As most of you know, the CPR Institute is a nonprofit think tank and alliance of global corporations, law firms, scholars, and public institutions dedicated to the principles of commercial conflict prevention and alternative dispute resolution. The “Best Electronic Media Award” is presented annually to “a company, group, or individual that has produced exceptional electronic media that was focused on the field of Alternative Dispute Resolution.”

CPR presented the award at a wonderful dinner in New York last week as evidenced by the photo.

(Tali Finkelstein (left), Roger Alford (center), and Leslie Alford (right))

Without sounding cliché, the award recognizes the outstanding work of all of our permanent and guest contributors, and the tireless support from Kluwer Law International (with a special shout out to KLI superstars Gwen de Vries, Eleanor Taylor, Vincent Verschoor, and Raymond Blijd).

Others CPR winners include:
ADR Center in Italy for Outstanding Practical Achievement;
Roselle Wissler for Outstanding Professional Article;
Stacie Strong for Outstanding Short Article;
Michael Diamond and Nate Mealey for Outstanding Student Articles;
Douglas Noll for Outstanding Book.

Congrats to all!

There is no doubt that for those foreign to it, arbitration appears as a particularly appealing field of practice. Not only it provides the opportunity of working in some of the most interesting matters and encountering some of the best lawyers and academics but it opens the door to developing a real international practice, something extremely unusual for those raised and trained in developing countries.

The attraction that international arbitration raises among non specialists is expressed in different ways. Partners of large firms with little or no experience in arbitration or litigation look at it with increasing interest when their time for retirement approaches. A surprising number of law firms periodically announce the opening of their arbitration practices and hundreds of participants gather in arbitration events even in locations with little-to-no arbitration tradition or work. Finally, the growing interest in arbitration reflects in the increasing curricular and extracurricular activities offered by universities, normally in the form of arbitration courses and moot competitions.

While most of these developments should be warmly welcomed, others generate some reasonable concern.

There is no doubt that moot competitions constitute a fascinating experience for all of those involved in them. Law students enjoy exciting experiences, and the moots provide teams coming from communities with no arbitration history with the opportunity to compete against (and often beat) others coming from places where arbitration practice is commonplace.

Competitions of this kind provide students with a unique opportunity to get in contact with other legal systems and cultural approaches, develop teamwork and technical skills in a format that they have never encountered (and in many cases will never be exposed to again), make new friends, etc. Therefore, it not only becomes an extremely valuable educational experience but a personal one that they deserve and will be grateful for life.

As moot competitions, short arbitration courses (either at undergrad or graduate level) will in general provide only benefits to their participants by allowing them to obtain a useful insight and a better understanding of the arbitration field and practice.

Extended graduate programs should, in my view, be looked in a different way. While it is true that most of them will provide participants with a better preparation and skills, the decision to concentrate a legal education in arbitration should be analyzed with caution, on a case by case basis and with an informed knowledge of the existing professional demand.

There is no doubt that increasing the opportunities to specialize where a market is demanding more arbitration professionals should be praised and encouraged. However, is that the current situation in most cases?

Notwithstanding its appeal, that doesn´t seem to be the general situation in areas within Latin America. It is true that countries as Brazil or Perú have significantly increased their arbitration practise in the last few years, mainly in the domestic side. However, most of the other countries in the region are far from having the number of arbitration cases to cope with the amount of young lawyers expressing their interest in joining this field.

Arbitration is essentially a practice, which as such can still be reasonably well trained when joining a good arbitration team. On the contrary, the lack of a solid education in a substantive field of law is a defect usually found in young lawyers that very rarely can be solved but through legal education. Taking an extended graduate program primarily focused in arbitration will, in most cases, guarantee a deep knowledge of the process but also mean a more limited education in a substantive field of law (commercial law, international law, administrative law, etc) that the one to be obtained through other specific programs. And generally it is the substance, not the process, that legal disputes (including those to be settled through arbitration) concern.

Therefore, if some legal markets are not demanding such a number of arbitration specialists, are we helping students and young lawyers by encouraging them to train and become arbitration specialists? Aren´t we providing them with wrong signals for their professional development that could drive them away from paths in which they could find more success?

A “market approach” answer will most probably simply dissipate such concern by stating that if that was the case incentives to specialize in arbitration will not last long.

Although that could be right in the long term, the truth is that most of our young colleagues who are currently choosing this path instead of others will have little opportunity to correct in the future the decision that they take today.

