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INTERNATIONAL COMMERCIAL ARBITRATION – HOW DOES IT WORK IN PRACTICE? Richard Fernyhough QC, Keating Chambers Tuesday 23 November 2010.

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Presentation on theme: "INTERNATIONAL COMMERCIAL ARBITRATION – HOW DOES IT WORK IN PRACTICE? Richard Fernyhough QC, Keating Chambers Tuesday 23 November 2010."— Presentation transcript:

1 INTERNATIONAL COMMERCIAL ARBITRATION – HOW DOES IT WORK IN PRACTICE? Richard Fernyhough QC, Keating Chambers Tuesday 23 November 2010

2 Confucius (12:13) “In hearing litigation, I am no different from any other man. But if you insist on a difference, it is, perhaps, that I try to get the parties not to resort to litigation in the first place.” “In hearing litigation, I am no different from any other man. But if you insist on a difference, it is, perhaps, that I try to get the parties not to resort to litigation in the first place.”

3 Introduction How International Commercial Arbitration works How International Commercial Arbitration works The qualities to look for in an arbitrator The qualities to look for in an arbitrator How arbitrators reach their decisions How arbitrators reach their decisions

4 The raison d’etre of International Arbitration Role of international trade Role of international trade “Home advantage” “Home advantage” Declining jurisdiction Declining jurisdiction Arbitration as supra-national Arbitration as supra-national Party autonomy Party autonomy

5 Party Autonomy Governing law Governing law Procedural rules Procedural rules Language of the arbitration Language of the arbitration Legal seat (and venue) Legal seat (and venue) Number of arbitrators Number of arbitrators Identity of an arbitrator Identity of an arbitrator

6 Governing Law Fear of “home advantage” Fear of “home advantage” Choice influenced by: Choice influenced by: Perceived neutrality and impartialityPerceived neutrality and impartiality AppropriatenessAppropriateness Parties’ familiarity with the lawParties’ familiarity with the law

7 Popular Choice 2010 International Arbitration Survey: Choices in International Arbitration 2010 International Arbitration Survey: Choices in International Arbitration 40 percent of respondents use English Law40 percent of respondents use English Law 17 percent use New York Law17 percent use New York Law

8 Procedural Rules of the Arbitration Procedural rules of the state Procedural rules of the state UNCITRAL Model Law on International Commercial Arbitration 1985 UNCITRAL Model Law on International Commercial Arbitration 1985OR International Arbitral Institutions International Arbitral Institutions International Chamber of Commerce in ParisInternational Chamber of Commerce in Paris London Court of International Arbitration in LondonLondon Court of International Arbitration in London Beijing Arbitration Commission in BeijingBeijing Arbitration Commission in Beijing

9 Choosing an International Arbitral Institution Corporations look for: Corporations look for: NeutralityNeutrality InternationalismInternationalism ReputationReputation RecognitionRecognition 2010 International Arbitration Survey: 2010 International Arbitration Survey: 50 percent of respondents cited the ICC as their preferred choice50 percent of respondents cited the ICC as their preferred choice

10 China Chinese institutions are the most common choice Chinese institutions are the most common choice CIETACCIETAC BACBAC SACSAC Advantages: Advantages: Generally less costlyGenerally less costly Role of trade associationsRole of trade associations

11 Language of the Arbitration Parties are often nationals of states speaking different languages Parties are often nationals of states speaking different languages Preference: Preference: English as the “lingua franca” of international tradeEnglish as the “lingua franca” of international trade Parties will often use same language in the arbitration as used in the agreement Parties will often use same language in the arbitration as used in the agreement

12 Seat of the Arbitration Not usually discussed by parties Not usually discussed by parties Agree on ‘venue’ instead Agree on ‘venue’ instead Consequences of failure to specify ‘seat’ Consequences of failure to specify ‘seat’ Bound by procedural rules where venue locatedBound by procedural rules where venue located Failure to anticipate consequences of different procedural rulesFailure to anticipate consequences of different procedural rules

13 Factors Influencing Choice of Seat Formal legal infrastructure Formal legal infrastructure National arbitration lawNational arbitration law Record of enforcementRecord of enforcement Neutrality and ImpartialityNeutrality and Impartiality Law governing the contract Law governing the contract Convenience Convenience 2010 International Arbitration Survey: London as the preferred seatLondon as the preferred seat Followed closely by GenevaFollowed closely by Geneva

14 Identity of the Arbitral Panel Parties can agree on composition of the panel: Parties can agree on composition of the panel: Number of arbitratorsNumber of arbitrators How arbitrators are appointedHow arbitrators are appointed QualificationsQualifications Professional body to appointProfessional body to appoint

15 One or Three Arbitrators? Preference for three arbitrators Preference for three arbitrators 2010 International Arbitration Survey: 2010 International Arbitration Survey: 87 percent of respondents preferred three arbitrators87 percent of respondents preferred three arbitrators Greater Neutrality Greater Neutrality Less risk of a poor decision Less risk of a poor decision More balanced award More balanced award

