CPR Arbitration Committee Draft: May 18, 2016
The CPR Corporate Counsel Manual for Cross-Border Dispute Resolution
Table of Contents
Page
INTRODUCTION
1
PLANNING FOR A CROSS-BORDER DISPUTE
1
A.
The Importance of Planning.....................................................................................1
B.
Negotiation and Mediation ......................................................................................2
C.
Expert Determination and Dispute Boards ..............................................................3
D.
International Commercial Arbitration......................................................................4
E.
Investment Arbitration .............................................................................................9
DRAFTING
CROSS-BORDER
STEP-CLAUSES
PROVIDING
FOR
NEGOTIATION AND/OR MEDIATION BEFORE FINAL, BINDING DISPUTE
RESOLUTION
10
A.
Necessary Elements of a Step-Clause ....................................................................11
B.
Optional Elements ..................................................................................................13
Interim relief ..............................................................................................13
Tolling limitations periods .........................................................................13
Confidentiality and use of documents exchanged in negotiation or
mediation in subsequent arbitration or litigation .......................................14
C.
Special Considerations for Negotiation .................................................................15
Time and manner of negotiation ................................................................15
Specifying negotiators ...............................................................................15
D.
Special Considerations for Mediation ....................................................................16
Selection of mediator .................................................................................16
Mediation rules ..........................................................................................17
E.
Three-step clause ...................................................................................................17
F.
Drafting a mediation agreement after a dispute has arisen ....................................18
DRAFTING EXPERT DETERMINATION AND DISPUTE BOARD CLAUSES
19
DRAFTING INTERNATIONAL ARBITRATION CLAUSES
19
A.
Necessary Elements ...............................................................................................19
Choice of Institutional or Ad Hoc Arbitration Rules .................................20
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a.
Institutional or ad hoc arbitration? .................................................21
b.
Model clauses.................................................................................25
Scope of Disputes Subject to Arbitration and Mandatory Language ........26
Seat or Place of Arbitration........................................................................27
a.
Importance of choosing a seat in the arbitration clause .................27
b.
Recommended seats .......................................................................29
c.
The applicable arbitration law (lex arbitri) ....................................30
Language of the Arbitration .......................................................................30
Arbitrator Selection ....................................................................................32
a.
Number of arbitrators .....................................................................32
b.
Method of selection........................................................................32
Law Governing the Contract and Any Disputes Arising Out of or
Relating to the Contract .............................................................................34
a.
B.
Applicability of CISG ....................................................................36
Optional Elements ..................................................................................................36
Affiliate and Parent Guarantors .................................................................37
Allocation of Costs and Fees .....................................................................37
Arbitrator Qualifications ............................................................................40
a.
Expertise ........................................................................................40
b.
Nationality......................................................................................41
c.
Impartiality and independence .......................................................42
Confidentiality ...........................................................................................42
Currency of Award and Interest Rate ........................................................44
Disclosure Limitations ...............................................................................45
a.
CPR Protocol .................................................................................46
b.
IBA Rules of Evidence ..................................................................47
Appellate Review of an Arbitral Award ....................................................48
Finality of Arbitration ................................................................................49
Interim, Provisional and Conservatory Measures ......................................50
Remedies ....................................................................................................53
Amiable Compositeur and Ex Aequo et Bono ...........................................53
Baseball Arbitration ...................................................................................54
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Time Limits and Fast-Tracking .................................................................55
States, State Entities and International Organizations as a Contracting
Party: Waiver of Immunity .......................................................................56
Protective Measures when Counterparty Hails from, or the Contract is
to be Performed in, a Jurisdiction that Is Unreliable or Hostile to
Arbitration ..................................................................................................57
Sole Option Clauses ...................................................................................59
C.
Multi-Party and Multi-Contract Arbitration Clauses .............................................61
Multi-Party Arbitration Clauses .................................................................61
a.
Choice of institutional or ad hoc arbitration ..................................62
b.
Consent and notice .........................................................................62
c.
Arbitrator selection ........................................................................63
d.
Joinder and intervention .................................................................64
e.
Consolidation .................................................................................65
Multi-Contract Arbitration Clauses ...........................................................65
Model Clauses ............................................................................................67
D.
Battle of the Forms and Master Agreements .........................................................71
E.
Agreement to Submit Existing Dispute to Arbitration ..........................................72
STRUCTURING FOREIGN INVESTMENTS TO ATTRACT INVESTMENT
TREATY PROTECTION AGAINST POTENTIAL GOVERNMENT ACTION
73
A.
The Protection Offered by Bilateral Investment Treaties, Investment Chapters
in Free Trade Agreements, and International Investment Arbitration ...................73
B.
The Agreement to Arbitrate in Investment Arbitration .........................................75
C.
Arbitral Institutions for Investment Arbitration .....................................................76
D.
Some Salient Issues That Frequently Arise in Investment Arbitration..................77
Fork in the Road v. Exhaustion of Local Remedies and Other PreConditions to Arbitration ...........................................................................77
Jurisdiction .................................................................................................78
a.
Jurisdiction rationae materiae – is there a covered investment? ...78
b.
Jurisdiction rationae personae – is there a covered investor? .......79
c.
Jurisdiction rationae temporis – timing of the dispute ..................80
Applicable Law ..........................................................................................80
Merits, Damages and Remedies .................................................................80
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E.
The Importance of Planning – Protecting Investments Before It’s Too Late ........81
Structuring Foreign Investments to Attract Investment Treaty
Protection Against Potential Government Action......................................81
Political Risk Insurance .............................................................................82
PRACTICAL TIPS
ARBITRATION
FOR
MANAGING
CROSS-BORDER
ADR
AND
82
A.
Managing Negotiation, Mediation, Expert Determination and Dispute Board
Proceedings ............................................................................................................82
B.
Managing an International Commercial Arbitration..............................................82
Amicable Settlement ..................................................................................82
a.
Tolling statutory time limits to allow resolution by agreement .....83
b.
“Last offer” or “high-low” arbitration ...........................................84
c.
“Sealed” or “Calderbank” offer .....................................................85
Initial Stages...............................................................................................87
a.
Review of the arbitration provision ...............................................87
b.
Early case assessment ....................................................................87
c.
Retention of outside counsel/staffing.............................................88
d.
Arbitrator selection ........................................................................88
e.
Consideration of time limits and fast-track procedures .................91
f.
Document preservation measures ..................................................92
g.
Document collection and organization ..........................................93
h.
Early retention of experts ...............................................................93
i.
Initial pleadings ..............................................................................94
j.
Insurance and third-party funding ..................................................94
Case Management Conference ..................................................................95
a.
Crafting the procedural rules and timetable ...................................95
b.
Importance of cooperating with opposing counsel ........................99
c.
In-person versus telephonic or video conferences .........................99
Ongoing Involvement (When Outside Counsel Has Been Retained) ........99
a.
Serving as a liaison between business personnel and outside
counsel .........................................................................................100
b.
Role in case developing and setting strategy ...............................100
c.
Witness identification and preparation ........................................100
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d.
Reviewing submissions ................................................................100
e.
Budget ..........................................................................................101
f.
Document production...................................................................101
g.
Attendance at case management conferences and hearing ..........101
Post-Award Involvement .........................................................................102
C.
a.
Assessment of and internal communication about the award ......102
b.
Request for interpretation / correction .........................................102
c.
Voluntary compliance/settlement ................................................102
d.
Set-aside proceedings...................................................................103
e.
Enforcement proceedings.............................................................104
f.
Decide whether to retain new outside counsel .............................104
g.
Feedback / Database ....................................................................104
Managing an Investment Arbitration ...................................................................105
Selection of Counsel and Arbitrators .......................................................105
Early Case Assessment ............................................................................105
Arbitrating Against State Actors ..............................................................105
Post-Award ..............................................................................................106
ANNEX
USEFUL RESOURCES
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INTRODUCTION
[To be added]
PLANNING FOR A CROSS-BORDER DISPUTE
A.
The Importance of Planning
No one wants to think of divorce during the courtship. When companies are “doing a deal,” how
the parties will resolve future disputes is often a low priority subject. Disputes, however, are a
reality of doing business that can be managed effectively by putting in place an appropriate
dispute management procedure at the time of contracting. With a well-planned and carefully
considered dispute management procedure, the parties may reduce the time, costs and disruption
caused by disputes, mitigate business risk, and ensure a dispute resolution process that is tailored
to the transaction and the company’s needs.
Planning is particularly critical in the cross-border context for several reasons. First, parties
from different jurisdictions may have vastly different expectations as to how disputes should be
resolved. These disparate expectations can be managed by crafting the dispute resolution
process in the original contract. Second, the lack of a clear, agreed-upon method of dispute
resolution may lead to parallel proceedings and multiple, inconsistent judgements if the courts of
two or more countries assert jurisdiction over an eventual dispute. By designating an exclusive
forum for the resolution of disputes, parties can minimize the risk of inconsistent judgments, and
the increased time and costs associated with parallel proceedings. Third, some countries have
unreliable legal systems that would not offer meaningful relief to an aggrieved party. Parties can
structure the dispute management process to minimize the risk that unreliable courts will impede
the dispute resolution process. Fourth, in the cross-border context, the assets required to satisfy
an award or judgment may be in a different jurisdiction than the place where the decision is
rendered. Parties therefore must plan for the possibility that they will need to enforce a decision
in more than one jurisdiction. The dispute resolution clause can be structured to facilitate
enforcement in different jurisdictions and avoid re-litigating a case in every jurisdiction where
enforcement is necessary.
Separately, companies investing in foreign countries may be able to take steps to mitigate against
the risk of interference by State actors in that country, by purchasing political risk insurance or
structuring an investment to benefit from an international treaty that provides a right to bring an
investment arbitration against the State.
The first step in effective planning for dispute resolution is to assess the nature and type of
disputes most likely to arise as well as the likely counterparties. Corporate counsel can then craft
a dispute management strategy that is tailored to the transaction and the client’s needs. This
chapter introduces six tools that can be employed in the international context with advance
planning in order to mitigate the risks of cross-border transactions and facilitate efficient dispute
management – negotiation, mediation, expert determination and dispute boards, international
commercial arbitration, and international investment arbitration.
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B.
Negotiation and Mediation
Two of the most commonly used ADR options in the international context are:

Negotiation: The parties attempt to reach an amicable settlement of their dispute through
direct oral and/or written exchanges without the intervention of a third party; and