Many of those reading this blog frequently receive resumes of outstanding candidates with impressive academic qualifications (many of which we could even envy) interested in joining their arbitration practices. Unfortunately, after a few years many of those very same candidates are still trying to insert themselves in this area being no longer young graduates but colleagues that could have consolidated in other fields of practice should they have taken different decisions.

On the long run, market rules will probably prevail and unrealistic expectations will accommodate to the real professional demand. However, until that time comes it is our duty as more experienced professionals and academics to guide our students and younger colleagues wisely and when necessary raise our voices as what we do (or do not) could influence significantly their future.

As already reported by Global Arbitration Review, the survey shows “the extent to which the governing law is a driver of choice among those framing arbitration agreements, and the dominance of established arbitral seats.” Specific findings of the survey include:

• English law was used most frequently (by 40% of respondents), followed by New York law (17% of respondents);

• London was named as the preferred seat of arbitration (30%), followed by Geneva (9%), Paris, Tokyo and Singapore (each 7%) and New York (6%). Moscow and China were viewed negatively as seats of arbitration;

• The ICC International Court of Arbitration is the most preferred and widely used arbitration institution (50%), although there was a perception amongst a majority of interviewees that ICC arbitration is too expensive and that arbitration institutions in general are costly. Respondents had the most negative perceptions of the Cairo Regional Centre for International Commercial Arbitration (CRCICA), Dubai International Arbitration Centre (DIAC) and China International Economic and Trade Arbitration Commission (CIETAC).

As summed up by White & Case partner Paul Friedland, the survey revealed, perhaps unsurprisingly, that corporate parties’ first choice for governing law is that of their home jurisdictions. When that was unattainable, parties gravitated towards well-established and well-known laws such as English, New York, and Swiss law. Although governing law was rated as one of the most critical factors for parties, 53% of survey respondents indicated that they believed that its impact could be limited to some extent with a carefully drafted contract.

The survey also provided interesting findings on other issues, including with respect to corporate choices concerning the appointment of arbitrators and confidentiality.

Arbitrators: Open-mindedness and fairness, prior arbitration experience, quality of awards, availability, knowledge of the applicable law, and reputation are the key factors that influence corporations’ arbitrator choices. A full 50% of respondents indicated that they have been disappointed with arbitrator performance. Corporations indicated a desire for more information regarding arbitrator availability (including requiring arbitrators to publish information about their pending commitments), skills, and experience and, to some extent, greater autonomy in the selection of arbitrators. A large majority (75%) reported that they would like to assess arbitrators at the end of a dispute. Of these, 76% would like to report to the arbitration institution (if any), and 30% would like to be able to submit publicly available reviews.

Corporate respondents indicated a strong preference for a “pro-active case management style rather than a deferential or reactive style.” Respondents also noted that “soft skills,” including the ability to work with other members of the panel, can positively affect the efficiency and cost of the arbitration.

Confidentiality: The survey revealed that while confidentiality is important to users of arbitration (62% of respondents rated it as “very important”), it is not the essential reason for recourse to arbitration. In fact, several respondents noted that because commercial arbitration matters often “do not involve sensitive commercial information … in many cases confidentiality is not an extremely serious concern.” In addition, while 35% of respondents said that they would not continue to use arbitration if it did not offer the potential for confidentiality, 38% said that this would not deter them (while 26% did not offer an opinion). Some interviewees expressed a desire for greater access to awards to better understand the arbitral process and to review previous decisions of potential arbitrators. These interviewees acknowledged that this “may be inconsistent with their desire for confidentiality of their own awards.”

Finally, in a surprising finding, 50% of those interviewed erroneously believe that arbitration is confidential even where there is no specific clause to that effect in the arbitration agreement or governing arbitration rules, while 12% were uncertain whether the arbitration would be confidential under such circumstances.

The 67 interviews of survey participants will form the basis of a forthcoming more detailed report. For now, the above data suggest some interesting trends. These include demands by parties for greater involvement in arbitrator appointments, with an emphasis on practical (rather than legal) considerations, including the ability of arbitrators to work together to increase efficiencies and exert sufficient control over the process to avoid cost and delay. The survey also reveals competing concerns – such as the desire to assess arbitrator performance – that may lead to increased transparency, particularly among those respondents that acknowledge the already “porous” nature of arbitration and who are willing to utilize arbitration as a dispute resolution mechanism even in the absence of confidentiality.

