Changes And Challenges In International Arbitration

Friday, June 22, 2012 - 10:37

 

The Editor interviews Charles C. Adams Jr., Partner-in-Charge of Akin Gump’s Geneva office.

Editor: Please tell our readers about your background and your practice.

Adams: I am firmwide head of Akin Gump’s global international arbitration practice group. I’ve lived and worked in Geneva for the last 25 years as managing partner of four different U.S. firms. Akin Gump’s lawyers in the U.S. and around the world who work on international arbitration matters are part of our practice group. Although we have a very small and collegial group in Geneva, we draw upon the firm’s resources worldwide for staffing our major international arbitration cases.

Editor: What are the trends in international arbitration, and in what respects is its spectrum widening?

Adams: International arbitration has been around as a preferred mode of dispute resolution in international transactions for the last 50 years or so. A number of trends can be identified. One of them is the increasing globalization of international arbitration. Formerly it was a heavily Western phenomenon: the parties to international arbitration proceedings tended to be from the U.S. and Western Europe (including the UK), and London, Paris and Geneva were very heavily favored as venues.

Today, the Western influence has diminished in favor of India, China (including Hong Kong), Singapore, Latin America and the Middle East. Bringing in new players from these emerging markets is a very healthy development.  

I have the privilege of sitting on the board of trustees of the Dubai International Arbitration Center, which is one of the new emerging arbitral institutions. It is a very active center attracting significant cases not only from the United Arab Emirates but also from the entire region.

The trend toward widening the spectrum of choice of arbitral institutions is a desirable development because it diversifies the pool of end users, counsel and arbitrators.

Editor: Discuss the increasing relevance of public international law – such as treaty-based law – to the interests of private parties.

Adams: The last ten years have seen the explosion of treaty-based international arbitration. My own view is that the wave of treaty-based international arbitration is likely to recede because governments, particularly emerging market governments, are very unhappy with what they view as pushing the envelope of the jurisdiction of the international arbitration tribunals.

Editor: What about globalization in the sense of the incorporation into the global economy of so many developing countries?

Adams: Global wealth is being generated from around the planet. In the past, the foreign trade that generated international arbitration was either north/south oriented or involved developed country companies dealing with each other. Now, there is an increasing number of countries that are attractive venues for foreign direct investment, and deals are being done by companies from all over the world.

Editor: Assume a U.S. company that is starting up a business in a developing country gets a commitment from that country to provide such things as access roads and lower taxes. Can arbitration be used to enforce that undertaking?

Adams: A state or local government anyplace in the world can become either a claimant or a defendant in a dispute over such peripheral support for a company investing in its territory. It’s pretty obvious that trying to obtain redress from a government in the courts of that country is an unpromising proposition for any claimant. In such situations, treaty-based international arbitration can provide a much more level playing field.

Editor: Should international arbitral institutions provide more control and oversight over arbitrations taking place under their auspices?

Adams: Absolutely. End users perceive the current arbitration system to be slow, complicated, burdensome, prohibitively expensive and, from time to time, arbitrary. The system has broken down to a degree and needs to be fixed.

International arbitration is the go-to mechanism for the resolution of international commercial disputes, but plainly if it is to continue to be the preferred means of resolution of disputes, these concerns are going to have to be addressed. One solution is quality control by the arbitral institution, whether it be the London Court of International Arbitration, International Chamber of Commerce, Swiss Chambers or Dubai.

All such institutions need to exercise more oversight and control in order to assure that any particularly egregious problems that arise in the context of the given case are corrected. The parties should have confidence that somebody is looking over the shoulder of a given proceeding to make sure that it doesn’t run seriously off the tracks.

Editor: Should agreements relating to M&A and other international transactions specify that disputes will be settled by ADR?

Adams: The reason for the current steadily rising flow of international arbitration is that Western companies going into developing countries were simply not willing to submit disputes relating to their contractual rights to the jurisdiction of those countries’ local courts.  

On the other hand, the governments of developing countries were for reasons of national sovereignty unwilling to agree to accept the jurisdiction of the local courts of the United States, France, Great Britain or whichever Western country was involved. International arbitration became the only available compromise, and that, to a large degree, remains the case today.

 International arbitration seems to be the most desirable solution from the standpoint of all stakeholders. It is an entirely consensual contractual means of international dispute resolution. The parties provide for it in their contracts because it is something that they want to do.