Mediation: A neutral third party mediator facilitates an amicable settlement. In the
cross-border context, a mediator may help to bridge cultural divides between the parties
that could hinder effective communication and prevent them from finding common
ground on their own. Mediation has become a mainstream practice in many jurisdictions
in the past decade. For example, certain US courts now require mediation before they
will hear a matter. The European Union has promoted mediation through a 2008
directive on mediation in civil and commercial matters.1 A CPR survey that was
published in 2013 suggests that companies in the Asia Pacific region are also using
mediation: 80% of the 122 survey participants had recently used mediation.2
Both offer the prospect of resolving disputes more quickly, efficiently, and economically than
arbitration or litigation. They also increase the likelihood of preserving ongoing business
relationships. Depending on the counterparties in the transaction, the less adversarial nature of
negotiation and mediation may make them more culturally acceptable than a contentious
litigation or arbitration.3 Another benefit is confidentiality.
Negotiation and mediation may be used at any juncture of a dispute: as the first mode of dispute
resolution before a more formal adjudicatory process is pursued; after a litigation or arbitration
has been filed; or even after a decision has been rendered in a litigation or arbitration. They
usually are, however, most effective at cutting the time and costs of dispute resolution and
preserving business relationships, if they are the first steps in the dispute management procedure.
After a party initiates arbitration or litigation, positions may harden and emotions may create
barriers to settlement that may not erode (if at all) until the proceedings are well underway and
the parties have incurred substantial costs.
There are benefits to using negotiation or mediation before turning to litigation or arbitration
even if the process does not lead to an immediate resolution of the dispute. As a result of the
negotiation or mediation process, you are likely to gain a better understanding of the other side’s
position, strengths and weaknesses on both sides, and personalities on the other side of the table,
all of which may inform a subsequent litigation or arbitration strategy. A preliminary
negotiation or mediation might be particularly valuable in the context of cross-border disputes
where the parties do not have a long-standing business relationship or are unfamiliar with the
1
2
3
Directive 2008/52/EC of the European Parliament and of the Council of 21 May 208 on certain aspects of mediation in civil
and commercial matters, 2008 O.J. (L 136) 3-8.
Attitudes Toward ADR In the Asia-Pacific Region: A CPR Survey at 12, available at http://www.cpradr.org/Portals/0/AsiaPacific%20Survey.pdf.
When asked why they had used mediation, participants in the 2013 CPR survey on attitudes toward ADR in the Asia-Pacific
region listed “less adversarial process” and “more culturally acceptable” among the top reasons. Attitudes Toward ADR In
the Asia-Pacific Region: A CPR Survey at 13, available at http://www.cpradr.org/Portals/0/Asia-Pacific%20Survey.pdf.
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other side’s legal culture. Early negotiation or mediation may also open the lines of
communication between the parties and sow the seeds for later amicable resolution.
Corporate counsel should plan for negotiation and mediation before a dispute arises by
considering including these mechanisms in the dispute resolution clause of the contract (as the
likelihood that parties will agree to it once a dispute has arisen is low). Without careful drafting,
however, negotiation and mediation clauses may do more harm than good. For example, a
clause that requires negotiation before arbitration or litigation but that does not specify a time
limit on negotiation could be used by an uncooperative party to frustrate the other side’s attempt
to initiate arbitration or litigation. Recommended language and considerations for drafting
negotiation and mediation clauses are set forth in Chapter III below.
C.
Expert Determination and Dispute Boards
Expert determination is a type of alternative dispute resolution in which the parties agree to
submit certain disputes to one or more third parties chosen for their expertise in the subject
matter – the expert(s). Expert determination is a flexible procedure that can be adapted to fit the
circumstances. The parties may elect for the expert determination to be binding (on an interim or
final basis) or non-binding (in which case the purpose of the expert’s opinion is to help the
parties reach a resolution by agreement). When the decision is binding, the parties often provide
that it may be reviewed for fraud or manifest error. Where the contract provides for arbitration
as the general dispute resolution method, jurisdiction to conduct this review typically will lie
with the arbitral tribunal; otherwise, the national courts will be competent. Unlike negotiation
and mediation which can be used at any stage of the dispute resolution process, expert
determination typically precedes arbitration or litigation and would not be used after an award or
court decision has been rendered.
Expert determination has its origins in non-contentious valuation4 and, to this day, is commonly
used in valuation disputes, such as post-closing disputes over purchase price adjustments in the
M&A context. While the expert’s authority is often limited to deciding specific factual and
technical issues within his area of expertise,5 expert determinations are now used in a wide
variety of contexts other than valuations, ranging from oilfield exploration to rent reviews,
intellectual property, mining, and international construction contracts.
Expert determination is considered a faster, less expensive, and more informal method of dispute
resolution than arbitration or litigation.
One particular form of expert determination is a “dispute board” (“DB”). Dispute boards can be
used for any kind of long-term project, but are most common in international construction
contracts. There are several options here as well. While most DBs are standing bodies of
experts appointed by the parties to resolve disputes as they arise over the course of the project,
they can also be constituted ad hoc for a particular dispute that arises. And while so-called
4
5
Early English cases referred to the expert as a “valuer” and the procedure as “valuation” or an “appraisment.” John Kendall
et al., Expert Determination 4 (4th ed. 2008).
As discussed in Chapter IV below, the expert determination clause of a contract should enumerate with specificity the types
of disputes that will be subject to expert determination.
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dispute adjudication boards (“DAB”) issue binding decisions that become final if not challenged
by a particular deadline, the decisions of so-called dispute review boards (“DRB”) are advisory
in nature.
One potential disadvantage to expert determination, particularly in the cross-border context, is
that the expert’s decision may not be summarily enforceable before national courts depending on
how the clause is drafted and applicable law. Model language and guidance for crafting an
expert determination or DB procedure is in Chapter IV below.
D.
International Commercial Arbitration
The most critical choice in structuring a dispute management procedure in a contract is whether
to select arbitration or litigation. As a general rule, every dispute resolution clause in a crossborder commercial contract should specify one or the other, even if it provides for another
dispute resolution option to be pursued first, because you must plan for the possibility that the
negotiation or mediation will fail or that a party may seek to challenge an expert determination
and it is important to specify a forum where any dispute will be resolved with finality.6 [NTD:
Once expert determination chapter is drafted, confirm that last sentence of this para. conforms
with advice therein.]
A significant benefit of arbitration in the cross-border context is the 1958 Convention on the
Recognition and Enforcement of Foreign Arbitral Awards7 (“New York Convention”) which
requires signatory States to recognize and enforce arbitral awards rendered in other States,
subject only to certain limited exceptions enumerated in the Convention. As of April 2016, 156
[update before publication] States have ratified the New York Convention.8 No similar
convention exists with respect to the enforcement of foreign court judgments.9 As a result, the
enforcement of an arbitral award is often faster and more likely to succeed than enforcement of a
foreign court judgment, with less risk that the local courts will rehear the merits of the dispute.
Arbitration has several other potential advantages to litigation, including:
6
7
8
9
A dispute resolution provision that provides for negotiation or mediation before litigation or arbitration can be commenced
is referred to as a “step clause.” Step clauses are discussed further in Chapter III.C. Tips for drafting a hybrid expert
determination-arbitration clause are in Chapter IV.
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Jun. 10, 1958, 330 U.N.T.S. 38, available at
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html.
Note that nearly every country has adopted the reciprocity reservation to the New York Convention, meaning that they will
apply the Convention regime only to arbitral awards rendered in other State parties to the Convention. For that reason, as
explained in Chapter VI.A.3 below, it is important to seat the arbitration in a State that has ratified the New York
Convention.
The Convention on Choice of Court Agreements sets up a framework for the recognition and enforcement of court
judgments between signatory States that is similar to the New York Convention. Convention on Choice of Court
Agreements Chapter 3, Jun. 30, 2005, 330 U.N.T.S. 3 [To check that treaty source is correct]. As of [April 2016], however,
the Convention has been ratified only by the European Union and Mexico, which means it cannot be used outside of those
jurisdictions. Convention of 30 June 2005 on Choice of Court Agreements, Status table, Hague Conference on Private
International Law, https://www.hcch.net/en/instruments/conventions/status-table/?cid=98 (last visited Apr. 28, 2016).
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
avoiding unreliable local courts that are biased, corrupt, unacceptably slow, or lack
quality judges;10

decreasing the time and cost of dispute resolution because arbitral awards are not
generally subject to appeal,11 unlike court decisions which can be appealed up the
national court chain;12

assuring the prompt availability of a dispute resolution process (rather than entering a
long litigation queue, or having some local court decline to hear a matter at all);

flexible procedures selected by the parties;

more limited discovery than in some legal systems, particularly the US and some other
common law jurisdictions;

ability to choose the decision-makers; and

enhanced confidentiality in some cases.
In reality, international arbitration may not be faster, nor less expensive, than litigation.
However, other factors, such as neutrality, enforceability, confidentiality, possibility to select
arbitrators with subject matter expertise, or flexibility may favor arbitration even where
arbitration is likely to rival litigation in expense and complexity.
When deciding which option works best for your client and the deal, it is important to consider
the following questions.
1. Would it be advantageous to insist on litigation on home turf and does your company
have the bargaining power to so insist?
Consider whether there could be a tactical advantage if the counterparty would agree to litigate
disputes in the home territory of your company’s entity that is a party to the agreement. Such
advantages could include reduced effort and cost for your company. In addition, the
counterparty may be reluctant to take a dispute to court if it perceives that your firm may have a
“home field advantage.” (Interestingly, lawyers within many companies do not believe that their
local courts treat their companies any differently from businesses headquartered elsewhere;
nevertheless the perception on the other side of your deal may be different.)
2. Are the local courts where litigation may take place reliable, fair, and efficient?
10
11
12
Another alternative to avoid litigation in an unreliable jurisdiction would be to select the courts of a “neutral” jurisdiction
with reliable courts. Whether the selected jurisdiction will agree to hear a dispute that has no contacts with the jurisdiction
other than the parties’ forum-selection clause will depend on local law.
Some arbitral institutions, including CPR, now offer an appeal process for arbitral awards that the parties can opt into in
their arbitration agreement. See infra Chapter V.B.x.
Note, however, that annulment proceedings are possible and also may involve appeals up the national court chain of the
lower court’s annulment decision.
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If the only local courts available to the parties (by agreement or by default) are unreliable, either
because of concerns about lack of due process and fairness or because they are unacceptably
slow, arbitration may be the better option.13 If you do not have personal knowledge of the court
process in a jurisdiction that is being contemplated as the chosen forum, you should consult a
local lawyer in that jurisdiction.
3. What is the subject matter and what is the likely amount in dispute?
Some categories of disputes may be better suited to arbitration, while others can be resolved
more effectively through litigation. There are no bright line rules that certain types of disputes
should be arbitrated while others should be litigated, but consider the following:
13
14
15

For technical disputes involving complex claims, arbitration is often preferable to
litigation because the parties can select arbitrators with technical expertise in the subject
matter. For example, it may be preferred to have an accountant or lawyer with
accounting expertise decide an issue involving complex financial questions, or for an
engineer with a legal background or specialist construction lawyer to determine
satisfactory performance of a construction contract.14Judges in national courts usually
have only a legal training and no particular subject matter expertise. Exceptions exist
where countries have established specialist courts for particular areas (such as the English
Technology and Construction Court).

