Arbitration of International Agreements

Major Arbitration Bodies/Rules–Advantages and Disadvantages

American Arbitration Association (AAA)

  • The arbitrator(s) must make a decision within 30 days of the close of the hearing; no extensions are permitted.
  • The arbitrator may consider custom and usage in the industry.
  • The parties may present expert witnesses.
  • A decision may be made solely on the documents submitted if the parties choose.
  • In international arbitration the AAA will select the arbitrator(s) from countries other than the countries of the parties to the dispute.

International Chamber of Commerce (ICC)

  • The proceedings may take place anywhere in the world.
  • The ICC has an International Centre for Technical Expertise, which can supply technical experts if the parties agree.
  • While decisions technically must be made within six months of the close of hearings, extensions are quite frequently granted.
  • The arbitrator(s) may consider custom and usage in the industry.
  • It is solely within the discretion of the arbitrator(s) whether to allow expert testimony–and the expert is chosen by the arbitrator(s).
  • A decision may be made solely on the documents submitted if the parties choose.

London Court of International Arbitration (LCIA)

  • The LCIA's rules are more specific than most.
  • Discovery tends to be easier.
  • The fees are based on a daily and hourly fee rate. Often this is substantially less expensive than the AAA and ICC, which charge based on the amount in dispute.
  • There is no time limit set on issuing the decision.
  • The arbitrator(s) might well not consider custom and usage in the industry.
  • The right to cross-examine witnesses is not guaranteed.
  • The arbitrator(s) may or may not allow expert witnesses.
  • If the parties agree, the decision may be based solely on the documents submitted.

Arbitration Institute of the Stockholm Chamber of Commerce (SCC Institute)

  • Decisions are to be made within one year after the case has been referred to the arbitrator(s).
  • Fees are determined by both the time spent by the arbitrator(s) and the amount in dispute.
  • Again, the dispute may be resolved solely on the documents if the parties agree.
  • There are no restrictions on the admissibility of evidence.

British Columbia International Commercial Arbitration Centre (BCICAC)

  • The rules are modeled on the UNCITRAL rules.
  • The location may be attractive for Pacific Rim disputes.

The U.N. Commission on International Trade Law (UNCITRAL) Rules

  • These rules can be used with all of the above organizations.
  • There is no time limit by which the arbitrator(s) must make an award.
  • The arbitrator(s) must apply custom and usage in the industry.
  • The decision to allow expert witnesses is left to the arbitrator(s), and any expert witness is selected by the arbitrator(s). However, the parties may cross-examine the expert and then present their own.
  • All costs of the arbitration are paid by the losing party unless the arbitrator(s) decide apportionment is equitable.
  • Fees are based on actual costs, not a percentage of the amount in dispute.

Key Considerations for Arbitration Clauses

Selection and number of arbitrators

  • The selection can be left to the arbitrating body, or provision can be made for each of the parties to select one arbitrator, who will in turn select a third.
  • Because of their interactions, three arbitrators tend to be much more expensive than three times a single arbitrator–but a panel can avoid quirks that may result from use of a single arbitrator.
  • The parties may want to specify that the arbitrator(s) have knowledge of the industry.

Site of the arbitration.

Language of the arbitration.

Payment of costs, arbitration fees and attorneys' fees is typically born by the losing party in international arbitration unless otherwise specified.

Governing law.

  • The law of a given country and/or state can be specified.
  • English commercial law is often favored as "neutral" law.
  • The decision as to the law to be applied may be left to the arbitrator(s).
  • The arbitrator(s) can be directed to apply "natural" justice and equity or "fundamental and universal" legal principles rather than any given nation's laws.

Adding a "time is of the essence" clause may help speed a decision.

Enforcement

Enforcement is generally not a problem if the countries of the parties and the site of the arbitration all belong to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

Among other nations, the United States, Mexico, Canada, the United Kingdom, Sweden, Switzerland, France, Germany, China, Japan, Singapore and Korea have all ratified the New York Convention.

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Methven & Associates
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Copyright 2004 Bruce E. Methven, All Rights Reserved.

The foregoing article constitutes general information only and should not be relied upon as legal advice.