International Arbitrations Evolve With Growth
As cross-border economic activity exploded over the last few decades, so did the number of international business disputes, which gave rise to the demand for a way to effectively resolve those conflicts without turning to foreign courts. The overwhelming choice for private parties has been international arbitration.
JAMS neutral David Huebner, a former ambassador to New Zealand and Samoa who was appointed by President Barack Obama as one of four American arbitrators at the International Centre for the Settlement of Investment Disputes, said he doesn’t expect the growth of international arbitration to slow any time soon. That is in part because of the vital role it plays in promoting cross-border economic activity and the advantages it has over public, lengthy and costly court proceedings.
“If you look at the numbers, all the major arbitration institutions’ caseloads have been steadily increasing over the last 10 years, and that trend will likely continue,” said Huebner who has been involved as an arbitrator or advocate in more than 100 international disputes in two dozen jurisdictions around the world. “The original rationale for private cross-border dispute resolution remains, and no viable alternative to arbitration has emerged.”
The arbitration of international disputes dates back centuries. But in the modern era, it gained considerable momentum in 1958 when the United Nations adopted the New York Arbitration Convention, which Huebner calls “one of the most successful treaties of all time because of the great impact it has had on reinforcing global rule of law, and on stabilizing and encouraging cross-border economic activity.”
Arbitration institutions, including JAMS and the International Chamber of Commerce (ICC), continue to refine their arbitration rules to make them fairer, more efficient and more accessible. Lately, providers have been focused on exploring ways to limit discovery, streamline hearings and issue awards promptly. Another pressing issue is ensuring that parties have enough information about the expertise of arbitrators.
“Some arbitrators may not be as skilled as others, either generally or in particular specialized subject matters, or they may have a history of error or inefficiency,” said Huebner. “It’s the kind of information parties would want to have before they select an arbitrator.”
Besides providing more information about the qualification of arbitrators, arbitration institutions are looking for ways to make sure clients trust the fairness and neutrality of the arbitration process, according to JAMS neutral Zela G. Claiborne. Claiborne has been a full-time neutral since 1998, and has heard many international disputes, the most recent involving parties in Israel, Turkey, the United Kingdom, Spain, China and India.
“One emerging trend to fight the appearance of bias is ‘screened selection,’” she explained. “That means the panel is selected without knowing which side picked us.” The International Institute for Conflict Prevention and Resolution, or CPR, began offering that option several years ago.
Claiborne was recently selected for a three-person international panel as the third arbitrator in a process where each party selects one arbitrator, then the two approved arbitrators select the third to chair the panel.
“During that process, we all made disclosures of potential conflicts of interest,” she said.
Claiborne’s disclosures have, on occasion, meant that she didn’t serve on a panel, she said. Ultimately, the disclosures are meant to benefit the parties and to give them confidence in the fairness of the outcome.
But what draws parties to arbitration is often the efficiency and confidentiality it provides.
“What the parties want is a fair and effective process,” said Claiborne. “I think confidentiality is a big value to companies in arbitration. They don’t want their competitors to know about the dispute and they want to protect their business and trade secrets.”
Most disputes that end up in international arbitration are commercial conflicts between private parties. They typically cover such matters as joint ventures, distribution agreements and sales contracts, as well as issues specific to deals and projects in industry sectors such as construction, shipping, life sciences, and energy.
It is in such cross-border commercial disputes where arbitration services are most widely utilized, Huebner said. He added that responsiveness to user preferences gives an arbitration institution a competitive advantage.
“The best arbitration institutions are focused on the needs of their clients, the entities and persons who utilize their services,” he said. “Such institutions are continuously looking for ways to offer more flexible and comprehensive services to suit clients’ needs.”
An example of this is the increased use of emergency or expedited arbitration proceedings, similar to the court’s temporary injunction process, Huebner said, noting that his last case was a multi-billion dispute that settled after one party won the emergency proceeding.
Also, arbitrations are increasingly including in their rules provisions for joinder or to consolidate disputes that arise from the same relationship or same circumstances, but not the same contract, Huebner said.
JAMS also has a rule reminiscent of judicial sanctions for parties that behave badly.
“According to JAMS rules, an arbitrator can make a decision about how JAMS fees and arbitrator compensation are divided between parties,” Claiborne said. “I had a party that dragged its feet and wasted a lot of time. That party was assessed 80 percent of the fees.”
While there are trends and issues, Claiborne says that arbitrators remain focused on careful review of evidence and the applicable law.
“We are especially conscious of the fact that once we make rulings, there’s no appeal, and there are very few grounds for overturning an arbitration award,” she said. “So our first focus is on being prepared, studying the materials submitted by each party and applying the law to achieve a just result.”
Zela ”Zee” G. Claiborne, Esq., a full-time neutral since 1998, specializes in the resolution of complex domestic and international business disputes. She has successfully mediated and arbitrated thousands of cases in business and commercial matters, construction, engineering and infrastructure, employment, energy, intellectual property, professional liability, real estate and international matters. She is based in JAMS’ San Francisco Resolution Center. You may reach her at firstname.lastname@example.org.
Ambassador (Ret.) David Huebner joins JAMS after 25 years of practice in international law and arbitration. He has handled more than 100 arbitrations in two dozen jurisdictions around the world as an advocate or neutral, and has expertise in technology, life sciences, energy, infrastructure, construction and investment disputes. In 2016, President Obama appointed him as one of four American designees to the panel of arbitrators of the International Centre for the Settlement of Investment Disputes. You may reach him at email@example.com.