By Andrea J. Menaker and Nicole Thornton

* The 2010 International Arbitration Survey: Choices in International Arbitration is one of the largest empirical studies ever undertaken of corporate attitudes and practices regarding international arbitration. The survey is the third in a series of high profile surveys conducted by the School of International Arbitration at Queen Mary, University of London. White & Case is the first law firm to sponsor the survey.

This development is one of several recent manifestations of the Commission’s opposition to the application of BITs between Member States of the European Union.

The question of the applicability of an intra-EU BIT was raised in the Eastern Sugar v. Czech Republic arbitration (Partial Award, 27 March 2007). In this case, two letters from the Commission were considered by the Tribunal. These included statements such as: “where the EC Treaty or secondary legislation are in conflict with some of these BITs’ provisions […] Community law will automatically prevail over the non-conforming BIT provisions”; “intra-EU BITs should be terminated in so far as the matters under the agreements fall under Community competence”; or “that Member States [should] exchange notes to the effect that such BITs are no longer applicable, and also formally rescind such agreements.” The Commission therefore considered that intra-EU BITs should be rescinded because they were superseded by EU law (notwithstanding the fact that EU law does not confer access to arbitration to investors).

In September 2008, the Commission intervened directly in two ICSID arbitration proceedings against Hungary (AES v. Hungary and Electrabel v. Hungary) by filing amici curiae briefs. It has been reported that the Commission took Hungary’s side by stating that the power purchase agreements between the investors and a Hungarian State-owned entity violated EC law as they could restrict competition, thereby not taking account of the protection granted to the investors by the investment treaty at stake. The Commission’s view, based on the supremacy of EC law over investment treaties, seems to leave little room for the application of investment treaties between Member States.

The Commission’s views were also expressed in more informal settings: during a conference on investment law and the European Union in Paris in April 2009, the Commission reiterated its views on the supremacy of EC law over intra-EU BITs. International law specialists held a different position, according to which questions relating to conflicts between treaties must be resolved by the application of the Vienna Convention on the Law of Treaties, including Article 59 which sets out conditions for a treaty to be terminated by the conclusion of a later treaty.

The two letters by the Commission analyzed by the tribunal in the Eastern Sugar case provide us with the reasons behind the Commission’s position.

In the first letter, addressed to the Czech Republic, the Commission advances the argument that “the application of intra-EU BITs could lead to a more favourable treatment of investors and investments between the parties covered by the BITs and consequently discriminate against other Member States, a situation which would not be in accordance with the relevant Treaty provisions.” What does this difference of treatment amount to? One element of BITs comes to mind: the right of investors to have recourse to international arbitration. Indeed, only EU investors whose State of origin has entered into a BIT with the host State would have access to international arbitration.

In the second letter, addressed to the Economic and Financial Committee, the Commission states that investors starting arbitration proceedings based on intra-EU BITs “could lead to arbitration taking place without relevant questions of EC law being submitted to the ECJ, with unequal treatment of investors among Member States as a possible outcome.”

Therefore, the Commission seems to consider that the application of intra-EU BITs, including access to arbitration, may be a source of inequality between EU citizens as well as a hindrance to the harmonized development of EC law.

During the April 2009 Paris conference, certain speakers criticized the Commission’s position and stressed the importance of access to arbitration in the build-up of a European area of freedom, security and justice. However, the recently reported intervention by the Commission in the Eureko v. Slovakia case confirms the Commission’s apparent opposition to arbitration under intra-EU BITs.

A measure of hope is to be found in the attitude of Member States and tribunals.

As highlighted by the Economic and Financial Committee in a 2008 report: a “clear majority of Member States prefer to maintain the existing [intra-EU BITs], in particular with a view to the provisions on […] investor-to-state dispute settlement.”

In addition, in the Eastern Sugar case, the arbitral tribunal stated that the BIT in question was not superseded by EC law because, inter alia, this was not expressly set out in the treaties marking the Czech Republic’s accession to the EU nor in the BIT; and the conditions set out in Article 59 of the Vienna Convention were not satisfied. Also, in the newly published AES v. Hungary award (Award, 23 September 2010), the tribunal stated that EC law, “once introduced in the national legal orders … is part of these legal orders” and that “a state may not invoke its domestic law as an excuse for alleged breaches of its international obligations.”

By Christophe von Krause and Florian Quintard

Although I would have liked to have spoken on a substantive trend in international arbitration, I decided I could not ignore a much bigger, procedural trend that has been the topic of conferences in both the United States and Latin America – that is the growing discontent of corporate users with international arbitration.

