Arbitration could be a strange world of wonders, but, on the other hand, if mastered professionally in the first place while planning and managing the process, arbitration could turn out to be a process that will be directed towards a winning strategy.
Much can be written about the arbitration process, but this article attempts to pinpoint 7 essentials that are a must in the tool box and knowledge of the arbitration lawyer.
1 – You must control your arbitral procedure – This may seem rather trivial. However, time and again, cases such as those this writer has scrutinized or managed indicate that when counsels who are aware of the “technicalities” and plan for them, they gain considerable advantages or at least control of the international arbitration.
2 – Precisely define your arbitration agreement/clauses – This essential cannot be emphasized enough, as to its importance and great impact over the arbitral process. This preliminary phase of any arbitration process – which is always based upon some kind of consent granting the jurisdiction to an arbitral tribunal – is the key for safeguarding interests.
3 – Cautiously choose and define the seat of arbitration– The seat of arbitration is not “just” the venue where the arbitration will take place – it is the country whose courts will have jurisdiction over the matters surrounding, supporting and enforcing the arbitration procedure.
This might have crucial relevance, even for the validity of the arbitration agreement itself, since each country has its own internal arbitration laws regulating arbitration and, thus, might interpret validity or non-validity of an arbitration agreement irrespective of the law applying to the arbitration or the intent of the parties initially. For example, some countries may not enforce an arbitration without a signed arbitration agreement, whereas others, such as Israel, might acknowledge consent for arbitration without a written document.
The seat of arbitration may also have a great impact even over interim measures. It is crucial to review what kind of interim measures are possible or impossible according to the law of the seat of the arbitration – some cases revolve around interim measures without which the arbitration might be meaningless.
The seat of arbitration might also have a great impact in light of the public policy in the specific country – which might not enable the validation or enforcement of an arbitral award counter to its public policy principles – and thus make an arbitral award worthless.
4 – Definition of the possible remedies and the exclusion of others – This is another essential that, for some reason, in practice is often overlooked, despite the obvious advantage this might have over the scope of the arbitration. Parties to an arbitration agreement have the power not only to provide the matters that are subject to arbitration and the applicable law, but also to control their legal exposure in arbitration – and, in fact, minimize or maximize it – if they just give thought to remedy definitions, rather than leave it inattentively hanging as a midnight clause.
For instance, a party might define that punitive or tort damages are included or excluded. Similarly, parties can provide to cap possible compensation (such as a certain value of the transaction), all in a manner so that the arbitration process can be navigated solely to what the parties, or any one of them, actually seek. This will contain and minimize the risk of the unexpected or unknown.
In this respect, it is also important to determine clearly what the scope of the arbitral tribunal authority might be – because what is not included might be determined to be excluded.
For instance, parties sometimes provide that the tribunal will have the jurisdiction to render awards as to questions of interpretation of the contract and its terms – but such a provision may be found to not provide jurisdiction as to breach of the contract – this might turn out to be a substantial obstacle for the enforcing party.
5 – Determining the applicable law – This has great relevance and importance for obvious reasons – and yet many times parties are found to have agreed upon an applicable law – such as British or Swiss law – without actually looking into said law and its possible implications for the matter in the case in dispute. It is indeed worth the extra effort to consult with counsel acquainted with the proposed applicable law while presenting the scope of interests to be protected and any possible downsides in the transaction.
6 – Determining and controlling arbitration costs – International arbitration could be extremely costly, especially if parties have not provided in advance for the terms for conducting the process. Parties could and should consider controlling costs, inter alia, by the following:
- Providing for a sole arbitrator rather than a tribunal of three
- Providing that the arbitration will be conducted by written submissions and affidavits only
- Providing limitation of document disclosure – especially while dealing with U.S. parties or under U.S. applicable laws (which may have extremely broad and often onerous discovery provisions)
- Providing in advance for short hearings and a limitation on the number of hearings
- Appointing an arbitrator to manage the arbitration without the administrative costs and fees usually involved when applying to an international arbitration institution
- Providing that the arbitrator is an expert in the fields relevant to the matter, in case specific expertise is required, therefore avoiding the need for appointment of an expert
7 – Ensuring that enforcement is possible – An essential element to be reviewed in advance, even before engaging in an arbitration agreement, is the possibility of enforcing the arbitral award. In general, the New York Convention of 1958 provides sufficient reference for this consideration. This may not always be the case. Thus, a technical review of the convention is sufficient to ensure enforceability in a particular case or situation.
There are instances in which legal or political considerations may preclude enforcement even when the target jurisdiction is part of the New York Convention. For instance: non-mutuality of enforcement among countries, an award that contradicts public policy of the target enforcement country, difficulties originating from conflicts of law – since the enforcing jurisdiction will usually apply its set of laws, rules and values.
Moreover, it is greatly advisable to explore in advance if the opposing party is solvent, where its assets are situated and the ability to enforce the award against such assets.