"Efficiency" in International Arbitration: Last Night's Martini?

During a recent meeting of the Dispute Resolution Committee of the ABA Business Law Section, GE Oil & Gas Assistant General Counsel Mike McIlwrath shared some cogent and stimulating — and personal — observations on the responsibility that corporate end-users must take for the process of international arbitration.  Soon after the meeting, Mike offered the following — personal — written remarks, which we share with his permission:

During a conversation with the ABA Business Law Section’s Committee on Dispute Resolution, I commented that it is time to move on from the “efficiency” debate in international arbitration, and just start making better use of the existing menu of available options. In that, I made a point about whether parties in an international dispute should avoid appointing American counsel or arbitrators in international arbitration.

The point is one that I had developed previously in a blog post about how choices of counsel and arbitrators can influence the subsequent procedure:

The thrust of the efficiency debate has been on reforming the process, including improvements in the rules, case management procedures, more available arbitrators, less discovery, more front-loading of the process, etc. But parties’ own choices of counsel and arbitrators in an international dispute will have a more powerful and immediate influence over their disputes than all of these reforms combined.

Here’s a bit more explanation in more practical terms.

First, we’ve been beating the “efficiency” drum for at least a dozen years. After grappling for so long with the complaints about cost and time and the so-called “Americanization” of international arbitration, there have been tangible results in response. International arbitral institutions have revised their rules. Arbitrators have been sensitized and some are much better than others at effective case management.

Of course, things are not perfect, and they never will be. But parties now have greater choices than ever, and we need to be aware that we make choices at the inception of a dispute that will influence the type of procedure that will be applied. For example, we end-users shouldn’t complain that our “international arbitration” suffered from American-style practices if we adopt a North American city as the place of arbitration, retain North American counsel, and appoint North American arbitrators. That’s called getting what you ordered. We parties need to change as much or more than the process we are availing ourselves of.

Second, it follows as a corollary to the first point that we parties have to recognize that decisions to appoint counsel and arbitrators should be made strategically, not as knee-jerk reactions to the place of arbitration or to the opposing party’s appointment of counsel or arbitrator, or because one or another place as chosen as a place of arbitration in a previous contract. Questions worth answering include whether potential disputes under a contract would really benefit from broader discovery, and whether the party might want greater emphasis placed on the value of witness testimony than in a proceeding done under the civil law.

If so, then there’s a good argument the party would be better off with a more US-style proceeding, and should site arbitrations in the US and appoint US counsel and arbitrators. The justice will be good quality, even gold-plated. It is also likely to cost significantly more and take longer than other options, but that’s a choice a party should make.

So my point in saying, “avoid American firms and arbitrators,” is that we parties should embrace the choices we make, knowing they are bound to influence the subsequent procedure. After a dozen years of debate and initiatives to improve the practice of international arbitration, things are what they are. Rather than deriding American-style international arbitration as “inefficient,” we should recognize it as a procedural option that is suited to particular types of disputes where saving cost and time are less important than having access to a vast amount of data in the other party’s possession, for example.

Now, your colleagues in the Business Law Section will rightly point out that there are many excellent North American law firms and North American arbitrators who are capable of conducting more business-efficient arbitration, much less in the style of American litigation. And I agree with that. But if you are a party in France or China or Brazil, how do you find those business-efficient counsel and arbitrators? You can’t assume that all parties will have access to this information and will be highly sophisticated.

Now, if there were a database where arbitrators could openly declare their preferred “style” of arbitration (domestic US, international, civil law, general common law without US-style depositions and document discovery, etc.), and not just the “I’m adaptable,” which is a pretty useless non-answer, then we’d be talking a different game. But for now, if you conduct an arbitration using lawyers and arbitrators from the US, odds are you’ll get a US-style arbitration.
You can choose to have it or not to have it.

But don’t complain if what you get is what you ordered.


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