The International Journal of Public and Private Arbitration
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- International Overviews
- Designating the Administrator for International Commercial Arbitrations
- International Arbitration in Asia
- Country Overviews
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The Asia Pacific Arbitration Review 2008
Section 1: International Overviews
Designating the Administrator for International Commercial Arbitrations
Luis M Martinez
International Centre for Dispute Resolution
Not all arbitrations are created equal. In the world of international commercial arbitration, the difference between an efficient and economical resolution to a business dispute and finding oneself in a protracted, expensive arbitral process (where parties may be subjected to procedural irregularities, bad faith, dilatory tactics, biased or unqualified arbitrators) may hinge on whether the arbitration is administered by an arbitral institute or not and, if selected, the quality and capabilities of that particular institution. The designation of the administrator in an arbitration clause cannot be taken lightly and all too often there is insufficient due diligence conducted when it comes to the dispute resolution provision. This decision has significant consequences that the drafter must fully consider, especially when it pertains to the role played by the administering institution, which is an essential component for the successful resolution of any international commercial dispute. The designated institution's administrative system and its policies are important factors as they provide the foundation for its character and identity. It is essential that parties understand the character and identity of the institution as well as its arbitral system and institutional integrity before designating them in their dispute resolution agreement, in order to enhance their level of predictability and avoid the aforementioned pitfalls.
The institution
The International Centre for Dispute Resolution (ICDR) is the international division of the American Arbitration Association (AAA) charged with administering all the AAA's international initiatives. Established in 1996, the ICDR consolidated the AAA's international caseload and global experience of more than 70 years under this new division. Its administrative system contains various components and is based on the institutional experience, international expertise, multilingual legal staff, flexibility, international dispute resolution procedures, commitment to service and sensitivity to culture. The ICDR is guided by the principle that the institution must act in the best interests of arbitration and this is an integral part of its international administrative system and policies. All this provides the parties with a measure of predictability and an institutional advantage over arbitrations that are not institutionally administered, for example, ad hoc1 arbitrations or other institutions that may not have the experience, infrastructure or the policies needed for these complex international matters and thereby highlighting again the importance of the designation of the administrator especially when integrity and transparency have become highly valued requirements for the successful dispute resolution providers operating in today's evolving global markets.
One of the areas of concern in the field today is the sheer numbers of arbitral institutions throughout the world. There are many institutions that have entered the market expecting to be successful administrators; however, their arbitrators may lack qualifications, their staff may be inexperienced, administrative decisions may be unsound or motivated by self-interest, and they may not realise that while it is important to provide a service for their clients it must never be at the expense of the arbitral process as supported by the judiciary. The administrator's mission to protect the arbitral process requires that it not accept every case when the parties' agreement conflicts with due process, fair play and integrity.
A non-profit organisation, the ICDR prides itself on continuing its founding traditions of due process, fair play and integrity throughout all aspects of its domestic and international dispute resolution services. Parties recognise this and understand this difference when designating the ICDR/AAA as their administrators. They are not only selecting a service, they are also selecting an institution with a tradition of values of the highest standards. The ICDR is an international administrator that provides a full range of conflict management services to businesses around the world. It has offices in the US, Ireland and Mexico, and another recently opened in Singapore, as well as a network of cooperative institutions and key alliances spanning 44 countries. The ICDR thus provides international administrative services and educational initiatives, with access to the local alternative dispute resolution (ADR) methods. Cultural sensitivity by its staff and arbitrators is a priority under the ICDR system. Understanding verbal and nonverbal miscommunications, cultural mores and biases, religion and politics allow the ICDR to better understand how culture affects international dispute resolution which can be an invaluable tool in resolving these commercial disputes.2
One of the oft-cited advantages of international arbitration is the ability of the parties to structure their dispute resolution mechanisms in such a way as to foster greater predictability in the procedure to be followed and its eventual results once the dispute has occurred. Achieving predictability, while it can certainly be enhanced it cannot by any means be ensured, especially when one considers the incredible number of variables that may impact an international arbitration.3 Moreover, any discussion of trying to establish a measure of predictability must guard against generalisation by suggesting that predictability is equally available in all forms of international arbitration. It is admittedly no easy task to see what the future holds for the parties involved in an international arbitration. There are a number of inherent advantages found in an institutionally administered private international commercial arbitration over those that participate in an ad hoc arbitral proceeding. Another area of concern where predictability is elusive is the increasing number of cases involving investor-state proceedings4 because the context and dynamics are dramatically different and frequently problematic. These cases must be distinguished from the private commercial arbitrations where the state is not a party.5
The practitioner's quest for predictability is certainly enhanced by understanding the administrative process. The ICDR's administrative system has the advantage of being easy to follow for common law and civil law practitioners alike. The system has been developed with the benefit of extensive user feedback and has evolved to offer a flexible process combined with a proactive common- sense administrative approach, with less formality and without unnecessary procedural steps. It is subject only to the institutional protection of the process and the parties' due process and fair play requirements. The ICDR brings the parties together via conference call to explore at the outset the use of mediation and any other methods for a possible early resolution. If mediation is not desired, the ICDR consults with the parties and prepares a list of potential arbitrators for their selection. It ensures that qualified arbitrators are appointed from its international panel and that they are impartial and independent and have cleared all conflicts prior to their confirmation.