In simple collection matters for failure to pay for goods or services, or in matters
expected to be relatively modest (say, under $250,000), a court action in a reliable
jurisdiction with efficient procedures for handling such claims – or even the threat of one
– may resolve matters more quickly and less expensively than arbitration. On the other
hand, many arbitration institutions now offer fast-track arbitration with expedited
timelines for the arbitration process that apply either at the option of the parties or by
default if the amount in dispute is below a certain threshold.15

It is often faster and more effective to seek injunctive relief or exclusion orders for
infringement of intellectual property (IP) rights from local courts, assuming the relevant
local courts are reliable. IP claims may arise under a wide range of contracts, from standalone confidentiality agreements to technology license agreements to commercial
contracts containing confidentiality and other IP-related clauses (e.g., agent and
distributor, manufacturing and supply, proprietary equipment sale, and JV agreements).
The existence of IP-related claims does not, by itself, mean that parties should choose
litigation over arbitration for the transaction. All considerations should be weighed. If
there is a possibility of a dispute involving IP but other considerations militate in favor of
Even if arbitration is chosen, the courts of an unreliable or arbitration-unfriendly jurisdiction may interfere with the arbitral
process. While this risk cannot be eliminated entirely, the arbitration clause can be drafted to minimize this risk. See infra
Chapter V.B.13.
As discussed in Chapter V.B.x, parties can specify arbitrator requirements in the arbitration clause, although the general
recommendation is to avoid doing so or, at the very least, to make the requirements as broad as possible. If expertise
requirements are too specific, the parties may find it difficult or even impossible to locate suitable arbitrators later.
See infra Chapter IV.B.x.
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arbitration, you should ensure that you will have the right to seek preliminary injunctive
relief in court in aid of arbitration.16

