is not surprising since the parties are likely from different countries and trials differ from country to country. Arbitration hearings incorporate the best aspects of the various legal systems to make the hearing most efficient.
Unlike in court where your case may be just one of many that is being heard by the judge, the arbitrators are focused on just your case. As a result, delays are far less likely and the risk of it being called off and postponed at the last minute for reasons unrelated to the case are virtually non-existent. Moreover, the parties themselves may agree where the hearing will be held and, to a large extent, how long it will last. The atmosphere is often far less formal than in court. And while courts are responsible for seeing that numerous cases run on time and are handled appropriately, which means that often an individual party's requirements will have to make room for the greater good, arbitration hearings are tailored as much as possible to accommodate the parties's needs. The parties are usually represented by experienced arbitration lawyers, just as they would be in court by a trial lawyer, who are familiar with not only the arbitration rules but also the customs of each specialized arbitration.
WHAT RULES OF EVIDENCE APPLY?
The short answer is none, unless the parties agree otherwise to include evidentiary rules. Generally speaking, arbitration organizations' rules do not include rules of evidence. Instead, parties are free to choose their own rules of evidence, such as the new "IBA Rules on the Taking of Evidence in International Arbitration."
IS THERE AN APPEAL?
There is no "appeal" in the traditional sense of the word. Arbitration awards can be set aside - "vacated" - only on limited statutory grounds in legal proceedings brought in court. However, some arbitration rules allow for the award to be "corrected" for specific reasons (such as calculation errors), and there are rare instances where the award can be changed through a process called "revision." But as a general rule, arbitration awards are final.
IN WHAT COUNTRIES CAN I ENFORCE THE AWARD?
Unlike most court judgments that are only enforceable in the country where they were given or a limited number of countries, most arbitration awards are enforceable in virtually any country in the world. However, enforcement entails use of the courts and various other technical aspects, for which clients should consult an experienced arbitration lawyer.
I AM NEGOTIATING A CONTRACT AND THE OTHER SIDE IS PROPOSING TO INCLUDE AN ARBITRATION CLAUSE?
The first thing to realize is that this is a positive sign. If there are ever disputes, you can resolve them efficiently through arbitration and hopefully remain on good terms. An arbitration clause is an important element of your agreement. It will determine what the arbitration will be like, when and where you can arbitrate, and it may even help you prevent disagreements from getting out of hand and growing into real disputes. You should also have a say in drafting the arbitration clause. Often, parties propose to include a standard arbitration clause. However, your agreement is far too important for a boiler-plate arbitration clause. Just like you would consult a tax specialist if tax were an issue, in most cases it is wise to consult with an experienced arbitration lawyer to tailor the arbitration clause to your expected needs. Obtaining such advice is relatively inexpensive and may ultimately save you significant money in the long run.
I HAVE BEEN SUED IN A COURT, EVEN THOUGH WE HAD AGREED TO ARBITRATE AND/OR MY CONTRACT HAS AN ARBITRATION CLAUSE?
This happens sometimes, when an opponent tries to escape from the agreement to arbitrate. What needs to be done depends on the particular situation, your arbitration clause, and timing. You need the help of an experienced arbitration lawyer to force your opponent to drop the lawsuit and to submit to arbitration as agreed. In some cases, it is even possible to avoid the dispute altogether at this early stage through careful negotiations or mediation. Time is of the essence in such a situation, so you should not delay seeking advice.
I RECEIVED A DEMAND FOR ARBITRATION
Your time to respond is limited and any failure to do so in an appropriate manner will seriously harm your position. You should consult with an experienced arbitration lawyer immediately.
WE ARE INVOLVED IN AN ARBITRATION AND ARE BEING ASSISTED BY OUR REGULAR OUTSIDE COUNSEL WHO, WHILE AN OTHERWISE EXCELLENT LAWYER, SEEMS NOT TO BE ENTIRELY FAMILIAR WITH WHAT IS GOING ON OR HOW TO HANDLE THE SITUATION?
This can happen. Arbitration is a very specific field and lawyers may have done some arbitration work, but that is often not enough – and most lawyers, no matter how good or experienced otherwise, usually have no experience with international arbitrations whatsoever. Your regular outside counsel may also not have experience with a number of other things that play an important role in international arbitrations, such as cross-examination (simply because he or she comes from a country or legal culture where that does not exist, as it does in the United States). Moreover, it may also be the case that your opponent is being represented by experienced arbitration counsel. There is no reason why you should not have the best lawyers you can get to represent your interests. Experienced arbitration lawyers are accustomed to working together with regular outside counsel – and, of course, with in-house counsel. Contact us, and after an initial consultation, you will find that cooperation is smooth and – most importantly - provides an effective way to best defend your interests.
I AM A LAWYER AND MY CLIENT IS INVOLVED IN AN ARBITRATION BUT I HAVE NO EXPERIENCE WITH IT, WHAT SHOULD I DO?
Arbitration is a complex area and not something you want to learn about last-minute while under the gun because your relationship with your client is simply too important for that and to expend your energies to do so is simply not necessary. Often the best sign of a good lawyer is to know when to ask for help. Your client will see this as a sign of confidence and good judgment, and will ultimately be grateful to you for it. After all, clients rely on your advice and seek your help with many issues that may not be within your expertise. Rather than them having to go out into the world to seek help themselves, you helping them and guiding the process is universally appreciated by clients. And even if you are not an arbitration lawyer, you have an important and significant role to play during the arbitration and the preparation leading up to it. You know the client well, and as experienced arbitration lawyers we value your continuous involvement. We work closely with you as regular outside counsel, and you will become an integral part of the arbitration team. That way, the client can have the best of both worlds. And after all is said and done, the "credit" for having handled "the situation" will be yours.
...is an information site brought to you by lawyers who have arbitrated billions of dollars worth of disputes and have helped a large number of the world's leading companies to resolve their disputes through arbitration. Here, you will find quick answers to many of your questions about your arbitration or dispute in bullet point fashion as well as links to relevant arbitration rules and useful organizations.
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