The ICDR has not adopted the IBA's Guidelines on Conflicts of Interest in International Arbitration. While the ICDR recognises that these guidelines provide needed guidance for arbitrators regarding their disclosures in the international arena, the existing version was not consistent with the institution's standards for disclosures and its policy of ensuring that the parties must always be given the opportunity to object to an arbitrator based on their disclosures.
Throughout the process, the ICDR resolves all procedural impasses and properly interprets and applies its International Arbitration Rules. All cases can be filed online, and all documents submitted electronically. This approach, combined with the ICDR's proactive oversight of the entire arbitral process, results in arbitration awards that are readily enforced throughout the world, and a process that best meets the expectations of the parties.
ICDR International Arbitration Rules
Another key component in the successful resolution of an international commercial dispute is the arbitration rules the parties select to govern their arbitration. The International Arbitration Rules are well suited for this purpose. They allow for the maximum in party autonomy while preserving due process. Parties are free to customise their arbitration in any way they deem appropriate, subject to the limitation that each side be given a full opportunity to present its case. Parties are free to choose the seat of the arbitration, the language of the arbitration, the number of arbitrators and the method of their appointment whether opting for a party-appointment or the list method. The parties may designate the nationality of the arbitrator or decide to exclude certain nationalities from the list of potential arbitrators. They may agree to name a specific arbitrator within their arbitration clause. Parties may also include in the clause the scope of document exchange and address other issues such as consolidation, the use of expert testimony or the need for any hearings at all, as they may decide to base their arbitration on documents alone.
The ICDR will be guided by the parties' agreement and, where the agreement is silent, the International Arbitration Rules. The Rules require that all arbitrators be impartial and independent and contain a provision waiving the right to punitive damages unless the parties agree otherwise. A significant feature of the Rules is that they provide the arbitrators with the power to direct the order of proof, bifurcate the proceedings, exclude cumulative or irrelevant testimony and direct the parties to focus their presentations. Moreover these tried and tested Rules contain all the necessary default mechanisms to ensure that the arbitration is not frustrated if the arbitration clause is missing any elements or when faced with a recalcitrant party.
These Rules were revised in 2006 to include a new provision granting parties access to an arbitrator to hear a motion for emergency relief. In international arbitration, it normally takes some time to have an arbitrator appointed and parties in need of emergency protection in the past had to turn to the courts for such relief, with inconsistent results. The ICDR's International Arbitration Rules now includes a new article 37, which provides for an emergency arbitrator to be appointed within 24 hours with notice to the other side6 to make a determination regarding the emergency relief. It was determined that this service was needed at a minimum to provide the parties with the option consistent with their desire to select arbitration in the first place and to avoid each other's national courts.
The ICDR's model arbitration clause
Practitioners who wish to designate the ICDR as their administrator can arbitrate future disputes by inserting the following clause into their contracts:
The parties should add the following provisions:
- 'The number of arbitrators shall be [one or three]';
- 'The place of arbitration shall be [city and/or country]'; and
- 'The language(s) of the arbitration shall be [....]'
The ICDR is an international institution that can provide efficient, neutral and affordable dispute resolution services to parties from all over the world. For further information and contact details, please visit the ICDR's website at www.adr.org/icdr.
Notes
- An arbitration that is not administered by an institution.
- For a discussion on culture in international commercial arbitration, see William K Slate II, 'Paying Attention to Culture in International Commercial Arbitration' in Dispute Resolution Journal (August-October 2004).
- The will of the parties, applicable laws, the arbitration rules, the courts at the situs and the role of the arbitrators to name a few.
- Consider Bolivia's recent denunciation of the Convention on the Settlement of Investment Disputes between States and Nationals of other States. For a discussion on some of the inconsistent decisions in investment treaty arbitration, see Susan D Franck, 'The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions' in Fordham Law Review (March 2005).
- See Bernardo Cremades, 'Resurgence of the Calvo Doctrine in Latin America', 7 Bus L Int'l 53 (2006).
- The ICDR will not allow for any ex-parte applications and this article only applies to contracts that have incorporated the ICDR's International Arbitration Rules entered on or after 1 May 2006 - see article 37(1).