Arbitration is often preferred over litigation for joint venture transactions involving two
or more parties from different jurisdictions.
4. Will the dispute involve non-arbitrable issues?
A non-arbitrable issue is one that is considered as falling under the exclusive jurisdiction of
national courts because of public policy considerations. There is no international standard of
what constitutes a non-arbitrable issue. This is governed by national law, usually the arbitration
law of the place of arbitration, although a court seized of the issue may apply forum law.
In arbitration-friendly jurisdictions, most claims are considered arbitrable. One common
exception is claims relating to the existence and validity of IP rights that have been granted by a
sovereign power (such as patents). However, the worldwide trend is to allow parties to arbitrate
contractual disputes relating to such rights. Other issues that may be non-arbitrable include
disputes with consumers and employees (e.g., in certain European jurisdictions), family law
matters, insolvency matters, anti-trust/competition law matters, and tenancy matters.
If the disputes that are likely to arise will relate to non-arbitrable issues, then you should select
litigation rather than arbitration.
5. Where does the counter-party have assets that can be used to satisfy any damages
awarded?
First, determine the countries in which the counterparty has sufficient assets to satisfy a likely
damages award. Second, consider whether there are any international treaties or conventions –
bilateral or multilateral – on the enforcement of judgments between those countries and the
country where litigation is contemplated. If such a treaty is in force, then litigation may be a
viable option. For example, Council Regulation No. 44/2001 requires European Union member
States to recognize and enforce judgments rendered by the courts of another member State in
civil and commercial matters without “any special procedure being required.”17 A national court
can refuse recognition only on certain limited grounds, such as if the judgment violates the
public policy of the recognizing State or is irreconcilable with a judgment of the recognizing
court in a dispute between the same parties.18 If the transaction is to take place exclusively
within the European Union, the parties may decide that litigation is preferable to arbitration.
Even where there is no treaty in place requiring the enforcement of foreign court judgments, a
local court may enforce a foreign court judgment as a matter of international comity. The
enforcement of foreign judgments under principles of international comity will, however, depend
on local law in the country where enforcement is sought. The New York Convention eliminates
16
17
18
This right is often set forth in the chosen arbitration rules and/or the arbitration law of the place of arbitration and may not
need to be expressly set forth in the arbitration clause. See infra Chapter VI.B.9.
Council Regulation (EC) 44/2001, O.J. (L 12), Chapter III Recognition and Enforcement.
Council Regulation (EC) 44/2001, O.J. (L 12), Art. 33.
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much of the uncertainty associated with enforcement of foreign judgments under principles of
comity, which is why arbitration is usually preferable to litigation if there is no applicable treaty
on enforcement of local court judgments. Nearly every country you will encounter in business is
a signatory to the New York Convention. (Notable non-signatories include Iraq, Libya and
Taiwan19 [check at time of publication].) Generally speaking, if both the countries of likely
enforcement and the arbitral seat are located in New York Convention countries, an arbitration
award should be more readily enforceable than a court judgment.
Note of caution: Some New York Convention countries have failed to implement
adequate local legislation giving effect to the New York Convention, or have a track
record of applying the New York Convention unreliably (for instance, by interpreting the
limited grounds for refusing enforcement broadly in order to review an award on the
merits). The arbitration clause therefore should specify an arbitration-friendly place of
arbitration.20 If the counterparty is from a New York Convention country with a poor
track record of compliance with the New York Convention, or the transaction or dispute
may implicate such a country, further measures may be needed to optimize your
company’s ability to enforce an arbitration award.21
6. Is confidentiality critical?
The parties may desire to keep disputes confidential, especially where trade secrets or
commercially sensitive information could be at issue. Arbitration is generally superior to
litigation for that purpose, although arbitration does not guarantee that proceedings will be kept
confidential. Arbitration rules vary in how thoroughly they impose confidentiality obligations on
the parties and arbitrators. If confidentiality is important, you should consider including explicit
confidentiality obligations in the arbitration agreement, in addition to whatever requirements are
in the chosen rules. (Even in that case, the award may become public as result of post-award set
aside / enforcement proceedings.)
On the other hand, sometimes a company wants the reputation enhancement that can come from
standing up in a public court to assert its rights, such as when its IP is misused, or there is the
threat of a pattern of repeated misconduct, perhaps by many similarly situated counterparties,
that might be chilled. In such cases, a company may wish to choose litigation over arbitration.
19
20
21
These countries may, however, have bilateral treaties for the recognition and enforcement of court decisions and/or awards.
For example, Article VI, paragraph 4 of the Treaty of Friendship, Commerce, and Navigation between Taiwan and the US
provides that awards rendered in arbitrations involving “nationals, corporations or associations” of both countries “shall be
provided full faith and credit by the courts within the territories of the High Contracting Party in which it was rendered,
provided the arbitration proceedings were conducted in good faith and in conformity with the agreement for arbitration”.
Treaty of Friendship, Commerce, and Navigation, US-China (Taiwan), Nov. 4, 1972, T.I.A.S. 1871. It also states that
nationals and corporations of both parties should be able to exercise legal rights and privileges “on terms no less favorable
than the terms which are or may hereafter be accorded to the nationals” of the other party. Id. While this provision may
facilitate enforcement of Taiwanese awards and court judgments in the US (and vice versa), it does not guarantee
enforcement and does not provide the same level of certainty and predictability as enforcement under the New York
Convention.
See infra Chapter V.A.3.
See infra Chapter V.B.16.
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It should also be noted that some court systems do include relatively stringent confidentiality
safeguards. For example, in many continental European jurisdictions, litigation proceedings are
conducted in private, with very little information being made available to the general public. In
the US, where court records normally are freely available to the public, it is possible for certain
parts of the court record to be sealed, or (rarely) for an entire case to be conducted under seal.
However, it is reasonable to expect that even the most confidential information may become
publically available if it is used as evidence at trial. In England and other systems based on the
English model, the general rule is that non-parties may obtain copies of the statement of case,
judgments, and orders given or made in public without having to apply for permission (subject to
certain exceptions). Other documents filed with the court may be obtained by application and
particularly sensitive information may be kept private if the court makes an order to that effect.
At the far end of the publicity scale, the constitution of the Republic of Ireland guarantees that all
judicial proceedings will be open to the public except in extraordinary circumstances as set forth
in Irish law.22
If other considerations militate in favor of litigation, and the contemplated jurisdiction is one
with adequate confidentiality safeguards, then litigation may be a viable option even if it is likely
that future disputes will involve confidential issues.
E.
Investment Arbitration
International investment arbitration is a specialized form of arbitration of disputes arising
between foreign investors and the governments of the countries where their investments are
located. It can differ in significant respects from international commercial arbitration. For
example, while in international commercial arbitration the right to arbitrate usually arises from
the parties’ agreement, in international investment arbitration the right to arbitrate usually arises
from an international treaty. Such treaty typically is a bilateral investment treaty (“BIT”) or a
free trade agreement (“FTA”) with investment protection provisions, that gives investors of one
signatory State the right to arbitrate with another signatory State any disputes that arise from that
State’s breach of the substantive protections provided in the treaty.23 The US is party to 48
22
23
Examples of circumstances where a party can apply to the Irish courts for a matter to be heard in private include matters
relating to minors, lunacy, family law, official secrets, take-over applications, certain Companies Act applications and where
the proceedings involve the disclosure of a secret manufacturing process.
A BIT is a treaty between two countries to promote reciprocal investment. A FTA is a treaty between two or more countries
that promotes trade. Many FTAs, such as the North American Free Trade Association (NAFTA), include investment
chapters that provide protections similar to those in BITs. In addition to entering BITs or FTAs, countries seeking foreign
investment may enact domestic investment protection laws that give foreign investors protections similar to those provided
in BITs, including the right to resolve investment disputes by international arbitration. An investment arbitration can also
arise from a contract involving a State or State entity that provides for arbitration as the exclusive means of dispute
resolution.
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BITs24 and 13 FTAs.25 There are more than 3,000 international investment agreements (“IIAs”)
worldwide, the vast majority of which are BITs.26
Investment arbitration is not a panacea for all investor ills. Such cases are likely to raise
complex issues of public international law that usually take a long time and much expense to
develop and be decided. As a result, an investment arbitration may last several years (depending
on the procedure adopted by the particular tribunal). Nevertheless, the possibility of investment
arbitration can provide much-needed protection for investors making foreign investments,
against wrongful expropriation, unfair or inequitable treatment, or discriminatory measures.
Investors have recovered hundreds of millions, if not billions, of dollars through investment
arbitration cases in the past.
In a manner similar to tax planning of an investment, well-advised investors hedge against State
interference by structuring their investments to take advantage of an IIA to which its home State
and the host State of the investment are parties.27 For example, if a company is not incorporated
in a country that has a BIT with a country in which the company is contemplating an investment,
the company may want to consider structuring the investment through an affiliate that is
incorporated in a State that has a BIT with the host State. When doing so, care must be taken to
ensure that the BIT contains sufficient protections and not to run afoul of a so-called “denial of
benefits” clause found in some BITs, which precludes the application of the treaty to
corporations without substantial business activities in the State of their incorporation.
Consulting an investment arbitration specialist when structuring an investment is the surest
means of obtaining effective treaty coverage.
DRAFTING CROSS-BORDER STEP-CLAUSES PROVIDING FOR
NEGOTIATION AND/OR MEDIATION BEFORE FINAL, BINDING DISPUTE
RESOLUTION
One of the greatest challenges in drafting dispute resolution clauses is to balance provisions
designed to avoid and/or mitigate the necessity for formal dispute resolution with provisions
designed to provide a final resolution for disputes. This chapter introduces dispute resolution
clauses providing for stepped progression through dispute resolution procedures of various
degrees of formality (negotiation among the parties and mediation) with final resolution through
24
25
26
27
See US Bilateral Investment Treaties, US DEP’T OF STATE, http://www.state.gov/e/eb/ifd/bit/117402.htm (last visited [ADD
B/F PUBLICATION]) (listing all 48 BITs).
Benefits of US Free Trade Agreements, US DEP’T OF STATE, http://www.state.gov/e/eb/tpp/bta/fta/c26474.htm (last visited
[ADD B/F PUBLICATION]).
See International Investment Agreements, INV. POLICY HUB, U.N. CONFERENCE ON TRADE & DEV.,
http://investmentpolicyhub.unctad.org/IIA (last visited [ADD B/F PUBLICATION]. The United Nations Conference on
Trade
and
Development
(UNCTAD)
website
has
country
specific
lists
of
BITs
at
http://unctad.org/en/Pages/DIAE/International%20Investment%20Agreements%20(IIA)/Country-specific-Lists-ofBITs.aspx.
Another way in which investors often protect their investments in foreign countries is by purchasing political risk insurance.
Such insurance can be obtained from State-sponsored agencies like the US’ Overseas Private Investment Corporation
(“OPIC”), private agencies like Lloyds of London and AIG, and the World Bank’s Multilateral Investment Guaranty
Agency (“MIGA”). Such insurance typically covers political risks like currency inconvertibility, expropriation and political
violence, and thus may be less comprehensive than the protections accorded in an IIA. NOAH RUBINS & N. STEPHAN
KINSELLA, INTERNATIONAL INVESTMENT, POLITICAL RISK AND DISPUTE RESOLUTION: A PRACTIONER’S GUIDE 69 (2005).
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binding arbitration. These dispute resolution clauses are frequently referred to as “step-clauses”
and they present a variety of drafting challenges which are discussed below.
At the outset, it is important to note that while it is often appropriate to provide for a period of
negotiation or mediation (or both), a cross-border contract must always provide for a final and
binding form of dispute resolution in the event that less formal dispute resolution procedures are
unsuccessful. Because negotiation and mediation should never be the sole means of dispute
resolution, this chapter focuses first on general considerations for drafting step-clauses, followed
by specific considerations relating to the negotiation and mediation aspects of the clause.
The most important task in drafting a multi-step clause is to carefully consider the specific
context in which the clause is being drafted with due consideration to the size and complexity of
the transaction, the identity, nationality and sophistication of the parties, and what each party’s
responsibility will be in the performance of the contract that will contain the clause. If speed of
enforcement is necessary for one of the parties, a step-clause providing for significant procedural
delays may not be appropriate. On the other hand, if the contract provides for a long-ongoing
relationship between the parties, a step-clause can be instrumental in helping the parties preserve
the relationship while resolving any disputes that may arise regarding operational issues along
the way. For example, if a contract provides for a single delivery of goods by one party and
prompt payment by the counter-party, a step clause may be inappropriate as the dispute is likely
to concern payment or the conformity of the goods and the delay associated with a step clause
may be prejudicial to the party seeking payment. In the alternative, if an agreement calls for the
parties to work together in a construction consortium to build an oil-refinery for a common
customer, a step clause may be very helpful as neither party will want the relationship to break
down over an operational dispute during the course of the project.
If, after taking into account the circumstances of the parties and their relationship, it appears that
a multi-step clause is appropriate, it is important to draft the clause with care. In particular, it is
critical that the clause leave no ambiguity about how the steps are to be triggered and when the
steps are completed. The clause should include clear deadlines. Any ambiguity can lead to
jurisdictional disputes, should one of the parties proceed to arbitration (or litigation). [This is
somewhat duplicative of what is in the necessary elements section and could be shortened or
deleted.]
A.
Necessary Elements of a Step-Clause
The following table sets forth the basic elements that any step clause must contain:
Elements that Any Step Clause Must Contain
Necessary Elements
1.
Clearly
and
broadly define the
disputes subject to
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Model Language
1. Any dispute arising out of or relating to this
[Agreement], including the breach, termination or
validity thereof (“Dispute”), shall be finally resolved
11
the
dispute
resolution
procedure in the
step clause
according to the procedures set forth in this section.
2. Specify
a
procedure
to
provide notice of
dispute
2. To initiate dispute resolution under this Section,
either party shall provide the other with written
notice of the Dispute delivered pursuant to the
procedures set forth in [notice provision] and
containing a brief statement of the disputed issue(s).
3. Specify steps in
dispute resolution
procedure
and
order in which
they must be
followed
3. The parties shall first seek to resolve any disputes by
[negotiation]/[mediation].
4. Set a time limit
after which either
party may initiate
the next step in
the procedure
4. If within [30] days of written notice of the Dispute by
either party pursuant to this Section, the parties have
not
resolved
the
Dispute
through
[negotiation]/[mediation], or if, at any time, the
parties agree that further negotiation will not resolve
the Dispute [for Committee discussion], either party
may commence arbitration pursuant to this Section.
Each of these points is further discussed below.
A requirement for written notice to initiate the dispute resolution process avoids disputes over
when the time period begins. A well-drafted step clause should be clear about how disputes are
noticed and how the dispute resolution process is initiated.
The clause should also be clear about when each step is considered completed. It is best to
include a strict time limit for completion running from the specific notice date. Avoid clauses
that give one of the parties’ discretion to derail the process through foot-dragging. For example,
a clause that states “disputes shall be negotiated by senior management until such negotiations
are concluded or reach an impasse” could enable a party wishing to delay the process to stall by
claiming that it has not completed the negotiations. Some arbitrators might find that the party’s
failure to agree that the negotiations are completed or that there is an impasse deprives the
arbitrator of jurisdiction or renders the claim inadmissible.
A strict time limit provides time for negotiation or mediation but eliminates the ability to use the
step-clause as a stalling device. A clear clause gives the potential claimant discretion about
whether to go to the next step or continue the negotiation/mediation. While there is no bright-
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line rule for how much time to require, step-clauses often provide for time periods in the range of
15 to 30 days for negotiation and 30 to 45 days for mediation. If negotiations are going well, the
parties can always agree to extend the deadline or delay the next step. In contrast, after a dispute
has arisen it is much more difficult to reach agreement to reduce the deadline.
Note of caution: Avoid requirements to negotiate or mediate “in good faith.” Good faith
requirements lead to disputes over whether the parties acted in good faith. Similarly, do
not include substantive progress requirements (e.g., a requirement that the negotiators
resolve “a financial range”) before the parties can advance to the next stage of the
dispute resolution process – substantive progress requirements lead to disputes.
B.
Optional Elements
The following optional elements can be considered when drafting a step-clause.
Interim relief
[TBD with Committee whether to address interim relief under necessary elements or optional
elements.]
In many agreements, there are some potential disputes for which a multi-step process may be
appropriate, but also certain disputes for which one of the parties may need immediate recourse
to interim relief. For example, immediate relief may be necessary to protect against irreparable
harm in contracts relating to IP rights in the event valuable information is misappropriated or
stolen. If the step clause [Consistently use step clause, not step-clause] does not provide
explicitly that immediate recourse to interim relief is available notwithstanding the requirement
to pursue negotiation and/or mediation, a party may be precluded from seeking such urgent relief
on the ground that the step clause must be complied with before launching a binding dispute
resolution procedure. The following language can be used to clarify that urgent disputes may be
resolved by expedited means notwithstanding the step clause.
Notwithstanding the foregoing, either party may seek at any time interim
relief through emergency arbitration [for Committee discussion] and/or
interim injunctive or other equitable relief in advance of or in aid of
arbitration and any other relief available to it from any governmental
administrative body such as customs and trade regulation authorities [TBD
with Committee].
Tolling limitations periods
It may also be useful to include in step-clauses a tolling agreement with respect to limitations
periods applicable to the subject claim. Occasionally step clauses can place claimants in a
dilemma because compliance with the procedure would arguably delay the initiation of an
arbitration until after the applicable limitations period has run. Language such as the following
helps to avoid this problem.
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Any period of limitations that would otherwise expire between the
initiation of the [negotiation/mediation] pursuant to this Section [__]
[between this and what?] shall be extended until thirty (30) days after the
conclusion of the [negotiation/mediation] or the expiration of the period
allotted for such [negotiation/mediation].
If a tolling agreement is desirable, it is important to seek advice from counsel in the appropriate
jurisdictions (which may include the jurisdiction where any ultimate arbitration would take
place, the jurisdiction of the chosen law, and any jurisdictions where you may need to enforce
the award). The validity of tolling agreements and whether statutory time limits can be waived
will be governed by applicable national law – it is possible that some limitations periods may not
be waivable.
Confidentiality and use of documents exchanged in negotiation or
mediation in subsequent arbitration or litigation
For negotiation or mediation to be effective, it is important for parties to be able to be candid
about the strengths and weaknesses of their positions. It is therefore advisable that settlement
