Learning The Language Of International Arbitration

Friday, August 1, 2008 - 01:00

Editor: Please tell our readers about your international arbitration practice.

Armas: Chadbourne's international arbitration practice is an integral part of our International Dispute Resolution (IDR) practice. The four underpinnings of our IDR group are: arbitration; mediation and other forms of alternative dispute resolution (ADR); cross-border litigation; and government investigations.

We represent clients all over the world in dispute resolution that does not traditionally fall into the category of in-court litigation, and arbitration is one example. Instead of being heard by a judge, disputes arising out of or relating to a commercial agreement - typically involving allegations of a breach of contract - come before an arbitrator or a panel of three arbitrators. The process is deemed to be a viable alternative to litigation because, at least domestically, arbitration moves quicker, and an arbitrator is able to render an award that ultimately has the force of a court judgment.

Internationally, the main reason for parties to choose arbitration is that they are less likely to trust each other's court systems and thus adopt arbitration to have a neutral playing field. Those disputes typically center around commercial contracts, although sometimes these are disputes between an investor and a sovereign government, or sometimes even between governments. These are played out before international tribunals, usually in international centers such as New York, London, Paris, Geneva and the like. An award rendered by those tribunals is an international award that then needs to be enforced. Various international conventions permit parties to reduce such awards into local judgments.

Editor: You are flanked by an impressive array of international arbitration practitioners within the firm. Perhaps you could mention your colleagues in the International Disputes Resolution Group.

Armas: We are uniquely blessed in that we have a very large platform of talent. We have 13 offices around the world, in all of which we have arbitration capability and, in some instances, very large arbitration benches and case loads. In New York, where I practice, Tom Hall has a very large arbitration practice. In Washington DC, we have a whole array of arbitration experts: David Raim and Bill Perry are two prominent practitioners in that area. In Los Angeles, we have Jay Henneberry and Robin Ball. In Mexico, we have Luis Enrique Graham. In London, we have Adrian Mecz, Michelle George, Christopher Cardona and Mark Pring. Jack Greenwald, head of the Dubai office, manages a very large case load. In Warsaw, we have Sylwester Pieckowski. In Russia, our world-renowned main player is Mikhail Rozenberg. That is the core team of our International Dispute Resolution or IDR Group.

Editor: You have participated in arbitrations under the auspices of the major arbitral institutions of the world. What underlies the choice of an arbitral institution?

Armas: For general commercial disputes, a series of non-specialized arbitral institutions around the world market themselves as being able to handle those types of disputes, and, to a very large degree, they're all capable of doing so. The market is quite competitive. Whether you pick the London Court of International Arbitration (LCIA) or the International Chamber of Commerce (ICC) in Paris, or the American Arbitration Association (ICDR/AAA), in New York, you can't really go wrong. Their rules are largely identical in substance though not totally interchangeable, and their rosters of arbitrators have a large overlap among them. There are also specialized tribunals for special types of disputes such as the Court of Arbitration for Sport (CAS), in Lausanne, for sports-related disputes.

When advising our clients on which rules they should opt for - either to insert them in a contract or to apply them to an existing dispute - we also take into consideration where the parties are located and where we think it's going to be easiest to conduct the arbitration.

Even more important than the arbitral institution is the arbitrator who actually hears and decides the case. Much thought should go into that selection process.

Editor: Your knowledge of Spanish and Portuguese has equipped you to handle many arbitration cases that require a facility with these languages. What advantages does this provide your clients when conducting an arbitration in one of the Latin American countries?

Armas: The main advantage is that nothing needs to be translated. That is crucial because there's always something lost in translation. It could be a nuance, but it could be an important nuance. If you can keep everything in the native tongue of the witnesses, of the arbitrators and of the documents themselves, it's less likely that something will slip through the cracks, and it's more likely that whatever it is that needs to be highlighted and understood by the arbitrators will be. A welcome side effect is substantial cost savings. If you have to start translating everything back and forth, the cost of the arbitration almost triples, since there's a certain amount of inefficiency in the process.

Editor: When conducting an arbitration before an international tribunal in one of the BRIC countries, is there a problem in having the award enforced?

Armas: Potentially. The BRIC nations are emerging markets in every sense of the word, but especially in arbitration. Arbitration has been embraced by all of these countries as the preferred mechanism for dispute resolution. However, their judiciaries have not fully caught up to the need to carry out their role. They're on their way, and we're seeing a lot of favorable results, but we are still seeing decisions coming from courts where it's clear that they don't completely understand the concept of arbitration. Some judges view it with suspicion, almost as if we're trampling on their sovereignty. Some of them think that they should be the only ones deciding commercial disputes. But with time, the BRIC nations will have judiciaries embracing the concept that arbitration is supposed to peacefully coexist with the courts.