The criticisms regarding international arbitration center around cost and efficiency. A recent study of the Corporate Counsel International Arbitration Group (CCIAG) found that 100% of the corporate counsel participants believe that international arbitration “takes too long” (with 56% of those surveyed strongly agreeing) and “costs too much” (with 69% strongly agreeing).

Three main questions arise from these criticisms. The first is whether these criticisms are justified? The second is, if so, then what (or who) is to blame? The third and final question is what can the arbitration community do about these critiques? The answers to the first two questions depend on where one sits. But I am increasingly impatient with our responses to the third, as I think there are relatively simple solutions if we are willing to be creative and proactive.

First, much of the criticism regarding cost and efficiency in international arbitration is targeted at investor-state arbitration. These by their nature involve a more transparent and political process than international commercial arbitration, and the problems and solutions are, in part, different in each.

Second, there is plenty of blame to go around. Many blame complaints on outside counsel – especially those from the United States – for requesting too many documents, making too many motions, and generally filing too many pages. Others blame in-house counsel for not using their authority to rein in practices they criticize as inefficient or wasteful. And some blame the arbitral institutions themselves for not constructing a system that reins in everyone.

My most negative experiences recently, however, have been with arbitrators – and especially chairs – who are oftentimes overscheduled, unprepared, disorganized, reactive, timid and slow. Without suggesting I am blameless as a chair, there is no way to defend arbitrators who cannot schedule hearings for months or produce awards for years. But don’t take it from me. The CCIAG survey lists the following factors as contributing to the rising inefficiency of international arbitration: (i) 100% of those surveyed identified arbitrator availability and excessive document disclosure; (ii) 95% identified the “failure of tribunals to narrow issues, evidence and argument leading parties/counsel to feel need to cover all bases” and (iii) 90% identified excessive concern for due process over efficiency, leading to a free-for-all on timing.

So, then, what are the solutions? Fortunately several have already been identified and implemented. The CEDR and ICC have published rules and techniques for controlling time and costs. The ICC has revised its Arbitrator Statement of Independence to include information on availability, in the form of data about other cases in which an arbitrator candidate is serving. Despite the many complaints regarding the “Americanization” of document discovery, it is the AAA that has issued international guidelines calling for arbitrators to manage document disclosure strictly, using cost assessment as a control mechanism.

We can go farther. Institutions should require more than the ICC’s disclosure on availability. Why not require a simple calendar with black-out dates for scheduled hearings and deliberations as arbitrator, teaching commitments, hearings and major filings as counsel? No disclosure of details, of course, but just calendar dates – based on then-available information – on when an arbitrator is and is not available for hearings.
As for efficiency in issuing awards, why not require arbitrator candidates to disclose not just how many prior cases they have handled as arbitrator, but also, for each case, how much time passed between the close of the record and the issuance of the award? Provided there is a field for an explanation, i.e., delay caused by suspension, or illness, this is simply objective ‘data’ helpful to the parties.

How about building into the procedural calendar a one or two day private (and paid) meeting of the tribunal to allow (and in some cases, force), the arbitrators to study the record together, prepare focused hearing directions, and (ideally) issue (neutral) questions to parties to prioritize use of witnesses and hearing time. (This is the “Reed Schedule” I mentioned in prior talks and blogs.)

Finally, if these proposals seem radical, consider that the CCIAG has proposed a far more radical solution: linking arbitrator remuneration to achieving milestones in the procedural calendar.

Whether or not concerns about international arbitral efficiency are exaggerated, the international arbitration community must face this discontent and, more importantly, take steps to fix these problems if it is to maintain legitimacy with its users.

The last time I had the pleasure of blogging was back in December, when I introduced several significant enhancements to Kluwer Arbitration, including a new search engine. Seven months on, it gives me really great pleasure to announce that earlier this week (Monday 12th July) we introduced a brand NEW ‘Practice Tools’ section on the website. For those that haven’t already had a chance to use them, I don’t want to spoil the surprise entirely – do check them out for yourself at www.kluwerarbitration.com – the intention here, to merely ‘whet your appetite’.

The ‘Practice Tools’ (located in the top left-hand corner of the homepage) are something completely new (and exciting) for Kluwer Arbitration, and I’m convinced you’ll find them really useful aides to assist you with your research. So, what are they? They can be divided into two distinct elements; (1) a set of three easy-to-use Question-and-Answer Smart Charts, edited by Audley Sheppard, Clifford Chance LLP (and a dedicated team of country contributors), and (2) a search-for-an-arbitrator tool, the IAI Arbitrator Tool, developed together with the International Arbitration Institute (IAI).

