1. Drafting Dispute Resolution Clauses in Cross-Border Contracts
Claudia Salomon
AIPLA Brown Bag
January 2015

2. Strategic considerations
At the drafting stage consider:
Which party is most likely to claim?
What relief may be sought?
Where are the assets?
Which party holds the records / documents?
Is confidentiality required?

3. Why arbitrate? Survey says…
Major corporations view arbitration as the preferred method for resolving cross-border disputes
Twice as many respondents opted for international arbitration as a method of dispute resolution than litigation
73% of respondents said international arbitration well suited to resolve transnational disputes
PWC Survey on Corporate Choices in International Arbitration (2013)

4. Why arbitrate? Enforceability
Pyrrhic victory if cannot enforce against assets
1958 New York Convention: Contracting States
Contracting States recognize and enforce awards, with limited grounds for challenge
No equivalent for judgments outside EU

5. Why arbitrate? Other reasons
Neutrality
Privacy / confidentiality
Flexibility
Finality
Speed?
Cost?

6. Which seat (legal place) of arbitration?
Location, location, location - the seat is critical
Determines legal procedural framework
Important for enforcement via the New York Convention
New York
London
Paris
Singapore
Hong Kong
Dubai

7. Which institution? International Chamber of Commerce (ICC)
London Court of International Arbitration (LCIA)
American Arbitration Association/ International Centre for Dispute Resolution (AAA/ICDR)
Gaining ground . . .
Hong Kong International Arbitration Centre (HKIAC)
Singapore International Arbitration Centre (SIAC)
Other regional centres . . .
Chinese International Economic Trade Arbitration Commission (CIETAC)

8. The Rules – Standard Clauses
“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”
ICC Standard Clause
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the American Arbitration Association in accordance with its International Arbitration Rules.”
AAA/ICDR Standard Clause

9. Limited Scope
Except for Licensed Mark Disputes (as defined below), which are excluded from arbitration hereunder, all disputes arising out of or relating to this Agreement . . .
“Licensed Mark Disputes” shall constitute all disputes relating to the Licensor’s ownership of, the validity of, or the registration of any Licensed Marks.
Limiting the scope of arbitrated disputes can result in a protracted dispute about the scope of matters to be decided by arbitration.

10. Arbitrators 1 v 3 Method for appointment?? Qualifications??
Too many qualifications can make it difficult to find a qualified arbitrator.

11. Language The language of the arbitration shall be ______.
Pick one language, not two.

12. Confidentiality
“Except as may be required by law, neither a party nor its representatives nor a witness nor an arbitrator may disclose the existence, content or result of any arbitration hereunder without the prior written consent of both parties.”
Arbitration is not confidential unless the parties so provide.

13. Negotiation/mediation + arbitration
The parties shall use their best efforts to resolve all disputes relating to this Agreement by amicable negotiations. If either party gives notice to the other party that a dispute has arisen, and the parties are unable within thirty (30) days of such notice to resolve the dispute, then it shall be referred to [the Vice President for Sales] of Seller and [the Vice President for Quality Control] of Buyer. If these officers are unable within thirty (30) days to resolve the dispute, then it shall be referred to the [Chief Executive Officers] of Seller and Buyer. If the Chief Executive Officers of Seller and Buyer are unable within thirty (30) days to resolve the dispute, then either party may submit the dispute to arbitration in accordance with Article __.
Requiring executives to participate in negotiations puts the executive of the small company on equal footing but may not be the best use of time for a large company executive.

14. Discovery/Disclosure
Optional:
The IBA Rules of Evidence shall apply to the arbitration.

15. Interim measures
Option 1 - Parties have a right to seek preliminary relief from the relevant court only until the file is transmitted to the Tribunal
Option 2 - Parties retain right to seek relief from the relevant court (even after the Tribunal is constituted)
“Nothing in this Agreement shall prevent either party from seeking provisional measures from any court of competent jurisdiction, and any such request shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate.”

16. Other drafting issues Consolidation and/or joinder Fees and costs
Reducing time and costs

17. Request for Arbitration
Typical timeline
Request for Arbitration
+ 1-2 months: Constitution of Tribunal Response to Answer / Reply
months:
Further Submissions
Expert / Witness Evidence Disclosure of documents
+1 month:
Post-hearing briefs
Cost submissions
+ 1 month: Answer / Reply, including counterclaims
+ 1-2 months:
Terms of Reference (if relevant)
Provisional Timetable Case Management Conference
+ 1 month:
Hearing
+ 3-6 months:
Award
14-25 months

18. Governing Law
The governing law of the contract shall be the substantive law of ________.
Alternative additional language:
. . . (other than with respect to principles of conflicts of laws thereunder), except that issues relating to this arbitration clause and any arbitration hereunder shall be governed by the Federal Arbitration Act, Chapter 1 and 2.

19. Sample arbitration clause
“All disputes arising out of or in connection with the present contract ” [WIDE SCOPE]
. . . shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce [TRUSTED RULES]
There shall be one arbitrator. [SIMPLE TRIBUNAL]
The seat of the arbitration shall be New York. [ARBITRATION FRIENDLY, NEW YORK CONVENTION SEAT]
The language of the arbitration shall be English.” [LANGUAGE]

20. Key Drafting Points Use clear and mandatory language
Ensure internal consistency - choose litigation or arbitration (or if both identify clearly and precisely for each)
Identify any arbitral institution clearly and accurately
Use the institution’s standard clauses if possible
Specify seat of arbitration
Specify language
Specify governing law

21. Pathological Clauses
The courts of California have exclusive jurisdiction All disputes shall be resolved by ICC arbitration.
Arbitration, if any, ICC Rules in London.
All disputes under this agreement shall be resolved through arbitration in accordance with the arbitration rules of the London Chamber of Commerce, by one or more arbitrators, except in relation to technical matters which are to be submitted to an expert for resolution.

22. Pathological Clauses (cont.)
Drafting Point
Potential Consequences
No governing law
Preliminary issue
Non-NY Convention seat
Unenforceable award
Bad seat
Mired in local courts
Wrong institution
Invalid?
3 arbitrators instead of 1
Doubles/triples cost (but maybe ok)
Arbitration in 2 languages
Cost and delay

23. Contact Information
Claudia Salomon
New York