Editor: Based on your conversations with members of the end user community, is international arbitration deemed to be quicker, cheaper, less complicated and more likely to be fair and equitable in result than conventional litigation in domestic courts? If not, please suggest ways to address their concerns.

Adams: There is an increasing concern on the part of major end users that the system is not quicker, cheaper, less expensive or more fair than the alternative of conventional litigation. This can be addressed, as I have said, by first of all reinforcing the degree of oversight and quality control by the sponsoring arbitral institutions. More robust guidelines are needed to assure that arbitral tribunals reach dispositive results within a reasonable time.

I am among those who believe that it would be a good thing if the pool of experienced international arbitrators were to be expanded and diversified. It should be more accessible to qualified arbitrators from emerging markets and less populated by the longstanding club of largely Western European and American professional arbitrators, who are undoubtedly extremely well qualified and persons of competence and integrity. The pool would be enhanced by increasing the representation of younger lawyers. Other professionals should also be included because it is true that the function of an arbitrator need not necessarily be exclusively reserved to the legal profession.

Editor: Litigation costs have soared because of e-discovery. What is the impact of e-discovery on international arbitration?

Adams: Mercifully international arbitration in principle is not subject to the curse of discovery, electronic or otherwise. The document production process is very tightly controlled, and it’s a good thing, because once the camel of discovery gets its nose under the tent of international arbitration, things will become very difficult because e-discovery has become phenomenally expensive.

Editor: What problems are encountered in enforcing international arbitration awards?

Adams: An international arbitration award is not worth the paper it’s written on unless it can be enforced, and so the enforceability of the award is something that one needs to consider at the very outset of the proceeding because if there is no prospect of finding assets against which to enforce the award, then one is going to be throwing good money after bad.

It cannot be emphasized enough that this is an issue to be considered at the time of contract negotiation and not only when the dispute arises or once the arbitration is launched. The enforcement of arbitration awards is something that often involves skilled lawyering to the same degree as the conduct of the proceeding itself. It can be fun because it can involve attaching huge ocean-going container ships or aircraft or bank accounts in exotic locations, and there is a fair amount of intelligence gathering that goes into it.

Editor: Does your firm follow through on the enforcement side?

Adams: You betand we’ve had some real adventures in so doing. One of my favorites has to do with the enforcement of a $100 million arbitration award that we had secured on behalf of the consortium, a joint venture of two important clients of ours, against a party in Taiwan.

This was a Singapore arbitration under Taiwan law, and Taiwan is not a signatory of the UN convention on the enforcement of international arbitration awards, so the enforcement of this award in Taiwan against assets of the Taiwanese respondents was simply not feasible. However, one of the Taiwanese parties involved in the case on the other side was a well-known global marine transport company.

Ships are obviously moveable. Therefore it was necessary to track the movements of a ship belonging to the Taiwanese company into a port in a jurisdiction that is a signatory to the UN conventionand then to pounce. So we set up a system after the issuance of the award to track the movements of the ships of the Taiwanese company.

We got word that one of its ships, which happened to be the largest container ship in the world, was making steam for the Port of Le Havre in France. We got everything ready, and on the day that the ship turned up in the port we had some people in Paris get the stamp of enforcement on the international arbitration award. They got in a taxicab and barreled down the highway to Le Havre.

When they arrived, it wasn’t difficult for them to find the ship, which was three times the length of a football field. They marched up the gangplank and put the papers of arrest in the hands of the captain.

Editor: What about enforcement against sovereigns?

Adams: Dealings with sovereigns require considerations of issues of sovereign immunity because you don’t really want to go through an arbitration process and end up with an award against the government of country X and then find out that you can’t enforce it because you’re dealing with a sovereign who has the benefit of sovereign immunity.

At the time of contract negotiation, you want to make sure that you have waivers of sovereign immunity to provide you with the opportunity of going after a governmental agency and ultimately enforcing an award against its assets or against the assets of the sovereign without being faced with the defense of sovereign immunity. There is a whole body of law out there about the enforcement of international arbitration awards against sovereigns that is very important and needs to be taken into consideration whenever there is any question of a dispute arising out of a contract between a private sector party and a sovereign government.

Please email the interviewee at ccadams@akingump.com with questions about this interview.