The following excerpt is from David Hechler, published by Corporate Counsel:
The global recession has led to a spike in cross-border commercial disputes, which in turn has led to a rise in international arbitration.
But even as more companies turn to arbitration, many in-house lawyers complain that the process, at its worst, can be as costly and time-consuming as litigation. Now an advocacy organization called the Corporate Counsel International Arbitration Group is highlighting the problems in order to encourage reform.
Though CCIAG was launched three years ago, it’s just beginning to make its influence felt. The Paris-based group is composed of 50 large multinationals, including General Electric Company, Exxon Mobil Corp. and Siemens AG.
Roland Schroeder, a member of CCIAG’s steering committee, said that no one he knows who uses arbitration regularly is happy with it. A senior counsel in General Electric’s Connecticut headquarters, Schroeder coordinates GE’s international arbitration policy. And the dissatisfaction he hears from other in-house lawyers goes well beyond the common complaint that arbitrators resolve disputes by splitting the baby.
Schroeder said that in his own experience, one of every ten arbitrations may be excellent, and another one or two pretty good, but the rest are generally unsatisfactory. Some disappointing results may technically be “victories,” after which an arbitrator will demand: “How can you be unhappy? You won!” To which Schroeder counters: “Yeah, but it took six years. And it should have been two. Or six months.”
The problem with an interminable arbitration isn’t just that it costs more, Schroeder explained. A dispute may revolve around language also used in other contracts. And until the dispute is resolved, the business doesn’t know whether it needs to change the language.
Nevertheless, most major institutions that administer international arbitrations report that their caseloads in 2008 (the most recent year for which data is available) increased over 2007. The jump at the London Court of International Arbitration was 55 percent; at the China International Economic and Trade Arbitration Commission, 28 percent; and at the American Arbitration Association’s International Centre for Dispute Resolution, 13 percent.
Arbitration’s attraction has a lot to do with companies’ aversion to litigation. “No one has liked [litigation] for a long time,” says MaryBeth Wilkinson, a partner in the Chicago office of Lovells, “but it’s coming to resemble paranoia.” This attitude is most commonly directed at the United States and other common law countries where discovery can be especially burdensome. According to Wilkinson, more businesses now seek to “U.S.-proof” their transactions by insisting on international arbitration clauses. She added that electronic discovery “is the key factor because of its expense.”
Plus, when a dispute is cross-border, few companies want to face trial in an adversary’s home court. Arbitration is seen as cheaper, faster, and fairer — because the parties can choose the arbitrators. It’s also confidential. And if it’s held in one of the 144 countries that signed the New York Convention of 1958, the award is enforceable in all signatory countries. That’s a big advantage over court judgments, which may be difficult to enforce. “Arbitration is like a tough game of golf rather than the war of litigation,” Wilkinson said.
Read the entire article here.