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Here’s an exercise that TFOI Ben Davis uses and wants to share.

I just came across a tool that might be of interest on building arbitration clauses.  The only thing that I would add would be a reminder about Frederic Eisemann’s article on Pathological Arbitration Clauses (La Clause d’arbitrage pathologique, Commercial Arbitration Essays in Memoriam Eugenio Minoli, U.T.E.T. 1974).  In that article, the renowned former Secretary General of the ICC International Court of Arbitration emphasized four things that an arbitration clause should do in at least an international commercial arbitration:

“(1) The first, which is common to all agreements, is to produce mandatory consequences for the parties,

(2) The second, is to exclude the intervention of state courts in the settlement of the disputes, at least before the issuance of the award,

(3) The third, is to give powers to the arbitrators to resolve the disputes likely to arise between the parties,

(4) The fourth, is to permit the putting in place of a procedure leading under the best conditions of efficiency and rapidity to the rendering of an award that is susceptible of judicial enforcement.”

I and others have had the occasion to test these propositions with respect to various clauses seen, and – at least for me – these four propositions stand the test of time.

As has been noted by Professor Stacie Strong, people should be very careful about drafting arbitration clauses.  They can lead to many complications in just getting the arbitration started.  For example, the clausebuilder gives an option of setting time-limits in the arbitration clause.  Dealing with party imposed time-limits in the pre-dispute arbitration clause can cause immense headaches when the dispute ultimately arises and is one of the reasons that the ICC Rules includes a provision permitting the Court to extend any of those time-limits (sometimes called the fast-track rule) since 1998.  In the current version it states:

“Article 39: Modified Time Limits

1) The parties may agree to shorten the various time limits set out in the Rules. Any such agreement entered into subsequent to the constitution of an arbitral tribunal shall become effective only upon the approval of the arbitral tribunal.

2) The Court, on its own initiative, may extend any time limit which has been modified pursuant to Article 39(1) if it decides that it is necessary to do so in order that the arbitral tribunal and the Court may fulfil their responsibilities in accordance with the Rules.”

This preserves the flexibility for the Court on time-limits especially if the parties get time-limits wrong in the pre-dispute arbitration clause, after the dispute has arisen, and/or in the arbitration.

One of the most nefarious arbitration clauses (in its simplicity and complexity) is one I use in my arbitration class as part of the attached mock arbitration, to wit:

“Article 12.  All disputes arising in connection with the present contract shall be settled by one or more arbitrators.”

This mock arbitration is based on what I prepared for mock arbitration programs back in the 90’s at the ICC Court.  Arbitration professors are free to use it.  There is no standard or right answer.

When I teach this mock arbitration case,

  1. students use the current version of the ICC rules to analyze what the Request for Arbitration should contain,
  2. then what the Answer and Counterclaim if any should be,
  3. students in the role of the ICC Court take the steps with respect to setting the arbitration in motion,
  4. students constitute the Arbitral Tribunal made up of students dealing with issues like independence and impartiality,
  5. the remaining class other than the arbitrators and the ICC Court are divided into plaintiff and respondent legal teams and the students act as lawyers and with the arbitrators organize the procedure,
  6. student arbitrators run a hearing with students as advocates and with or without some students acting as expert witnesses,
  7. the student arbitrators deliberate as the arbitral tribunal out loud as to what decisions they will take on part or all of the claims,
  8. students as the ICC Court review the draft award (oral award that they heard from the student arbitrators),
  9. students as advocates decide whether to seek recourse against the award or how to enforce the award.

The mock case can be done in about three hours at a minimum (I think over two classes is the best to have the hearing, deliberation, award stuff in the second class) and much longer if one wants to dwell on specific points.

I usually use it the first week of my international and domestic arbitration class to throw students into international arbitration right away 1) to get them use to the more complex disputes (hint: what language is this arbitration to be in?) and 2) to give them some basis for then understanding the materials we study over the course of the semester.

Professors can use a current version of any institutional rules or UNCITRAL rules if they prefer that to the ICC. I use the ICC because it is the most supervised form of arbitration.

It is just fun! (I know that makes me weird no doubt in some persons heads that I find this stuff fun!).

Hope this helps.

Best,

Ben

Benjamin G. Davis

Chair, ABA Section of Dispute Resolution

Member, ABA ROLI Africa Council

Former Member, ABA Standing Committee on Law and National Security

Former Board Member, Society of American Law Teachers

Professor of Law

University of Toledo College of Law

 

John Lande is the Isidor Loeb Professor Emeritus and former director of the LLM Program in Dispute Resolution, at the University of Missouri, School of Law. He received his J.D. from Hastings College of Law and Ph.D in sociology from the University of Wisconsin-Madison. He is also an avid writer and contributor to Indisputably.org