negotiations be confidential and that discussions in that context be protected from later use.
Many attorneys assume that exchanges during negotiation and mediation are off limits from later
use. This assumption is not always justified. Negotiation is an ad hoc process and is unlikely to
be considered confidential absent an agreement between the parties. In many, but not all,
jurisdictions statements made in settlement discussions are protected from later use in
adjudicative proceedings.28 As for mediation, some, but by no means all, jurisdictions provide
for confidentiality of mediation.29 Additionally, if you provide for administered mediation under
institutional rules, the selected rules may include confidentiality provisions that apply by
default.30
If the default rules that are applicable to your transaction do not protect the parties’
communications made in the context of negotiation and/or mediation from later use or
disclosure, or if you are unsure about the default rules, you may wish to make this clear in the
step clause. The provision must distinguish statements made for the purposes of negotiation or
arbitration from underlying business documents or other evidence that may be discussed during
negotiation or mediation. Such pre-existing evidence should not become off-limits simply
because it is also exchanged during a settlement discussion. The model language below helps to
ensure that negotiation and/or mediation exchanges remain confidential and cannot be used in a
subsequent arbitration: [Add a sentence to explain the bracketed language regarding the
mediator.]
The parties agree that all offers, promises, conduct and statements,
whether oral or written, made in the course of the [negotiation][mediation]
28
29
30
[W&C to add a couple examples.]
[W&C to add a couple examples.]
See supra Chapter III.x [institutional mediation rules].
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by any of the parties, their agents, employees, experts and attorneys,
[and/or by the mediator] shall be confidential. Any such offers, promises,
conduct and statements are inadmissible in any proceeding under [crossreference arbitration clause] [TBD with Committee whether this should be
limited to any proceeding under arbitration clause or should be broader to
encompass any proceeding.], including for purposes of impeachment.
However, evidence that is otherwise admissible [Language to be
considered further] shall not be rendered inadmissible solely as a result of
its presentation or use during the [negotiation][mediation]. [The parties
agree that the mediator is immune from being called to testify in any
proceeding regarding the mediation and any documents and information in
the mediator’s possession will not be subpoenaed in any investigation
[wouldn’t such an agreement be difficult to enforce?], action or
proceeding, and all parties will oppose any effort to have the mediator
testify or documents subpoenaed.] [In light of the above comments,
review how the major arbitral institutions with mediation rules address
confidentiality of mediations and draft this clause to reflect the consensus
approach from those rules.]
C.
Special Considerations for Negotiation
The bottom line in preparing a negotiation provision is to tailor it to the specifics of the
relationship covered by the agreement. While some basic requirements may help to ensure that
the parties take the negotiation step seriously in an attempt to facilitate an amicable settlement
(rather than simply using it as a tactic to delay binding resolution), overly detailed requirements
may impede the negotiation process.
Time and manner of negotiation
Parties may wish to include specifications regarding the time and manner of the negotiation, such
as whether the negotiations are in-person or whether they should be preceded by written position
statements. Be careful, however, not to require procedures so cumbersome or detailed that they
risk impeding or even derailing the dispute resolution process. [We should have a similar section
under special considerations for mediation (where we would note, among other things, that
parties sometimes insert a requirement for a senior business person with authority to resolve the
dispute to attend at least one session on behalf of each party). Or we could have one general subsection on procedure under optional elements where we note that parties may wish to include
specifications for how the negotiation or mediation should be conducted, with a few sentences on
common specifications for negotiation and another para. on mediation procedure specifications,
with the general guidance not to get into too much detail in the clause.]
Specifying negotiators
Parties frequently include provisions in negotiation clauses that specify who should be the
negotiators. If you wish to include such a provision, don’t be too specific. Personnel change
over time and it is hard to predict in advance who may be best positioned to resolve a dispute.
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For example, sometimes parties provide for negotiation by top management. Individual disputes
may be too small for the involvement of personnel at that level or better resolved by personnel
with better knowledge of the facts and the relationship. Top-management provisions may also
be inappropriate where the two contracting parties are of very different sizes. For example, the
CEO of a large multi-national may not be the right person to resolve a dispute with a small
regional distributor. If you wish to designate negotiators in the clause by position, seek to ensure
that the designated negotiators from each side are evenly matched with due consideration for the
management and decision-making structures within both parties.
Alternatively, the clause may provide for negotiation by the managers of the project covered by
the agreement, but sometimes those managers are too close to the problem to resolve it.
Ordinarily, but not always, it is better for the representatives responsible for the negotiation not
to be the same people who were involved in the dispute. In other words, the negotiators should,
if possible, not have a direct personal or emotional stake in outcome of the dispute. It may also
be desirable for the negotiators to have responsibility for their business segment’s financial
performance, including the amount of any ultimate recovery by the claimant or liability of the
respondent.
D.
Special Considerations for Mediation
Mediation can follow a negotiation step or can be the first step in a staged dispute resolution
provision.31 Some considerations unique to mediation are discussed below.
Selection of mediator
The clause should specify how the parties will choose the mediator. One option is for the parties
to choose the mediator by agreement. Alternatively, the clause might provide for the parties to
engage a mediation provider to provide a list of qualified mediators. The parties may then seek
to agree on a mediator from the list or use a strike and rank procedure (e.g., out of a list of ten
mediators, each party may strike three and rank the remaining seven in order of preference with
mediator having the best joint ranking being appointed [what if there are two mediators with the
same score?]). Alternatively [it is unclear to what this is an alternative. Are there three
alternatives in the paragraph with the last sentence providing for straight appointment by the
mediation institution? If so, the “if the parties cannot agree” language should be deleted], the
agreement may provide for the mediation provider to choose the mediator if the parties cannot
agree.
Note that it is generally not advisable that the mediator also act as arbitrator. Ex parte
discussions between the mediator and each of the parties is an important part of the mediation
process and the mediator may obtain access to facts that one party may not want to be known to
the arbitrator. Also, in many jurisdictions, having a mediator transition to arbitrator may violate
ethical rules and could create problems with enforcement of the arbitral award. If the contract
involves one of those jurisdictions, it may be helpful to state explicitly in the mediation clause
that the mediator may not serve as an arbitrator regarding any mediated dispute.
31
Model language for the mediation portion of the clause can be found in the three-step clause in Chapter III.x [three step].
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Mediation rules
Most major arbitration institutions, including for example CPR, ICDR, JAMS, and the ICC
[NTD: To be defined first time are mentioned] provide mediation rules or procedures.32 Other
institutions such as the Centre for Effective Dispute Resolution (“CEDR”) in the UK are devoted
specifically to mediation and have a set of mediation rules.
While mediation is a flexible procedure not easily amenable to fixed rules, adoption of
institutional mediation procedures can have some benefits. One benefit is the ability to rely on
the organization to appoint a mediator if the parties cannot agree. Another benefit that can be
particularly useful in the cross-border context is that all of the major institutional mediation rules
provide for confidentiality of the process.33 As discussed above, not all jurisdictions
automatically assume that mediation is confidential and the institutional rules can ensure that
confidentiality is provided for by agreement.
Institutions that provide mediation rules publish model clause language to be used to specify
those rules. It is advisable to use that model language if you wish to adopt an institution’s
mediation rules.
If you do choose to adopt institutional mediation procedures, take care to ensure that the
procedures do not conflict with the provisions of your dispute resolution clause. For example,
the CPR Mediation Procedures provide that written submissions to the mediator must be
submitted “at least 10 days before the first substantive mediation conference.” This provision
could come into conflict with a step clause providing for a short period of mediation. If the
parties desire to complete the mediation more quickly, the dispute resolution clause should
specifically modify the time provided in the applicable rules for written submissions to the
mediator.
E.
Three-step clause
The necessary elements table above is based on a two-step clause that calls for either negotiation
or mediation and then arbitration. It is also possible to draft a step-clause that provides for a
progression through negotiation and then mediation before advancing to a binding dispute
resolution procedure. A suggested three-step-clause is set forth below. This clause provides for
institutional mediation under the CPR Mediation Procedure and includes only the basic
necessary elements.
Any dispute arising out of or relating to this [Agreement], including the
breach, termination or validity thereof (“Dispute”), shall be finally
resolved according to the procedures set forth in this Section.
To initiate dispute resolution under this Section, either party shall provide
the other with written notice of the Dispute delivered pursuant to the
32
33
[W&C to include references/examples.]
[W&C to include references/examples.]
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procedures set forth in [notice provision] and containing a brief statement
of the disputed issues.
The parties shall seek to resolve any Disputes by negotiation. If within
[30] days of written notice by either party of the Dispute, the parties have
not resolved the Dispute, or if, at any time, both parties determine that
further negotiation will not resolve the Dispute, either party may
commence a mediation pursuant to this Section.
Following negotiation, either party may commence a mediation before a
neutral mediator selected by the parties [and conducted according to the
[CPR Mediation Procedure] by written notice delivered pursuant to the
procedures set forth in [notice provision] to the other party. If within [30]
days of commencement of the mediation the parties have not resolved the
Dispute, or if, at any time, both parties determine that further mediation
will not resolve the Dispute, either party may commence an arbitration
pursuant to this Section.
Disputes not resolved through mediation according to this Section shall be
finally resolved by arbitration in accordance with the International
Institute for Conflict Prevention and Resolution (“CPR”) Rules for
Administered Arbitration of International Disputes (the “Rules). The seat
of the arbitration shall be [city, country]. The language of the arbitration
shall be [language]. There shall be [one or three] arbitrators, [selected in
accordance with the Rules.
F.
Drafting a mediation agreement after a dispute has arisen
In some cases, even where an agreement does not provide for stepped resolution of a dispute,
parties may decide to mediate an existing dispute. In such cases, the parties may wish to enter a
post-dispute mediation agreement with respect to the resolution of the specific dispute (often
referred to as a “submission agreement”). Because the parameters of the dispute are known, a
submission agreement can be more specific as to procedures. It is important to describe the
dispute in the submission agreement so that there are not later disputes about the agreement’s
scope.
A submission agreement may set out rules for mediator selection or name a specific mediator,
provide for written statements and evidence to be submitted to the mediator, length and location
of mediation conferences, and other procedures. If the parties have already chosen a mediator,
the mediator may also be a signatory to the submission agreement.
Alternatively, a submission agreement may be quite brief, expressing the parties’ desire to
commence mediation, describing the dispute briefly, and adopting a set of established
procedures, such as those of CPR. It is recommended, however, that the parties set out a firm
time limit after which formal dispute resolution may begin. The following language will suffice:
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We, the undersigned parties, hereby agree to submit to confidential
mediation under the CPR Mediation Procedure the following dispute:
[Describe briefly]
If the dispute has not been resolved within [60] days from the date hereof,
either party may submit the dispute to binding arbitration in accordance
with [cross-reference to arbitration clause]
[W&C to consider further this section F on next turn.]
DRAFTING EXPERT DETERMINATION AND DISPUTE BOARD CLAUSES
[A. Behrman rider to be inserted here]
DRAFTING INTERNATIONAL ARBITRATION CLAUSES
[Add introduction. Incorporate italicized language into introduction.]
Note of caution: The information in this chapter is generally applicable, but it may not
apply in special circumstances and is not a substitute for tailored advice from
experienced international arbitration counsel.
Main guideline: Keep it simple. If you do not need certain language, do not put it in.
A.
Necessary Elements
The following table sets forth the basic elements that any arbitration clause must contain:
Elements that Any Arbitration Clause Must Contain
Necessary Elements
Model Language
1. Clearly and broadly
define the disputes
subject to arbitration
1. Any dispute arising out of or relating to this contract,
including the breach, termination or validity thereof, …
2. Commit the parties to
arbitration
2. …. shall be finally resolved by arbitration …
3. Choose an arbitral
institution and its
rules, or ad hoc
arbitration rules (and,
in the latter case, an
appointing authority)
3. … in accordance with [the International Institute for
Conflict Prevention and Resolution Rules for
Administered Arbitration of International Disputes (the
“Rules”)].
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4. Choose the place of
arbitration (in a
country that has
ratified the 1958 New
York Convention)
4. The seat of the arbitration shall be [New York, New
York].
5. Choose the language
of the arbitration
5. The language of the arbitration shall be [English].
6. Specify the number
of arbitrators and
their method of
selection
6. There shall be [one or three] arbitrators, [selected in
accordance with the Rules].
Some of these elements are so essential that failure to include them will render the arbitration
clause unenforceable. Other elements are less essential in that, if they are not specified in the
clause, courts or the arbitration rules (if selected) will provide default procedures to save the
arbitration clause and the arbitration, but failing to specify these elements is likely to lead to
delay and additional cost.
If not specified elsewhere in the contract (which is preferable), the arbitration clause should also
identify the law governing the contract and any disputes arising out of or relating to the contract.
The following sections explain these elements (in a slightly different order), provide guidance on
how to choose among the various options, and propose drafting solutions. [These sections make
reference to the IBA Guidelines for Drafting International Arbitration Clauses (the “IBA
Drafting Guidelines”),34 which were drafted by a task force of highly-regarded arbitration
practitioners from around the world. These sections also refer to the CPR Master Guide on
Drafting Dispute Resolution Clauses (the “CPR Master Guide”), which provides useful guidance
on new and innovative uses of ADR for business and public disputes.] [NTD: Consider moving
bracketed text earlier and deleting here once Manual has been merged and drafts are closer to
final.]
Choice of Institutional or Ad Hoc Arbitration Rules
The decision between institutional or ad hoc arbitration precedes all other choices when drafting
arbitration clauses. In institutional arbitration, the parties choose an arbitral institution to
administer the arbitration according to its rules and procedures. In ad hoc arbitration, the arbitral
tribunal, once it is appointed, will determine any matters related to the procedure that the parties
have not agreed upon.
34
The IBA Drafting Guidelines were adopted by a resolution of the International Bar Association (“IBA”) Council on
October 7, 2010.
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Failure to incorporate a set of arbitration rules (i.e., a set of rules that will govern the arbitral
proceedings) into the arbitration clause may give rise to difficulties getting the arbitration started
and to procedural issues during the arbitration. This section provides guidance for deciding
between institutional and ad hoc arbitration, choosing an arbitral institution or ad hoc arbitration
rules, and incorporating the selected arbitral institution or rules into the arbitration clause.
Note of caution: Unless the arbitral institution you select has indicated that it is
prepared to do so,35 never mix and match, i.e., never provide that an arbitral institution
will administer the arbitration under another arbitral institution’s rules or under ad hoc
rules.
a.
Institutional or ad hoc arbitration?
In institutional arbitration, an arbitral institution assists in managing the arbitral proceedings in
exchange for a fee. One of the institution’s most important functions is aiding with arbitrator
selection. The institution will (i) make the necessary arbitrator appointments if a party defaults
or if the parties fail to agree on a sole arbitrator or chairperson, (ii) decide any challenges against
an arbitrator, and (iii) appoint a replacement arbitrator if an arbitrator can no longer serve and, as
applicable, the party that selected the arbitrator fails to make a new selection or the parties fail to
agree on a new sole arbitrator or chairperson. Arbitral institutions often have a roster of
arbitrators or other means of helping the parties find suitable arbitrator candidates. Arbitral
institutions also provide additional services, such as collecting advances for the administrative
and arbitrator fees, requesting and holding advances on costs, determining and paying the
arbitrators’ fees, organizing hearings, and handling communications between the parties and the
arbitrators. Several institutions provide (varying levels of) award review, thereby reducing the
risk of errors in the award.36 Award review can be especially helpful in cases heard by sole
arbitrators.
In ad hoc arbitration, the parties themselves are responsible for setting the proceedings in motion
and moving them forward, together with the arbitrators once appointed. While ad hoc arbitration
works well if the parties cooperate, there may be difficulties if a party is uncooperative. In that
case, the arbitration may move slowly, court assistance may be required, and it may even prove
difficult to get an arbitral tribunal in place (although good drafting can prevent this by naming an
appointing authority in the arbitration clause, as explained further below). Ad hoc arbitration
also leaves the sometimes awkward tasks of negotiating and administering arbitrator
compensation to the parties and the arbitrators themselves, although they can turn to the United
Nations Commission on International Trade Law (“UNCITRAL”) Rules for a framework to
collect deposits in order to secure fees and call upon third party services to administer fee
deposits. In ad hoc arbitration, the tribunal must draft the award without the benefit of review by
an experienced arbitral institution. The awards of ad hoc and institutional tribunals have the
same legal status and are subject to enforcement and set aside on the same grounds under the
35
36
For instance, the ICDR, LCIA, SCC and a few other arbitral institutions expressly state on their website that they administer
arbitrations under the UNCITRAL Arbitration Rules.
Note that the arbitral institution – even if named “court” – reviews the award for form and drafting errors and does not
decide the merits of the dispute; that responsibility remains with the arbitrators.
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New York Convention. Note, however, that ad hoc arbitration is prohibited in the People’s
Republic of China (“PRC”).37
Parties experienced in international arbitration usually prefer institutional arbitration. Although
arbitral institutions charge a fee for their services, most parties find that the benefits outweigh the
cost. The administrative fee is insignificant in comparison to attorneys’ and arbitrator fees, and
the services provided reduce the demand on the arbitrators’ (and counsel’s) time and ensure that
the arbitration starts quickly and runs smoothly. An arbitral institution can help resolve issues
that the parties could or did not anticipate when they drafted the arbitration clause. Moreover, an
arbitral award rendered under the auspices of a reputable institution may be less vulnerable to a
challenge in local courts, both because of the institution’s reputation and because the award
review that many institutions conduct enhances the likelihood that the award complies with
formal requirements (e.g., that it is signed, addresses all of the issues for decision, and contains
some reasoning) and is error-free. Choosing ad hoc arbitration and bypassing an arbitral
institution to save the administrative fee can be a false economy.38
Institutional or administered arbitration
(a)
Recommended arbitral institutions
If you opt for institutional arbitration, you should select a reputable institution with modern
arbitration rules (as those rules will govern the arbitral proceedings) and an established record of
administering international cases. While there are similarities among the various institutional
arbitration rules, they do differ and should be reviewed before you select an institution.
The following are major arbitral institutions with proven track records for international
commercial arbitration:
37
38

