ABA Journal Article: International Arbitration Loses Its Grip ?

The April 2010 edition of the ABA Journal features: “International Arbitration Loses Its Grip” by Steven Seidenberg. The article argues that international arbitration is starting to become as expensive and time consuming as litigation in U.S. Courts. Here is an excerpt:

Arbitration was supposed to be the solution for international companies seeking to resolve disputes without expensive and drawn-out court battles. But it is starting to look more like the problem.

Once a swift, cost-efficient method of resolving international commercial disputes, the process is now often bogged down in long and costly legal proceedings.

“It now takes longer, costs more and has many more steps in the procedures,” says Joseph R. Profaizer, of counsel to Paul, Hastings, Janofsky & Walker in Washington, D.C. “There is now broader discovery, larger damages requests, longer briefing schedules, much bigger briefs, far greater reliance on experts and their testimony, and more procedural challenges to the arbitration.”

If that sounds suspiciously like U.S.-style litigation, well, that is exactly the problem. Arbitration of international commercial disputes has taken on many of the characteristics of litigation in U.S. courts. And this has upset many companies that rely on arbitration to resolve cross-border business disputes.

Richard Naimark
Photo by Jordan Hollender

“There’s been an increasing chorus of voices that international arbitration is getting too expensive, mostly because it is taking too long,” says Richard W. Naimark, senior vice president of the American Arbitration Association’s International Center for Dispute Resolution.

A growing number of businesses appear to be turning away from arbitration and resolving their international commercial disputes the old-fashioned way—in the courts.

In a targeted survey of corporate counsel published in 2006 by the School of International Arbitration at Queen Mary, University of London, only 11 percent of in-house counsel said they preferred litigation to settle international disputes. In a follow-up survey conducted two years later, that figure rose to 41 percent—only slightly less than the number who prefer international arbitration.

Many businesses, attorneys and international arbitral organizations lament an Americanization of international arbitration. But they are often themselves to blame.

“It’s the parties who are causing the problem,” says one expert who spoke on the condition that he not be identified. “They’re the ones picking counsel and deciding how the arbitration is to be run. They’re asking the arbitral associations to stop the parties from bringing the problems on themselves.”

Profaizer agrees. “If arbitration is to commit suicide, it will do so of its own choosing, because the parties have chosen to make it more expensive, time-consuming and more like litigation.”

RESOLUTION IN PRIVATE

Arbitration isn’t dead yet. Far from it. Last year, the number of international commercial arbitrations hit a record high. It may be less popular than it used to be, but arbitration remains the preferred method of resolving international commercial disputes.

Edward Mullins
Photo by Matthew Pace

There are good reasons. For starters, arbitration offers parties the ability to resolve their problems in private. “Unlike the situation in many courts, in a typical commercial arbitration outsiders have no access to the case docket, written submissions or oral hearings. This allows parties to address matters outside the spotlight, which probably helps facilitate the resolution of commercial disputes,” says Mark W. Friedman, a partner in the New York City office of Debevoise & Plimpton.

Arbitration also offers parties a neutral forum, where neither side has the “home court” advantage of litigating in its nation’s courts. “You don’t have to learn a new set of rules from some foreign country, so neither side has a procedural advantage. And you don’t have to rely on local counsel you’re unfamiliar with,” says Edward M. Mullins, a partner in the Miami firm of Astigarraga Davis and co-chair of the International Litigation Committee of the ABA Section of Litigation.

Read the full article here. Any thoughts?

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