The aim of the Smart Charts is to allow users to quickly examine and compare specific content by particular jurisdiction or arbitral institution. By selecting questions (as general or specific as you require) and then relevant jurisdictions, you are very quickly able to create a comparative summary on a particular topic/question. The results are presented in a table, in both ‘chart’ and ‘matrix’ format, and can be printed and exported. The subjects covered so far are Drafting Arbitration Agreements, State Immunity, and Arbitral Institutions. We are delighted to work with Clifford Chance LLP on this project.

“To provide the best advice to clients about where to arbitrate or where to enforce an award, arbitration practitioners need easily accessible information about multiple jurisdictions and institutions, such as provided by these Smart Charts,” said Audley Sheppard, Clifford Chance LLP.

The IAI Arbitrator Tool allows users to search for and compare profiles of arbitration specialists from the IAI directory. Searches can be run based on name or a number of criteria: country of residence, nationality, languages spoken or experience (both as arbitrator or counsel). In addition, where available, links will be included to the text of publications and awards on Kluwer Arbitration.

“IAI profiles now include links to publications authored and awards rendered by IAI members. That will prove to be extremely useful to all those who seek to identify the best candidate for an arbitrator appointment,” said IAI President Emmanuel Gaillard. “This is a significant step in achieving greater transparency in international arbitration, which has been among the goals that our organization has been pursuing all along.”

I trust you will enjoy using the ‘Practice Tools’. Understanding our customers’ needs and requirements, has enabled us to launch these tools (and previous enhancements). Please do keep communicating with us by letting us have your feedback on the IAI Arbitrator Tool and Smart Charts. Please direct all feedback to me at eleanor.taylor@kluwerlaw.com.

I look forward to hearing from you.

Eleanor Taylor, Kluwer Law International

Stolt-Nielsen involved an arbitration brought in New York by AnimalFeeds against Stolt-Nielsen, a commercial shipping company, after Stolt-Nielsen had been subject to a U.S. Department of Justice criminal investigation involving charges of illegal price-fixing. The arbitration was brought pursuant to a broad arbitration clause (“[a]ny dispute arising from the making, performance or termination . . . .”) in a standardized shipping contract that did not mention class arbitration. AnimalFeeds demanded a class arbitration on behalf of itself and similarly situated shipping customers. The parties entered a supplemental agreement which, consistent with the AAA Supplementary Rules on Class Arbitration, submitted to the arbitrators the question whether the clause authorized class arbitration. During the course of the arbitration, the parties stipulated that the arbitration clause was “silent” on the question of class arbitration

The arbitral tribunal issued a partial award stating that the arbitration clause permitted class arbitrations, citing a consensus of arbitral awards interpreting “a wide variety of clauses in a wide variety of settings.” Stolt-Nielsen challenged the award in the federal courts. The Supreme Court found that the arbitrators had exceeded their authority by basing their decision on policy grounds rather than on the applicable law. The Supreme Court found that the FAA barred class arbitrations where the arbitration clause was “silent.” Justice Alito’s majority opinion based this holding on the premise that arbitration is a creature of consent, and that class arbitration cannot be forced on parties who have not consented to it.

As Justice Ginsburg’s dissenting opinion points out, “the Court does not insist on express consent to class arbitration,” and Justice Alito’s majority opinion specifically noted that the Court had “no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” This leaves little guidance to tribunals and courts interpreting arbitration clauses as to what contractual or factual basis can support a finding that the parties agreed to authorize class arbitration. While the Stolt-Nielsen opinion implies a restrictive interpretation of broad arbitration clauses on the issue of class arbitration, given the uncertainty noted by the dissent, and the singular fact that in Stolt-Nielsen the parties had stipulated that the arbitration clause was silent on the issue of class arbitration, the impact of Stolt-Nielsen on clause drafting in different contexts is uncertain.

The best option for drafters of arbitration clauses who want to provide for class arbitration is to make consent express in the clause, for example by including language such as “the parties agree that class action arbitration shall be available under this clause.” Drafters intent on including class arbitration should also consult the AAA’s Supplementary Rules for Class Arbitration, which provide a mechanism for the administration of class arbitration, and may wish to incorporate those Rules into their arbitration clause. It is to be noted, however, the AAA’s Supplementary Rules for Class Arbitration are likely subject to amendment in the wake of the Stolt-Nielsen decision. Drafters who want to exclude class arbitration should do so expressly by stating in their clause that “there shall be no class action arbitration.”

