by Andrew Flake
I had the opportunity to join colleagues last week at the excellent Berlin Dispute Resolution Days, an annual week of dispute-resolution programming put on by the German Ministry of Justice and the German Arbitration Institute (DIS).
I was a panel member, joining virtually, and our topic was one of common concern for non-U.S. lawyers: Whether an arbitration seated in the United States really the equivalent of litigation in the United States, with some of the features associated with it: longer timetables, lengthy motion practice, and above all, extensive discovery.
The answer, in short, is no. It is other factors, like the parties’ agreement, the rules they adopt and the administering institution, and arbitrator selection, that will principally define the arbitration.
Take a scenario in which a lawyer for a German company is negotiating with the lawyer for that company’s U.S. joint venture partner, and the first draft contains a New York judicial forum selection clause. While the German lawyer may be inclined to simply strike the US jurisdiction, that may invite the other side to simply strike the European jurisdiction, leaving the parties to select a location equally inconvenient for both.
But what if the German company has offices in New York and most of its witnesses are there? The German lawyer might agree to the New York seat, but suggest use of German law, along with an international arbitration rule set like those of the ICC , UNCITRAL, or the International Centre for Dispute Resolution (ICDR). ICDR Rules which are adapted to international arbitration.
These rules eschew the more open-ended discovery permitted under civil procedure rules in federal and state court litigation in favor of focused information exchange closer to international norms. And arbitration as a forum for dispute resolution, in general, offers a frequently acceptable compromise over the home country courts of one party or another.
Then there is arbitrator selection, which as experienced practitioners know, is critical, for a U.S.-seated arbitration as elsewhere. If desired, the advocate can include in the arbitration clause a particular process for selection of arbitrators. European arbitration counsel, for example, may be more comfortable with a protocol in which each party selects a wing arbitrator, and those two arbitrators then work together to select a chair.
Also, an experienced U.S.-based arbitrator, like colleagues abroad, will be very attuned to the difference between domestic litigation and arbitration, particularly those who practice in the international area. They will not only look to the rules and seek to apply them, with party input, in letter and spirit, but they will bring a sensibility and cross-cultural awareness that fits the case at hand, as part of the administrative process of the organization.
Another point our panel discussed, and that bears mention here, is the strong federal policy, embodied in our Federal Arbitration Act, in favor of arbitral resolution. United States courts are very experienced with arbitration involving international parties, and where the parties have agreed to arbitrate a dispute, United States courts respect and enforce that choice.
The enforcement process is also straightforward; for commercial awards, the United States is a party to and has implemented the New York Convention. That means the bases for challenge to a foreign or non-domestic award are very limited, consistent with the regimes and processes most familiar to our foreign colleagues.
To some degree, all of these factors explain why U.S. arbitration involving international parties should be, and as a rule, is, quite different from litigation in U.S. courts. The location of the arbitration does not tell us the whole story. It is other features that define the arbitration more definitely, and they are ones over which the foreign advocate has a high degree of control and input over the process, permitting more flexibility in negotiation of dispute-resolution processes and in the arbitration itself.