International Arbitration

In a nutshell

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Arbitration is a legally binding method of resolving disputes outside the courts with only limited opportunity to appeal the result. Companies often include an arbitration clause in their commercial contracts with one another, so that if a dispute arises between them, they are obliged to arbitrate their dispute rather than pursue traditional litigation.

Arbitration provides a binding solution to the dispute by way of an arbitral 'award'. The award can be enforced internationally through the provisions of the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards, which over 140 states have ratified. “Private parties often prefer international arbitration because it provides a neutral and relatively confidential forum, specialist arbitrators and greater ease of enforcement of the award in multiple jurisdictions. The New York Convention is unique in that there is no equivalent international treaty in force around the globe to ensure the international currency and enforcement of domestic court judgments,” explains David Lindsey, partner and cofounder of international arbitration boutique Chaffetz Lindsey in New York.

International arbitration addresses any case or potential dispute between parties, usually located in two different countries. The disputes are often considered under a foreign applicable law and resolved under the arbitration rules of the International Chamber of Commerce (ICC), the International Centre for Dispute Resolution of the American Arbitration Association (ICDR), the London Court of International Arbitration (LCIA), The World Bank’s International Centre for Settlement of Investment Disputes (ICSID), or the United Nations Commission on International Trade Law (UNCITRAL).

The types of cases heard in international arbitration are typically cross-border commercial disputes that occur in the context of joint ventures or corporate transactions like M&A. “The types of disputes run the gamut, but they are all really linked to investment and transactions outside the home jurisdiction of the claimant,” explains Nigel Blackaby, head of the US (and Latin American) international arbitration group at Freshfields Bruckhaus Deringer. Disputes commonly originate in the oil and gas, telecom, privatized public utilities and construction industries.

One specific type of international arbitration is ‘investment arbitration’, where a claim is brought by a foreign investor directly against the host state of its investment. Such action is pursuant to the arbitration provisions of a bilateral (or multilateral) investment treaty. BigLaw firms – as well as specialist boutique firms in some instances – represent both claimants and defendants in such cases, though they must be careful about conflicts. Investor-state disputes are usually arbitrated under UNCITRAL or ICSID and rely on the provisions of the applicable investment treaties.

What international arbitration attorneys do

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  • Receive instructions from the client, who thinks, for example, that their contract has been breached or that their rights under an applicable investment treaty have been infringed.
  • Review the contract or treaty, solicit and review relevant documentation and speak to potential witnesses.
  • Provide client with memo on the merits of the case. This may involve working with local counsel in the relevant jurisdiction.
  • If a client wants to proceed, draft the necessary initiation papers (usually a ‘Request for Arbitration’ in accordance with the arbitration rules set out in the applicable arbitration rules, e.g. ICDR, ICC or ICSID) and submit to the relevant arbitral institution.
  • The case is then registered and the request is communicated to the respondent, usually by the arbitral institution. The respondent answers, possibly with an objection to the jurisdiction and with a response to the case’s merits. They name an arbitrator.
  • In order to establish the tribunal, each party proposes an impartial and independent ‘party-nominated’ arbitrator. The party-nominated arbitrators then usually seek to agree on a ‘president’ or ‘chair’ of the tribunal, failing which, the president/chair will be nominated by the institution. Once constituted, the tribunal will invite parties to the first procedural hearing at the (usually neutral) seat of hearing (often jurisdictions with favorable arbitration laws and culture such as New York, London, Paris, Geneva and Singapore), where the calendar and procedural order for the next steps will be established.
  • In commercial arbitration, there is a period for exchanging documentary evidence, during which each side will produce the documents upon which it intends to rely. This does not typically include ‘US-style’ discovery, but a far more limited disclosure process.
  • The next steps usually include a very detailed presentation of the facts and evidence by the claimant (including written witness/expert statements and all relevant documentation). This is called a ‘Memorial’– it may also be included in a pre-hearing brief shortly before the hearing on the merits.
  • Defense attorneys submit a ‘Defense Memorial’ or response brief with a similar presentation.
  • There will often be a further round of ‘Reply’ and ‘Rejoinder’ memorials or briefs.
  • Final hearing takes place, where witnesses are questioned and cross-examined before the tribunal, and oral argument is made. The written witness statements filed with the Memorials often takes the place of direct testimony at the hearing.
  • Submit final, post-hearing briefs. In complex cases, these can be lengthy.
  • Tribunal determines award, which must be ‘reasoned’ (i.e. the tribunal’s reasoning for the award must be set out), in writing, and signed by the members of the tribunal. With a three-person tribunal, a majority determines the award.