White & Case represented Stolt-Nielsen in the dispute. The writers of this post were not part of the team representing Stolt-Nielsen and this post is based exclusively on information available to the public.

By Paul Friedland and Michael Ottolenghi

The major arbitral institutions’ rules, and the key non-institutional arbitral rules, do not require the body which decides a challenge to provide reasons for its decision to the parties. Most of the major arbitral rules are silent on this topic, and as such no obligation exists. While no rules require a decision-maker to provide the parties with reasons for the success or failure of a challenge, there is a trend towards providing parties with a reasoned decision to the challenge of an arbitrator [1]. In addition, some institutions from time to time publish summaries of the reasoning in respect of selected decisions on arbitrator challenges (for example the ICC does this).

Reasons underlying decisions on arbitrator challenges should be routinely provided to the parties to enhance the transparency of the arbitral process. Most institutions do not stipulate whether or not they will provide reasons, but the ICC has set out that it will not do so. (This is largely to avoid any further embarrassment to the challenged arbitrator.) Parties pay significant fees to the bodies that make the decisions in relation to arbitrator challenges, and it is not appropriate for them to be denied information about the reasons for a decision on the crucial subject of the fitness for office of an arbitrator. The reasoning is of fundamental interest to the parties, in particular to the challenging party, who may have serious concerns about the suitability of an arbitrator to continue to act in the proceedings. Providing parties with decisions in response to arbitrator challenges would increase the parties’ confidence in the decision-making processes of the bodies ruling on arbitrator challenges. A reasoned decision is likely to hold greater legitimacy in the eyes of the parties, and would make the decision-making bodies more accountable for their reasoning. It is also more likely to be considered seriously if the challenge decision is ever appealed to the state court.

In addition, all arbitral institutions should regularly publish summaries of the reasoning underlying their decisions on arbitrator challenges. Evidently, such reasons would need to be published in a way that safeguards the confidentiality of the arbitration (i.e. by providing generic descriptions of the issues in question). Publishing the reasons underlying a decision regarding a challenge would augment the presently limited jurisprudence available, providing more information to bodies ruling on challenges to arbitrators, and it is likely this would increase the predictability and consistency of challenge decisions. This body of reasoning would also be of use to parties and counsel, to guide them in making and responding to challenges, hopefully reducing the number of spurious challenges. Such jurisprudence would also be of interest to arbitrators, in guiding their disclosure of information to parties. As arbitrators come from a variety of legal backgrounds where conflict of interest rules differ greatly, a body of jurisprudence on the standards of independence and impartiality expected in international arbitration would be of assistance to them.

[1] The LCIA Court, which decides arbitrator challenges, does provide reasons to the parties along with the decision (P. Turner and R. Mohtashami, A Guide to the LCIA Arbitration Rules, 2009, at para. 4.124), as does the Board of the Centre of the VIAC, which decides arbitrator challenges, also provides reasons to the parties for its decisions (F. Schwarz and C. Konrad, The Vienna Rules: A Commentary on International Arbitration in Austria, 2009, at 16-045). Where cases are governed by PCA rules, the decision-making body will provide reasons for a challenge decision where they are requested to do so by the parties. Practice in respect of challenges under the ICSID and DIS rules demonstrates a trend towards providing the parties with reasoned decisions, although there is no obligation to do so.

By Daisy Joye and Nathalie Allen

In Abu Dhabi, some years ago, a decision was made by the government here to prepare, under license from FIDIC, two bespoked forms of the contract – build only, and design and build. Those forms were issued in 2007 accompanied by the requirement that they be used as the form of contract by all government departments in the Emirate of Abu Dhabi.

The centrepiece of the ADR process in that new form of contract is the use of a Dispute Adjudication Board (DAB).

It is not the purpose of this note to review the quite lengthy and detailed DAB and related dispute resolution procedures set out in the contract.

What is perhaps more relevant for the theme of this 4-part commentary, focusing on ADR in the Abu Dhabi major projects market, is the fact that, via this mandated form of FIDIC, the dispute resolution process proceeds first to the DAB(cl20.4) ie the use of a DAB is now the default rather than, in earlier versions, an option.

The Abu Dhabi government’s version of the FIDIC contract does maintain cl20.5 which expressly encourages amicable settlement at any time.

Finally, if those two processes do not resolve the matter, the dispute is referred to “final and binding” arbitration. The default body and rules are those of the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC).

In theory, of course, it is possible for some of these provisions to be amended by a government authority for a specific project. But what is more relevant for this note, is that after a detailed review and consultation process, the decision was made to mandate a DAB.