CPR – International Institute for Conflict Prevention and Resolution
(www.cpradr.org). Based in New York, US, CPR provides for administered
arbitration of international disputes through its Rules for Administered
Arbitration of International Disputes (“CPR Administered International
Rules”) which came into effect in late 2014. One unique feature of the CPR
Administered International Rules is the screened selection process that
prevents party-appointed arbitrators from learning which party nominated
them.

ICC – International Chamber of Commerce (www.iccwbo.org). Based in
Paris, France, the ICC administers arbitrations through its International Court
Arbitration Law (PRC), Art. 16 (stating that a valid arbitration agreement must provide inter alia for institutional
arbitration).
Note that many sovereign States prefer to avoid arbitral institutions and to select ad hoc arbitration, often under the
UNCITRAL Arbitration Rules (described in more detail below). As explained below, UNCITRAL arbitration is common,
generally works well, and is acceptable, especially in a commercial contract with a foreign State or State entity.
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of Arbitration, which was established in 1923.39 The ICC Rules of Arbitration
(“ICC Rules”) are among the most widely used. Among the ICC’s most
distinguishing features is its “scrutiny” of arbitral awards for both form and
substance.

LCIA – London Court of International Arbitration (www.lciaarbitration.com). Based in London, England, the LCIA is globally
recognized and its Arbitration Rules (“LCIA Rules”) are used throughout the
world. The LCIA Arbitration Court was established in 1985.40

ICDR – International Centre for Dispute Resolution (www.adr.org/icdr).
Based in New York, US, the ICDR is a specialized division of the American
Arbitration Association (“AAA”), responsible for the organization’s
international arbitrations. The ICDR administers international arbitrations
throughout the world under the AAA’s International Arbitration Rules
(“ICDR Rules”).

HKIAC – Hong Kong International Arbitration Centre (www.hkiac.org)
has long been a go-to institution for disputes with a Chinese or East Asian
nexus.

SIAC – Singapore International Arbitration Centre (www.siac.org.sg) is
increasingly selected for disputes with a South or East Asian nexus.

SCC – Stockholm Chamber of Commerce (www.sccinstitute.com) has
particular expertise in disputes involving parties from the Commonwealth of
Independent States (“CIS”) and China. [NTD: will need to ensure the rules of
institutions in last three bullets are defined the first time referenced.]
These arbitral institutions administer arbitrations around the world involving parties from diverse
nationalities and industries. Although all these institutions are capable of administrating
arbitrations in English, they are not necessarily able to administer proceedings in other
languages. If the language of the arbitration is not English, the parties should verify the
institution’s ability to administer arbitrations in that language.
(b)
Recommendation against unknown/untested
regional/local institutions
Be wary of requests to use any of the numerous regional and local arbitral institutions. Such
institutions often lack experience in administering international arbitrations and may not have the
expertise to handle disputes involving international parties or large, complex transactions. They
may lack staff with adequate language skills to administer the arbitration in English or other
39
40
The ICC International Court of Arbitration is not a “court,” but rather a body within the ICC that administers ICC
arbitrations. The arbitrations themselves are presided over and decided by a sole arbitrator or a three-member arbitral
tribunal appointed in accordance with the parties’ arbitration agreement.
Like the ICC, the LCIA is an arbitral institution rather than a “court.”
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languages. A local/regional institution’s roster of arbitrators may be limited and consist mainly
of local residents who may lack the expertise to serve in international cases, and the institution
may prohibit the parties from choosing arbitrators outside the roster. Favoritism towards the
local party may be a problem if the institution is located in the home country of your
counterparty. Finally, an award issued under the auspices of such an institution may lack
credibility, and foreign courts may be less willing to recognize or enforce the award.
There is one exception to this general rule to avoid local/regional institutions. When the seat of
arbitration is Mainland China, the validity of arbitration agreements providing for a foreign
arbitral institution and the enforceability of awards made under the auspices of a foreign arbitral
institution are uncertain. Thus, if the seat is in Mainland China, you should provide for a
Chinese institution. The most commonly used institution that has the most exposure to
international arbitration is the China International Economic and Trade Arbitration
Commission (“CIETAC”).
Ad hoc or non-administered arbitration
If you choose ad hoc or non-administered arbitration, you should adopt a set of rules designed
for such arbitrations. These will provide a clear mechanism for the appointment of the tribunal
as well as default rules for the conduct of the arbitration itself. Absent a designated set of
arbitration rules, you will need to go through the demanding exercise of spelling out, in the
arbitration clause, the rules and procedures that will govern the arbitral proceedings. That
exercise leads to long, complex clauses and poses the risk of inconsistencies and errors. In the
alternative, the parties and the arbitrator(s) will need to rely on the default provisions of the
arbitration law of the seat of arbitration (lex arbitri), which are often incomplete.
(a)
Recommended ad hoc arbitration rules
The following ad hoc arbitration rules are safe choices for international arbitration:

UNCITRAL
Arbitration
Rules
(http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2010Arbit
ration_rules.html). Drafted by UNCITRAL and adopted by resolution of the
United Nations (“UN”) General Assembly, these rules are widely used by
private parties and States for commercial and investment arbitrations. They
provide for ad hoc arbitration with no involvement whatsoever of the UN.

CPR’s Rules for Non-Administered Arbitration of International Disputes
(“CPR Non-Administered International Rules”) (www.cpradr.org).
These rules provide for management of the arbitration by the arbitral tribunal
and counsel. For a fee, CPR will provide certain administrative services,
including arbitrator selection and deciding challenges of arbitrators,
fundholding, award review, and conference room rental.