Realities of the job

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  • Being an international arbitration attorney requires an understanding of – and openness to – foreign contexts and cultures.
  • Language skills come at an absolute premium in international arbitration. Spanish, Mandarin and Portuguese are in great demand right now.
  • In other parts of the world, the case itself may be in English, but the underlying documents will often be in different languages.
  • Like any litigation job, international arbitration demands great discipline and a thorough understanding of large quantities of documents, some of which can be technical and need to be structured into databases.
  • The job involves a lot of travel to identify relevant documents and interview witnesses. Depending on the circumstances, associates may also travel.
  • Like much litigation, international arbitration is, to an extent, countercyclical, as parties seek to litigate contracts they signed when the economy was better. Nigel Blackaby, partner at Freshfields, describes such cases as “crisis-driven.”
  • Political reorientation of states and the nationalization of natural resources by states (e.g. Bolivia and Venezuela) also provide fertile ground for investment arbitration claims.
  • The primary bodies of law to which international arbitration attorneys refer are the governing substantive law of the contract or of any alleged torts relating to the contract, the arbitration laws of the seat of the arbitration, and the New York and Washington conventions of 1958 and 1965 respectively.
  • The investor-state arbitrations tend to follow a model more closely associated with European, rather than US, arbitration procedures.
  • However, the differences between European, US and Asian practices, and between civil law and common law, are not as great as they once were. Some say a more universal practice is developing; the International Bar Association’s now widely used evidence rules are a good example of the trend.
  • In 1996, the American Arbitration Association created the ICDR as its international division, since its rules did not always align with international practice. For example, the AAA commercial rules, typically used in domestic US cases, did not then require neutral arbitrators – a rule which has since been changed to reflect the international practice of neutrality among arbitrators.
  • US-based companies tend to favor the AAA or ICDR rules. European companies are more likely to favor the ICC rules.
  • The ICSID rules are used for bilateral investment treaty (BIT) claims against sovereigns or in contracts between investors and the host state of the investment.
  • The LCIA rules are thought by many to be heavily influenced by English arbitration practices.
  • The Stockholm Chamber of Commerce has historically been a favored institution (often also using Stockholm as a seat) for ‘East-West’ disputes, i.e. disputes between companies based in the former Soviet Union and companies based in the West.
  • In commercial arbitration, demands for documents from the other side are allowed, but not as much as in the discovery phases of US litigation. Depositions are rarely allowed, unless US parties are involved and the arbitration clause itself calls for them. (See the aforementioned IBA evidence rules for a good summary.)
  • Compared to US litigation, international arbitration typically relies more on written, instead of oral, advocacy and on contemporaneous documents, rather than on witness testimony from parties. In final hearings, for example, written witness statements often take the place of oral direct testimony.

Current issues

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  • "The world has become a small place for business,” says Freshfields' Blackaby. In other words, the more international contracts there are, the more international arbitration there will be, because many disputes won’t be litigated in national courts.
  • Many commercial transactions are happening in China, Russia and Latin America. “Those deals will definitely have arbitration clauses.” 
  • Brazil is the latest success story for arbitration, as observed in the quick growth of the São Paulo-based Câmara de Comércio Brasil-Canadá (sister organization of Toronto’s Brazil-Canada Chamber of Commerce). “The growth of arbitration in Brazil over the last decade has been remarkable. Brazil has become the leading light for arbitration in Latin America,” says Chaffetz Lindsey partner David Lindsey.
  • Meanwhile, other South American jurisdictions have become less arbitration-friendly than they were in the 1990s. Anger about investment claims against states like Argentina, Venezuela and Ecuador has had a negative effect on the ease of arbitrating commercial disputes there. However, arbitration in countries like Chile and Colombia continues to grow, albeit not at the same pace as Brazil.
  • The Middle East has recently decided to claim a central place in international arbitration, with major centers opening in Dubai and Bahrain.
  • The Singapore International Arbitration Centre (SIAC) also has a growing reputation, as well as an impressive new international arbitration center. It has become a popular venue for investors with disputes in India.
  • Indian support for arbitration has improved, but the Indian courts still occasionally interfere in some arbitral proceedings, especially if the government is involved. The interference can quickly derail the process, causing many foreign investors there to push for arbitration outside of India when possible.
  • The China International Economic and Trade Arbitration Commission (CIETAC) has many arbitrations, though recent reports told of harassment of Chinese arbitrators who had ruled against government interest.
  • Russia has used arbitration effectively, but instances of government harassment make it difficult to pursue arbitration there.

What top international arbitration attorneys say

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Nigel Blackaby, partner and head of US international arbitration group, Freshfields Bruckhaus Deringer

“International arbitration should be attractive to anyone with an international background, who enjoys interacting with different cultures. Students interested in the area should take any and all chances they have to study abroad and to learn at least one foreign language."

“Equally important is the desire to be a litigator. I always wanted to be a litigator, but I had languages and wanted to be able to use them, so international arbitration was a natural choice for me."

“Spanish, Chinese and Russian are the three key languages that are in demand at the moment. Be prepared for a lot of competition.”

David Lindsey, partner and cofounder, Chaffetz Lindsey

“The best part of the job is meeting people from around the world and being exposed to so many diverse cultures. I have met lawyers from many jurisdictions, both as co-counsel and opposing counsel, who have become good friends. Participants in the international arbitration Bar share a mutual respect and camaraderie that I have not witnessed in other areas of legal practice."

“The years I spent in London in the late 1990s had a very positive impact on my career. As for languages, in addition to those Nigel mentioned, I think Portuguese will continue to grow in importance as the Brazilian market continues to grow."

“The field has provided a place where female practitioners have been able to excel. The strength of the Arbitral Women group is a testament to that. Many of the finest young partners, counsel and senior associates in New York are women. The field also includes some of the most well-known and respected women in the field of law, such as Lucy Reed, Carolyn Lamm and Judith Gill.”