I see the introduction of a DAB as a very valuable and important step to facilitate major project disputes in Abu Dhabi.

In theory, a project-specific DAB, properly appointed and constantly in touch with a project’s progress and the development of a dispute, seems like not just a good solution, but an almost “ must have” for the demands created by projects in Abu Dhabi in 2010 and onwards.

But as good as they appear to be in theory, DABs seem to have a chequered history and more of a “B” rating, than an A+ in construction disputes.

Perhaps their fate is not helped by the entry alongside “dispute board” in Wikipedia which says “This article is an orphan, as few or no other articles link to it”.

But that is being a little unfair. In many jurisdictions DABs compete with an array of offerrings from commercial ADR institutions, advancing soltionsthat are quite varied and not limited to just arbitration (see for example AAA’s and the ICC’s extensive menus of ADR solutions).

So what are, or should be, the drivers in the Abu Dhabi market for making this DAB process work?

First, speed to an initial decision. Around the world, and particularly with in-house counsel, the constant and resounding criticism of arbitration is that it takes too long, and is too appealable (ie even longer). In almost all surveys of arbitration users, time and delay ranks far more significantly than cost. The case for arbitration, for major project and construction disputes, is not helped these days as being almost always a very expensive process. But speed of decision consitently comes first in surveys of in-house counsel and the users of the ADR systems, as the key factor in choosing an ADR solution or in measuring its success or valueto them.

Consistently with the views of Tom Stipanowich (Arbitration: the New Litigation(Univ. Illinois Law Review 2010) a speedy process must, by its very nature, require the setting of tight boundaries on evidence and submissions and expert reports. And the surveys tend to indicate that a controlled, and ostensibly fair but speedy system, is what most large orgainaistions are looking for thesedays.

Witness the outstanding success of the adjudication system in England. In England, and in Australia where it has been almost uniformly adopted in all states, it has had the effect of greatly reducing the number of disputes that go to arbitration. Adjudication has, however, had some adverse side effets. It has produced a large number of court cases at the stage the court is asked to adopt the adjudicator’s report. In the first 4 years of its introduction in Australia, there were over 150 cases ranging from issues of statutory interpreation through to whether the adjudicator had exceeded his jusrisdiction. The outcome being that a relatively short statute needs to be read an interperted in the light of quite a number of important judicial pronouncements. Another side-effect is that lawyers running these matters regularly have to prepare in 14 or 28 days claims and evidence that otherwise would take many months in an arbtiration or even in court.

So will the use of a DAB in Abu Dhabi produce a better result than say arbitration? Or is there a better alternative in this region and at this time in the cycle of major projects?

On any view the introduction of a mandated DAB is a very good first step. The essence of an effective DAB is a decision making process, in real time, by people who can see and view the project and fully understand the issues.

It is the complete converse of a project-specific DAB, that years after construction is completed 3 learned arbitrators have a sitting lasting mouths, to hear and consider expert debate on what did happen and more theoretically, what should have happened or been done, as they look at “as-built” programmes and the true audited accounts of the builder (did he really suffer a loss?).

If you therefore set the sceneas being Abu Dhabi in 2010 and onwards, looking to attract and secure investment; seeking to give transparency to the dispute resolution process and both physically and commercially just purely manage the massive volume of work (and hence disputes) there can be no argument against doing everything that is sensibly possible to make the DAB system work.

One real concern I have is that this initiative is not backed by my professional collegues, or their clients, in Abu Dhabi. If that were to happen, I do not believe that the “system” absent a DAB process, will cope at all.

Finally, let us not forget mediation. In the final part of this series I would like to advance the case for both ad-hoc and institutional mediation to be used as a first choice even before DAB’s in the major project market in Abu Dhabi.

It is not by chance that ADCCAC’s title includes the term “ concilitation” and that the centre promotes a disputes clause that requires the parties first to attempt concilitation, before embarking on an arbitration. In the next part I will review in some detail ADCCAC’s approach to conciliation and how it might be a valuable process for this market, at this time.

The accusation that international investment arbitration is undertheorized might be taken to imply that scholarship on international investment arbitration is overly concerned with doctrinal issues. Correspondingly, insufficient attention is paid to policy, methods of judging, and even conceptions of international law, just to raise a few important theoretical questions. The charge could also be understood to imply that scholarship in this field lacks original ideas. In short, “undertheorized” is parlor speak for vocational, or, quelle horreur, derivative.