The Permanent Court of Arbitration (“PCA”)’s Arbitration Rules 2012
(“PCA Rules”) (http://www.pca-cpa.org). The PCA is an intergovernmental
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organization based in The Hague, the Netherlands, which focuses on
arbitration involving at least one State, State-controlled entity, or international
organization. The PCA Rules are based on the UNCITRAL Arbitration
Rules. PCA arbitration is not fully administered, but the PCA can (and often
does) provide administrative services and support.
(b)
The need to specify an appointing authority in
the arbitration clause
When opting for ad hoc arbitration, parties should specify an appointing authority in the
arbitration clause.41 The appointing authority will select and replace arbitrators when a party
fails to do so, thereby ensuring that the arbitration gets started and remains on track even if a
party defaults or is obstructive. Ideally, the parties will select the arbitrators themselves by
appointment or agreement. An appointing authority should be approached only as a last resort if
agreement cannot be reached.
The CPR and UNCITRAL ad hoc arbitration rules both provide model language for the
designation of an appointing authority.42 They also contain default provisions if the parties do
not specify an appointing authority; the CPR Non-Administered International Rules provide that
CPR will serve as the appointing authority, and the UNCITRAL Arbitration Rules provide that
any party may request the Secretary-General of the PCA to designate the appointing authority.43
In UNCITRAL arbitration, it is recommended to specify the appointing authority in the
arbitration clause to avoid the intermediary step of petitioning the Secretary-General PCA to
designate the appointing authority.
As a general rule, arbitral institutions make better appointing authorities than courts. Arbitral
institutions have rosters of arbitrators and are used to appointing arbitrators. They can act
relatively quickly. Any of the major arbitral institutions discussed above can serve as an
appointing authority for a relatively low fixed fee. If you wish to designate another entity as
appointing authority, you should be sure that (i) the entity has the requisite experience and
knowledge of international arbitrators to make good appointments, (ii) the entity is willing to act
as appointing authority, and (iii) you use the accurate name for the entity in the arbitration
clause. Never designate an individual as appointing authority, as the person might die or
otherwise become unavailable.
b.
Model clauses
When drafting an arbitration clause, start with the model clause recommended by the arbitral
institution, or the issuer of the arbitration rules, of your choice (e.g., when providing for the CPR
Administered International Rules, use the model clause recommended by CPR for those rules).
41
42
43
Note that naming an appointing authority is not necessary when you choose PCA arbitration, as Article 6 of the PCA Rules
provides that “[t]he Secretary-General of the Permanent Court of Arbitration shall serve as appointing authority.”
CPR recommends the following appointing authority clause: “The Neutral Organization designated to perform the functions
specified in Rules 5, 6 and 7 shall be [CPR or other organization].” The UNCITRAL Rules recommend the following
appointing authority clause: “The appointing authority shall be [name of institution or person].”
CPR Non-Administered International Rules, Art. 6.1; UNCITRAL Arbitration Rules, Art. 6(3).
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The up-to-date model clauses for the arbitration institutions and rules identified above appear on
the relevant institution’s website.44
Starting from the model clause ensures that the arbitration clause has all the essential elements to
make it fully effective and enforceable. Never leave out language as the model clauses typically
include only essential elements which cannot be omitted.
Using the model clause also guarantees that you are using the full, correct name of the institution
or rules that you wish to incorporate into the arbitration clause. Arbitration clauses drafted from
scratch all too often refer to an institution or set of rules that does not exist (e.g., the American
Chamber of Commerce, which does not exist, rather than the International Chamber of
Commerce or the American Arbitration Association, which do exist). Failure to specify
accurately the arbitral institution or rules may give rise to difficulties in getting the arbitration
started and may even result in unenforceability of the arbitration clause.
While model clauses are enforceable and adding additional elements is generally unnecessary,
the following elements (which are sometimes, but not always, part of the model clause) are
useful and should be included: place of arbitration, language of the arbitration, number of
arbitrators and their method of selection.45 As explained above, failure to include these three
elements will not render the clause unenforceable, but it will lead to additional delay and cost.
Adding other elements often leads to inconsistency and confusion and is generally not
recommended. If tailoring a model clause is nonetheless necessary because of the particular
needs of the parties or the circumstances of the transaction, refer to Chapters V.B and V.C
below, which discusses and provides suggested wording for additional elements that parties
frequently include. [NTD: When Manual is closer to final consider including this para. as part of
into to Chapter V and deleting here.]
Scope of Disputes Subject to Arbitration and Mandatory Language
The arbitration clause must include an agreement by the parties to resolve disputes by arbitration
(and arbitration only). This requirement is so obvious that it is easily overlooked. Use
mandatory language, i.e., “any dispute arising out of or relating to this contract shall be finally
resolved by arbitration.” Using a permissive word, such as “may,” can raise doubt as to whether
the parties intended arbitration as the sole dispute resolution method or only one of various
options. All model clauses for the arbitration institutions and rules recommended in this Manual
use mandatory language. Whereas omission of some of the other “necessary” elements of an
arbitration clause may result merely in delay or additional cost, omission of mandatory language
can be fatal to the parties’ choice of arbitration over litigation.
To avoid fragmentation of multiple related disputes in several forums, the arbitration clause
should also include language that is broad enough to cover not only disputes arising directly out
of the contract, but also any disputes relating to the relationship created by the contract and the
44
45
See Annex to this Manual, List of Useful Resources.
See Table on p. X above (Elements that Any Arbitration Clause Must Contain) and Chapters X (Seat or place of arbitration),
X (Language of the arbitration), and X (Number of arbitrators and method of selection) below.
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transactions contemplated thereby. The CPR Master Guide recommends beginning an
arbitration agreement with the following clause:
Any dispute arising out of or relating to this contract, including the breach,
termination or validity thereof, shall be finally resolved by arbitration …
This wording requires arbitration of any and all claims related to the parties’ contractual
relationship, including for instance claims that the contract was void ab initio and tort claims
arising from activities relating to the performance of the contract. More restrictive language,
such as “arising out of” or “arising under this contract,” has been construed to cover only breach
of contract claims. All model clauses for the arbitration institutions and rules recommended in
this Manual include the recommended broad language.
If the needs of the parties or the nature of the transaction requires submitting certain disputes to
another dispute resolution mechanism (e.g., expert determination or litigation), the arbitration
clause should include a carve-out clause or be made subject to another provision in the contract
that explicitly and clearly identifies the carved-out disputes and the dispute resolution
mechanism for these disputes (e.g., an expert determination clause for certain valuation or
technical disputes).46 To minimize disputes over the scope of the arbitration clause, the parties
must clearly identify which matters are subject to arbitration and which matters are subject to the
other dispute resolution mechanism. Note that, even when the arbitration clause and the carveout provision are drafted properly and without ambiguity, disputes may arise over whether a
specific fact pattern falls within the arbitration clause or the carve-out. For instance, as disputes
often involve more than one issue, a dispute may include some issues that call for arbitration and
others that fall within the carve-out. You should therefore avoid carve-outs if possible, but when
not possible use carve-out language along the following lines: [NTD: Consider whether
duplicative with Chapter IV once that chapter is complete.]
Subject to [the clause providing for a different dispute resolution mechanism],
any dispute … [use model arbitration clause language].
OR
Except with respect to [identify carved-out disputes], any dispute … [use model
arbitration clause language].
Seat or Place of Arbitration
a.
Importance of choosing a seat in the arbitration clause
The “seat” of arbitration47 is of major importance, and the parties should designate it in the
arbitration clause.
46
47
See supra Chapter IV regarding carve-outs for expert determination.
The “seat” of arbitration is also often referred to as the “place” of arbitration. These terms can be used interchangeably,
although many users prefer the word “seat” for the reason that it arguably signals that this is about more than the physical
location of the hearings and has important legal implications. This Manual uses the term “seat.”
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The seat of arbitration usually determines, among other things:
(1)
the nationality of the arbitral award under the New York Convention (which, as
detailed below, will have implications for the award’s enforceability in other
countries);
(2)
the national arbitration law or lex arbitri that will apply to the arbitration (which inter
alia regulates matters such as which disputes may be the subject of arbitration,
contains default procedural rules, and provides the bases upon which an award may
be annulled);
(3)
the courts that will have supervisory jurisdiction over the arbitration, including the
power to annul the award; and
(4)
the place where the hearings will likely (but not necessarily) take place.
The seat may also influence the nationality and background of the parties’ counsel and the
arbitrators, and thereby the procedures and approach to various matters in the arbitration. Parties
often prefer to select counsel and arbitrators located at the seat of arbitration (for reasons of cost
and familiarity with the applicable arbitration law), and arbitral institutions often select a
chairperson located at the seat of arbitration. Counsel and arbitrators in turn may be influenced
by the procedures and practices in domestic litigation at their place of residence.
Virtually all arbitration rules provide that, in the absence of party choice, the arbitrators will
determine the seat of arbitration. Thus, if the parties have designated a set of arbitration rules,
the failure to specify the seat will not derail the arbitration, but it could lead to delay and
additional cost at the outset of the arbitration if the parties disagree on the appropriate location.
Of even greater significance, as explained above, the courts at the seat of arbitration play a
supervisory role and are the only courts that have the critical power to annul the arbitral award.
Once a court at the seat of the arbitration has set aside an award, enforcing the award in a foreign
jurisdiction becomes difficult. The parties should not leave the decision as to which courts will
have the power to annul the arbitral award to the arbitrators after the start of the arbitration. Note
also that, if the parties have not specified arbitration rules or if the parties have provided for ad
hoc arbitration and failed to designate an appointing authority, the failure to specify a seat may
lead to an inability to initiate arbitration, because if the respondent party fails to appoint an
arbitrator, the claimant party would not know which court has the authority to appoint one on its
behalf.
Do not use language such as “The arbitral hearings will be held in [city, country]” to designate
the seat of arbitration. Most arbitration rules permit arbitrators to hold hearings at locations other
than the seat of arbitration. Designating where the hearings will occur without specifically
identifying the location as the “seat” of arbitration can give rise to disputes over whether the
parties intended to designate the seat of arbitration or merely the location of the arbitral hearings
or both. Moreover, if you decide to move the “place” of arbitration, be clear in the written
confirmation whether the intent is to change the “seat” or merely to change the location of the
hearing and not to change the seat.
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b.
Recommended seats
Note: The selection of a seat of arbitration is independent of the selection of an arbitral
institution that will administer the arbitration. Parties can, for example, select New York
as the seat of arbitration and the London-headquartered LCIA as the arbitral institution.
The seat should be in a country that has ratified the New York Convention. As over 150 States
have done so,48 this requirement is not onerous. Seating the arbitration in a New York
Convention country is important because most countries have adopted the reciprocity reservation
to the New York Convention and will enforce only arbitral awards rendered in other State parties
to the Convention; thus, seating the arbitration in a country that has ratified the New York
Convention increases the likelihood that the 150+ countries that have ratified the Convention
will enforce the award.
The seat of arbitration should also have an arbitration law that supports the powers of the
arbitrators, limits the authority of the courts to interfere with the arbitration, provides narrow
grounds for annulment of an arbitral award, and encourages enforcement of arbitral awards. In
addition, the courts at the seat of arbitration should have a track record of supporting arbitrations
without unnecessarily interfering in them, annulling arbitral awards only on narrow procedural
grounds, and generally enforcing arbitral awards. To keep your options for selecting counsel
open, you may also wish to avoid a jurisdiction that bars foreign counsel from representing
parties in the arbitration.
The four most commonly selected seats of arbitration are Geneva, London, New York, and
Paris.49 Each of these seats satisfies the criteria set forth above.
If the parties want a seat of arbitration other than the four most commonly selected sites, the
courts in the locations listed below have experience dealing with international arbitrations:
48
49
50

Europe: Stockholm (Sweden), Vienna (Austria), and Zurich (Switzerland) are
well-known regional arbitral centers. Stockholm and Vienna are frequently
chosen for disputes involving Russia, Eastern Europe, and the former Soviet
countries.50

North America: Washington, D.C. (US), Miami (US), and Montreal and Toronto
(Canada).

Asia: Hong Kong and Singapore.