16 Advantages of One Arbitrator Expense Expense Cheaper to pay fees of one arbitratorCheaper to pay fees of one arbitrator Low sums of money at stakeLow sums of money at stake Speed Speed Concluded more quicklyConcluded more quickly Clear cut decision Clear cut decision On merits of claims and costs and expensesOn merits of claims and costs and expenses

17 Advantages of Three Arbitrators Complexity of the dispute Complexity of the dispute Legally, factually or technicallyLegally, factually or technically Burden too much for one arbitratorBurden too much for one arbitrator Divide workDivide work Combined experienceCombined experience Partiality Partiality Fallacy of appointing “their own man” to a panelFallacy of appointing “their own man” to a panel

18 Qualities in an Arbitrator Reputation Reputation Within a legal or arbitral communityWithin a legal or arbitral community Carry weight in tribunalCarry weight in tribunal Open mindedness / fairness Open mindedness / fairness 2010 International Arbitration Survey:2010 International Arbitration Survey: 68 percent of respondents ranked this as the most important factor 68 percent of respondents ranked this as the most important factor Integrity Integrity Honest and reliableHonest and reliable

19 Experience Experience In a number of different fields:In a number of different fields: Industry or type of dispute Industry or type of dispute Legal system Legal system Arbitration experience Arbitration experience Cultural or ethnic aspects Cultural or ethnic aspects 2010 International Arbitration Survey:2010 International Arbitration Survey: 58 percent of respondents ranked this as the second most important factor 58 percent of respondents ranked this as the second most important factor Strength of character Strength of character Power of persuasion Power of persuasion

20 The Role of the Party-Appointed Arbitrator The same as all arbitrators The same as all arbitrators Role is to Role is to Consider the evidenceConsider the evidence Consider the argumentsConsider the arguments Apply their own view of the lawApply their own view of the law To reach a JUST resultTo reach a JUST result

21 The Role of the Chairman Pre-Hearing Phase Pre-Hearing Phase Initiate procedural stepsInitiate procedural steps Powers of ChairmanPowers of Chairman The Hearing The Hearing Conduct proceedings efficiently, fairly and transparentlyConduct proceedings efficiently, fairly and transparently No special authorityNo special authority

22 The Formal Deliberations Will commence: Will commence: Once the hearing is concluded (post submissions)Once the hearing is concluded (post submissions) At meetings chaired by the chairmanAt meetings chaired by the chairman Dependent on personalities of the arbitrators and approach of chairman Dependent on personalities of the arbitrators and approach of chairman Views of co-arbitrators usually sought firstViews of co-arbitrators usually sought first Chairman as umpireChairman as umpire Chairman listens to views and forms own conclusionsChairman listens to views and forms own conclusions

23 The role of compromise “Settlement of differences by mutual concession or the partial waiving of views for the sake of reaching a settlement” “Settlement of differences by mutual concession or the partial waiving of views for the sake of reaching a settlement” Limits on compromise: Limits on compromise: What is the nature of the issue in question?What is the nature of the issue in question? How deeply held are the views?How deeply held are the views?

24 Dissents The following options are open to the dissenting arbitrator: The following options are open to the dissenting arbitrator: 1.Doing nothing 2.Un-motivated dissent 3.Motivated dissent 4.Publishing a dissenting opinion 5.Not signing the award To dissent or not to dissent? To dissent or not to dissent?

25 Drafting the Award All relevant decisions should be taken before the award is drafted All relevant decisions should be taken before the award is drafted Chairman decides the procedure by which all issues are to be decided Chairman decides the procedure by which all issues are to be decided Award drafted by chairman and / or co-arbitrators Award drafted by chairman and / or co-arbitrators

26 A Successful Conclusion? An award enforceable under the New York Convention An award enforceable under the New York Convention Addressed all issues raised Addressed all issues raised Tenable and reasonable conclusions Tenable and reasonable conclusions Parties given a fair opportunity to advance their case Parties given a fair opportunity to advance their case “Justice is to be done and also it is to be seen to be done”

27 Payment of Costs An appropriate costs order An appropriate costs order General rule:General rule: Losing party to pay legal costs and expenses of successful party Losing party to pay legal costs and expenses of successful party Who is the successful party?Who is the successful party? Amount of costs Amount of costs Whole of legal costs?Whole of legal costs? Reduction?Reduction?

28 International Commercial Arbitration as a growth industry High levels of satisfactionHigh levels of satisfaction Growth of international tradeGrowth of international trade New centres for International ArbitrationsNew centres for International Arbitrations

29 ASIA China and Hong Kong overtaken the ICC in volume of new cases China and Hong Kong overtaken the ICC in volume of new cases 2008: international cases by CIETAC and BAC reached 607 cases2008: international cases by CIETAC and BAC reached 607 cases Growth of arbitration: Growth of arbitration: Growth of Asian economiesGrowth of Asian economies Prominence in field of dispute resolutionProminence in field of dispute resolution More expedient More expedient Less formal Less formal Privacy and confidentiality Privacy and confidentiality

30 Conclusions Success attributable to: Success attributable to: Efficacy of institutionsEfficacy of institutions Arbitral rulesArbitral rules Quality and experience of arbitratorsQuality and experience of arbitrators

31 THE END


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