Editor: With the influx of investment in certain Latin American countries, how many cases come to a panel that have their contracts drafted in the law of the Latin American country?

Armas: A fair amount. There is probably still more of a move to have contracts of important international cases, even in Latin America, governed by U.S. law, customarily New York law. When we're dealing with Europe, it would be either the UK if one of the parties is from a common-law system, or Switzerland or another one of the more established civil law jurisdictions. New York law is excellent, well analyzed by forward-thinking judges. People feel comfortable inserting New York law provisions into their contracts. Another factor is that many large law firms handling the underlying contracts are in New York and have a bias toward New York law, thereby inserting it into their agreements.

If a Latin party has leverage in the contractual negotiations, or if the transaction is purely Latin American, and if the parties can agree, then you can see the law of a certain Latin American country applying.

Editor: Do you see new seats for international arbitration evolving as a result of investment in previously off-limits jurisdictions?

Armas: Yes. We're seeing a burst of regional arbitration centers that have sprung up in part to compete with the big boys such as the LCIA, the ICC, or the ICDR/AAA. These regional arbitration centers are very good. They've actually mimicked the rules of the big arbitral forums. They've been able to get good arbitrators on their panels and seem to be administering arbitration proceedings effectively. So we're starting to see these regional centers becoming a flashpoint for local regional arbitration. We observe this now in Brazil, where the Brazilian-Canadian Chamber of Commerce is active; in Dubai, where the Dubai International Arbitration Center (DIAC) is prominent; in Asia, with the Hong Kong International Arbitration Center (HKIAC) and the Singapore International Arbitration Center (SIAC). Depending on where your case is pending, or where the dispute may arise, picking those arbitration centers and keeping it away from New York, London or Paris is becoming increasingly viable. Madrid is gaining traction as a forum of choice for Latin American disputes.

Editor: What do you see as the future for international arbitration in Latin America?

Armas: The entire region has embraced arbitration as the preferred method for resolving disputes, at least on the commercial side. On the sovereign side, some governments are retreating, because they have not done well in international arbitration. A few decided to withdraw from the International Center for the Settlement of Investment Disputes (ICSID). Whether foreign investors will actually permit the sovereigns to opt out of the arbitration system altogether is yet to be seen.

The younger generation of Latin American lawyers is promising. Many have received LL.M. degrees at prominent U.S. universities, returned to their countries, and over time become leading attorneys there. They are the ones who are going to help change the mindset of the judiciary and their governments.

Editor: How do you reconcile civil law and common law when both pose differing standards for settlement in an arbitration?

Armas: Today's arbitration practice represents a convergence of the civil-law and the common-law systems. This is partly owing to the influence of the two great common-law jurisdictions on arbitration. There is also the historical influence of the civil-law countries, principally the Western and Northern European countries. When we come together in these international arbitration centers, almost by definition we bring the baggage that we have from our own local way of doing things and tend to meld them together. For example, it is fairly standard now for witnesses to testify by a written affidavit as opposed to U.S.-style live testimony. This is a nod to the civil-law manner of introducing evidence. On the other hand, witnesses are subject to cross-examination, which is a nod to the common-law system. We are experiencing more document disclosure, because the reality is that most of the information that is relevant in any dispute is often in the hands of the other party. For a long time, especially from the civil-law countries where they don't have these concepts of discovery and disclosure, that was a fierce battle. But we're beyond that point now. In almost every large case there is some form of document production. Experienced arbitrators have many disputes resolved under common-law and civil-law principles in a fluid, non-confrontational manner.

Editor: Do you foresee the use of electronic devices to enhance and expedite decision-making in future arbitral proceedings? Would this lead to more concentration of arbitration in certain select seats?

Armas: Technology is moving into every aspect of our lives, and clearly into arbitration as well. We're going to have more and more cases handled virtually, where the entire case is submitted electronically to a "virtual panel," without the need for live hearings and witnesses. The technology is already there. It's an issue of whether or not the end users - the clients - want to employ it. A panel of arbitrators would be available to hear the case immediately as opposed to waiting for arbitrators who may or may not be available at a stipulated time. (Trying to get three arbitrators to reconcile their schedules so that they can sit for two weeks to listen to a case is not an easy task.) A few institutions are gearing up to provide for that type of technology.

With the explosion of electronic evidence and electronic discovery and the like, there is a real risk that arbitration is going to become as cumbersome as court litigation sometimes is. If we don't come up with a mechanism for controlling electronic discovery and evidence, that could really hold the entire process hostage. Practitioners are finding ways of dealing with this problem as aggressively as they can.

That does not necessarily mean though that it is going to change where people seat their cases. The big cities with established judiciaries, in the event you have to run into court to get a subpoena or to get assistance in aid of the arbitration, are going to continue to be the preferred places for arbitration cases.