After the pejorative sting subsides, there are some important issues that still need addressing. What research agendas do international investment arbitration scholars pursue? What constituencies stand to benefit from each agenda? How well are these constituencies served by the scholarship?

These questions cannot be fully answered here. The authors nonetheless wish to venture abbreviated thoughts. We hope to encourage conversations among readers of this website.

Writing for practitioners serves useful purposes. It helps counsel zealously promote their clients’ legal interests. This is one of the key responsibilities of the legal profession. Practitioner-focused writing also assists arbitrators in resolving disputes. See ICJ Statute, Art. 38(1)(d). Dispute resolution is one important function of law that promotes world order if done correctly and wisely. There is also exemplary practitioner focused scholarship. In 2009, THE OXFORD HANDBOOK OF INTERNATIONAL INVESTMENT LAW won an honorable mention in a specialized field of international law from the American Society of International Law. It is a splendid book for what it is. From this perspective, writings on international investment arbitration can serve practitioners well.

But there may also be too much doctrinal writing about substantive and procedural rules and standards that confront counsel and feature in arbitral awards. By rough estimates, there are on Westlaw about 50 articles discussing fair and equitable treatment, and 150 articles on creeping expropriation. There are more books and conference proceedings on these subjects that are not on Westlaw. Mea culpa, one of the authors has also written about these topics. Could it be that every one of these works makes an original contribution?

Even useful practitioner-focused writing may elide key structural and theoretical issues. What are the competing policies at stake? How well does international investment arbitration harmonize the competing policies? What recommendations can scholars make to better promote the competing policies? Do the methods of reasoning and decision in international arbitrations shed light on what international law actually is and how it functions? Can we understand better the incentives, costs and benefits that motivate actors so we can align them to optimal outcomes? Ontological, epistemological, normative, empirical, methodological and policy questions are important to the Academy, policy-makers, and arbitrators. Collectively, international investment arbitration scholarship should also address these questions. If it does not, there may be truth to the charge that this body of scholarship is undertheorized.

Defenders of the existing scholarship have at least two answers. The authors agree with one. We will present both and let the reader decide for herself.

There are writings that address important structural questions. They do this task well. Steven Ratner recently took a good and careful look in the AMERICAN JOURNAL OF INTERNATIONAL LAW at whether we need to harmonize international investment arbitration with other international regimes. Ruti Teitel and Robert Howse wrote an important article examining the effect of arbitral tribunalization on international economic law against the backdrop of globalization and the human rights revolution.

Other observers may contend that practitioner-focused writing on international arbitration is not undertheorized because theoretical writing is impractical anyway. Over a decade ago, Judge Harry Edwards made this criticism of legal scholarship generally. Recently, Judge Roger Miner sharpened the barb. He groused in the NEW YORK LAW SCHOOL LAW REVIEW:

Many articles in many law reviews seem to be written by academics for academics. . . . [T]he writing is unintelligible and what is not unintelligible is boring to the point of stupefaction. I was going to say that if I saw the word “normative” in one more law review article, I would scream.

Law is a cognate academic discipline, along with history, philosophy, and literature. The Academy of Arts and Sciences recognizes law as a social science. Seven law professors are members. Some writings on international arbitration should be written in the pursuit of abstract knowledge, as one enterprise of the Academy. The claim that scholarship should only be written to help practitioners, arbitrators and judges do their job better is as curious as suggesting that an art critic should only help draughtsmen draw better.

As for the law scholar’s vernacular that irritates some judges and practitioners, that which is unintelligible to a lay person may signal important meaning to a member of an expert community. We assume no judge would think their awards and decisions should strain to avoid terms of art such as “consideration,” and “tort,” even though the average reader of the New York Times might not understand those words in a legal context. Why then should law scholars not use terms of their expert culture when their audience is the Academy? In any event, it is often the case that a jurist in the field of international arbitration, such as Brigitte Stern and David Caron, is both a scholar and arbitrator. It would be rather strange to think they might not understand scholarly writing.

One purpose of this post is to celebrate doctrinal writing about international investment arbitration. Another purpose is to encourage more theoretical projects in this field. The two endeavors should occur in concert, not conflict. A body of scholarship, and even a work of scholarship, can achieve both purposes. Many already do. We are reminded of Kurt Lewin’s insight: “There is nothing so practical as good theory.”

Tai-Heng Cheng
Visiting associate professor, Vanderbilt Law School
&
Christopher Harrison
Associate editor, NEW YORK LAW SCHOOL LAW REVIEW

The views of the authors do not necessarily reflect the views of their institutions.