Arbitration|Conflict Resolution|International

An International Look at Dispute Clause Drafting

The recent Conference of the International Bar Association in Madrid convened many of the leading practitioners and theorists in international law.  The Dispute Resolution Section of the IBA offered panels prepared by its Arbitration Committee (co-chairs Pierre Bienvenu of Canada and Guido Santiago Tawil of Argentina) and its Mediation Committee (chair Jon Lang of the UK) that provided very interesting and informed debate.

The first substantive session addressed “Options for the Resolution of International Commercial Disputes, Including the Drafting of Dispute Resolution Clauses.”   Clause drafting is a field that, only five years ago, was considered somewhat recondite by those who cared and irrelevant by those who didn’t.  It was a pleasant surprise to see how it has entered the mainstream, with international experts addressing a packed house.

Angelo Anglani of Italy offered an overview of the challenges of contract drafting.  His “checklist” mirrored those of many American writers, including the use of time-periods for action; multi-step construction; “carve-outs;” and neutral selection procedures with default rules. 

Jacomijn van Haersolte van Hof of Netherlands followed with a timely precaution about excessive zeal.  He noted that the contract clause might be likened to an ice cream sundae concoction — made interesting and attractive by selecting from the various flavors and toppings available for choice.  But crowding all of the options onto a single sundae results in a goo-ey mess.  He also addressed a distinction that I had not considered before — between issues arising in an arbitration and the real dispute giving rise to the procedure.  Hybrid processes and the use of neutral expert fact-finding can assist the parties in clarifying factual issues.  This permits a more narrow and more reliable approach to the legal claims at the heart of the dispute.

Gilberto Giusti of Brazil waxed eloquent and enthusiastic about the arbitration system in his country.  A good thing, too, since he reminded us that Brazil will host the World Cup in 2014 and the Olympics in 2016.  As he pointed out, the number of construction contracts, service and vendor contracts, and other legal papers flying about over the next seven years will be pretty impressive, and it will test the mettle of dispute resolution experts in the region.  (From his mouth to God’s ear, as the saying goes; many companies and lawyers have had far less enthusiastic things to say about commercial arbitration in Brazil!)

Miguel Temboury of Spain considered the nature of the patalogical arbitration clause — the contract clause that is sufficiently flawed as to require interpretation by the arbitration panel or the courts in order to glean the parties’ intent as to the arbitration.  I hear these stories with a mixture of amusement and nausea; there is really no end to the expense and ill will that a poorly drafted arbitration clause can provoke in the hands of able layers, and it is upsetting to realize that it all could have been avoided with the least bit of intelligence and competence.

Temoury sees a lot of this as head of the Madrid Court of Arbitration, and the offered for catagories of pathology:  (1) where the parties’ intent to arbitrate is unclear (such as naming both an arbitration center and the jurisdiction of a court); (2) where an arbitral tribunal is misidentified (such as the mythological “Permanent Commercial Court of Arbitratrion of Singapore”); (3) where the parties set forth impossible time schedules or other provisions (such as requiring an award within 30 days of submission of the dispute to the arbitration center); and (4) where the parties muddy-up the scope of the arbitration agreement (such as distinguishing between disputes arising from the “interpretation” of the contract and disputes involving the “execution” of the contract).

Once again, one is led to shake one’s head in wonderment that the corporate client, so expert in its profession, permits such sloppy work to take place in its name!  And the waste!

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