Latin America: Santiago (Chile), Sao Paulo (Brazil), and Rio de Janeiro (Brazil).
See http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html.
2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process, available at
http://arbitrationpractices.whitecase.com/.
This listing of known “regional” seats is not intended to be an exclusive list of suitable seats in Western Europe. The
capitals of most nations in Western Europe would be acceptable.
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
The Middle East and Africa: Historically, parties have rarely seated international
arbitrations in jurisdictions in the Middle East and Africa. As a result, courts in
those regions lack track records in international arbitration. Although parties
sometimes select Egypt and Dubai, decisions of concern have come out of their
courts. Mauritius has recently marketed itself as a preferred seat of arbitration
with an African nexus, but the Mauritian courts do not yet have an established
track record. As the region becomes increasingly engaged in international
commerce and international commercial arbitration, Mauritius as well as
Johannesburg, which is also making efforts in this respect, may become widely
accepted international arbitration seats.
Having the arbitration seated in your own country is usually an advantage because you and your
counsel are comfortable with the language, courts, and facilities, and travel costs are often
reduced. As both parties tend to appreciate the advantage of arbitration in their home
jurisdiction, however, they usually seat the arbitration in a neutral location, i.e., a location
different from both parties’ home jurisdictions. When your counterparty is from a less
developed country, insisting on a seat in a different country is critical.51 There are several
notorious examples of courts in developing countries sabotaging international arbitrations at the
request of the local party (before, during, or after the arbitration). The risk of courts doing the
bidding of local parties is much lower in the four main centers of arbitration identified above.
Given that hearings usually take place at the seat of arbitration, other considerations when
selecting the seat of arbitration include geographical convenience for the parties and potential
witnesses, safety and general infrastructure, visa requirements, and whether suitable hearing,
lodging and dining facilities are available as well as services needed for the hearing (e.g.,
interpretation and stenographic services). As costs, convenience, and applicable law often favor
having counsel and arbitrators located at or close to the seat of arbitration, parties should also
consider the availability of experienced counsel and arbitrators at or near the seat.
c.
The applicable arbitration law (lex arbitri)52
Most national arbitration laws provide that they apply to arbitrations seated in the jurisdiction.
Thus, as a general rule, the arbitration clause does not need to specify the lex arbitri.
Some jurisdictions permit parties to select the arbitration law of a jurisdiction other than the seat
of arbitration. Doing so is not advisable because it adds unnecessary complication, which
frequently increases expense and delay.
In no case should you incorporate the procedural or evidentiary rules of the local courts – even
your own – into the arbitration clause.
Language of the Arbitration
51
52
See infra Chapter V.B.16 for additional precautions that can be taken when drafting an arbitration clause in a transaction
where the counterparty is from a jurisdiction that is unreliable or hostile to arbitration.
See Chapter X below on the need to choose the applicable substantive law in international contracts.
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The language of the arbitration will influence the parties’ choice of counsel and arbitrators and
will determine the ease with which they present their case. Failing to specify the language of the
arbitration in the arbitration clause is not fatal to the arbitration; the parties can still agree on it at
the outset of the arbitration, or the arbitrators will determine it. But leaving the decision until
arbitration begins causes uncertainty (e.g., in what language should the notice of arbitration be
filed?) and risks unnecessary cost and delay.
Considerations that bear on choosing the language of the arbitration include the language of the
contract and related documents, the working languages of the parties and personnel likely to be
involved in any arbitration, and the availability of a pool of qualified arbitrators and counsel.
Usually the language of the arbitration should follow that of the contract, as disputes about the
meaning of contract language are best resolved without translation. Preferably the language of
the arbitration will be one in which you and your counsel are fluent, as you do not want the
arbitrators to reach their decision based on translations of your briefs and documents or
interpretation of the testimony of your key witnesses. English is by far the most frequently
chosen language for international arbitration, though Spanish is becoming more frequent when
the transaction involves a Latin American party.
Providing for more than one language of arbitration is not recommended. Multi-lingual
arbitration presents challenges. If the clause requires the use of both languages, all procedural
steps, including the award, will need to be done in both languages, adding significant additional
expense and delay. An alternative may be to provide that one or the other language may be used
at the option of the party making the submission (instead of requiring everything in both
languages). The following language can be used:
The languages of the arbitration shall be […] and […]. The parties shall be entitled to
use either language, and to submit documents and other evidence in either language,
without the need for translation or interpretation into the other language. The award shall
be in [select applicable language].
This type of provision requires finding counsel and arbitrators who are equally at ease in both
languages and thus significantly reduces the pool of suitable counsel and arbitrator candidates.
Without counsel and arbitrators who have the ability to work in both languages, translation of
documents and interpretation of oral testimony will be required, adding complexity and expense.
Where the parties wish to have one arbitration language, but know there will be documents and
witnesses in a different language, they may specify one language of arbitration, while providing
that documents and testimony may be provided in another language without translation or
interpretation. The following language can be used:
The language of the arbitration shall be […], except that documentary and testimonial
evidence may be submitted in […] without need for translation or interpretation.
Again such an arrangement will work only if you, your counsel, and all of the arbitrators are
fluent in the language of the arbitration and sufficiently at ease in the other language to handle
documents and testimonial evidence in that language.
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Arbitrator Selection
a.
Number of arbitrators
Parties may either choose the number of arbitrators (typically one or three) in the arbitration
clause or wait to choose the appropriate number of arbitrators after a dispute arises (by providing
that there shall be “one or three” arbitrators). If the parties have failed to set the number of
arbitrators, most commonly-used arbitration rules (including those discussed above) set the
number of arbitrators or allow the arbitral institution to determine the number of arbitrators,
often based on a monetary threshold.
When deciding the number of arbitrators, parties should consider the potential amount in dispute
and the potential complexity of issues likely to be presented. A three-person tribunal is more
expensive, is likely to encounter more scheduling issues, and may take longer to issue the award,
but three arbitrators are generally better suited to decide complex, high stake issues. The
collegiality of a three-person tribunal may also reduce the risks of mistake or corruption.
Although a sole arbitrator may be able to advance arbitral proceedings more quickly and at a
lower cost, the risk of error (especially in ad hoc arbitration) is greater. As arbitral awards are
not subject to appeal and cannot be vacated for mistakes of fact or law, minimizing the risk of
errors is an important concern.
Parties may be tempted to leave the number of arbitrators open because predicting what disputes
will arise is difficult. Even though most arbitration rules contain default provisions,53 failing to
fix the number of arbitrators in the arbitration agreement creates uncertainty and can cause delay
at the outset of the arbitration, when the party that initiates the arbitration typically wants to
progress matters quickly. One approach that is sometimes followed is to set a monetary
threshold (including all claims and counterclaims) below which there will be a sole arbitrator.
Such approach is not always effective, as a party may try to circumvent such provision by an
artful phrasing of its request for relief and/or there may be a dispute as to whether the monetary
threshold is reached.
b.
Method of selection
Institutional and ad hoc arbitration rules usually contain default provisions for selecting
arbitrators. These provisions are typically satisfactory and apply by default, so specifying an
arbitrator selection mechanism in the arbitration clause usually is not necessary, with one
exception.
Some of the major institutional rules provide that the institution, not the parties, will select the
sole arbitrator or the chairperson in the event of a three-member tribunal.54 The choice of who
will serve as chairperson is one of the most important decisions in any arbitration and could
53
54
For example, under Rule 5.1 of the CPR Administered International Rules, the default number of arbitrators is three, unless
the parties agree otherwise in writing. Under the ICC Rules, the default is a sole arbitrator and the ICC International Court
of Arbitration will appoint three arbitrators only where the amount in dispute is above a given threshold. ICC Rules, Art.
12(2).
ICC Rules, Art. 12(5); LCIA Rules, Art. 5.6.
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determine the outcome. Parties should try to make this choice by agreement rather than leaving
it to a third party. Thus, where the chosen arbitration rules do not leave this choice to the parties,
it is recommended to include language that gives the parties (or, in the case of three-person
tribunals, the party-appointed arbitrators) the right to choose the sole arbitrator or chairperson by
agreement, with the institution making the selection only if the parties (or the party-appointed
arbitrators) fail to reach an agreement within a specified period of time.
[Add a couple sentences about default arbitral rules that provide a list arbitrator selection
method, such as CPR Rules, clarifying that such a selection procedure is satisfactory and that
customized language is generally unnecessary where a list procedure is the default rule.]
The following language is recommended when the parties wish to provide for a three-member
tribunal and the chosen rules do not give the parties the right to select and replace the
chairperson in the first instance:
There shall be three arbitrators, to be selected in accordance with [the applicable
arbitration rules] except that the third arbitrator, who shall act as [chairperson or
presiding arbitrator], shall be selected jointly by the two [parties / co-arbitrators] within
[30] days of the [confirmation of the] selection of the second arbitrator. If any arbitrators
are not selected within the foregoing time periods, the [institution] shall make the
selection(s). If replacement of an arbitrator becomes necessary, the party or parties
making the original selection shall select the replacement. If a replacement is not
selected within [30] days, the [institution] shall make the selection.
When the parties want to submit disputes to a sole arbitrator and the institutional rules do not
give the parties the right to select and replace the sole arbitrator in the first instance, the
following language is recommended:
There shall be one arbitrator, selected jointly by the parties. If the arbitrator is not
selected within [30] days of the receipt of the [request for arbitration/demand for
arbitration/notice of arbitration], the [institution] shall make the selection. If replacement
of the sole arbitrator becomes necessary, the parties shall jointly select the replacement.
If a replacement is not selected within [30] days, the [institution] shall make the selection.
Another exception you might wish to consider is if there will be a three-member tribunal and you
are confident that in any arbitration your company will be the claimant. Most arbitration rules
provide for consecutive appointment of the party-appointed arbitrators, with the claimant
selecting its arbitrator first. This gives the respondent the advantage that it can appoint its
arbitrator with the benefit of knowing the claimant’s appointee. If you wish to deny the (future)
respondent this benefit, you can provide for simultaneous selection of the arbitrators:
There shall be three arbitrators. Each party shall select an arbitrator within [30] days of
respondent’s receipt of the [request for arbitration/demand for arbitration/notice of
arbitration]. The third arbitrator, who shall act as [chairperson or presiding arbitrator],
shall be selected jointly by the [parties / co-arbitrators] within [30] days of the
[confirmation of the selection] of the party-appointed arbitrators. If any arbitrators are
not selected within the foregoing time periods, the [institution] shall make the
selection(s). If replacement of an arbitrator becomes necessary, the party or parties
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making the original selection shall select the replacement. If a replacement is not
selected within [30] days, the [institution] shall make the selection.
When including arbitrator selection provisions, be mindful of the terminology in the applicable
arbitration rules. For example, some rules distinguish a party’s power to “nominate” an
arbitrator from an institution’s power to “appoint” an arbitrator.
When a transaction involves more than two parties, the arbitration clause may need to address
the impact of this multiplicity of parties on the appointment of the arbitrators.55
Law Governing the Contract and Any Disputes Arising Out of or
Relating to the Contract
Note: The selection of the substantive law is independent of the selection of the seat of
arbitration. Parties could, for example, select Singapore as the seat of arbitration and
New York law as the governing substantive law. The selection of the substantive law is
also independent of the choice of the arbitral institution.
International contracts should specify the law that will govern the interpretation of the contract
and the merits of any dispute arising out of or relating to the contract. During their performance
of the contract, the parties need to know which law governs their contractual relationship and
their respective rights and obligations. Most arbitral rules (including all those recommended
herein) mandate that arbitral tribunals respect the parties’ express choice of law. Although the
parties could agree on the governing law at the outset of the arbitration, reaching agreement once
a dispute has arisen is unlikely. Failing agreement of the parties, the arbitrators will need to
determine the governing law,56 which will require party submissions on the issue and cause delay
and additional cost at the outset of the arbitration.
Commercial contracts often contain a clause separate from the arbitration clause that identifies
the substantive law that governs the contract and any disputes arising out of or relating to the
contract. Having a separate choice of law clause is generally recommended, as courts have at
times interpreted a choice of law in the arbitration provision to include a choice of the procedural
provisions of the chosen law. When there is a separate choice of law clause, the arbitration
clause should not include a choice of law provision, as having two provisions may give rise to
inconsistencies and disputes. If a contract fails to identify the governing law, the arbitration
clause should include a governing law provision. In that case, the clause heading should indicate
that the clause serves a dual purpose by stating, e.g., “Governing Law and Arbitration [or
Dispute Resolution].”
The choice of law language, whether in a separate clause or in the arbitration clause, should be
along the following lines (subject, of course, to specific advice from counsel qualified to advise
on the chosen law):
55
56
Drafting considerations and recommended clauses for multi-party and multi-contract arbitration are in Chapter V.C below.
Under virtually all arbitration rules and arbitration laws, absent party agreement, the arbitrators will determine the governing
law.
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This agreement shall be governed by and interpreted in accordance with,
and any disputes arising out of or relating to this agreement shall be
determined in accordance with, the law of [name a jurisdiction], without
regard to the choice of law rules of any jurisdiction.57
Note that this recommended language excludes not just the choice of law rules of the chosen
jurisdiction but the choice of law rules of any jurisdiction. Choice of law clauses often state that
the law of a certain jurisdiction will apply “without regard to its choice of law rules.” The use of
“its” can lead to the argument that the parties did not consider, and thus did not intend, to
exclude the choice of law rules of relevant jurisdictions other than the chosen one.
Most parties want to choose a governing law with which they and their counsel are familiar, so
that they know the contract is valid and they can predict how judges or arbitrators will interpret
the contract in case of dispute. Sometimes neither party to an international contract wants to let
the law of the other party govern the contract, so they agree on the law of a “neutral” jurisdiction
with which neither party is fully familiar. Such a compromise increases the risk of unintended
consequences. If you cannot impose your own law or if you and your counterparty agree to
choose the law of a third country, choose the system of a well-developed industrial country that
has a reputation in the international business community for providing contractual and regulatory
predictability and fairness and that others in the relevant industry have used for the type of
transaction involved. Several common and civil law jurisdictions satisfy these criteria and, while
the common law and civil law systems have significant differences, for many practical
international business purposes, they will offer broadly similar protection to the parties.
According to a 2010 survey, parties most frequently choose English, New York, Swiss, and
French law for international business transactions.58
That same survey indicates that parties often choose as the governing substantive law the law of
the seat of the arbitration.59 This is not necessary, but it does present advantages. For instance,
counsel admitted in that jurisdiction will be able to provide legal advice both on the merits and
on any legal issues related to the seat of the arbitration. There is also typically less risk that
conflict of law questions will arise, for instance, in relation to privilege, the law governing
interest, etc.
As a general rule, parties should not choose lex mercatoria or other international or a-national
rules of law as the governing law because such designation will likely create uncertainty as to the
content of the governing law.60 One exception to the general rule is if you must agree to the law
of a jurisdiction that has a commercial law which is not fully developed or idiosyncratic; in that
57
58
59
60
The “without regard” language may not be necessary in particular jurisdictions, but absent counsel advice should be
included.
2010
International
Arbitration
Survey:
Choices
in
International
Arbitration,
available
at
http://www.whitecase.com/files/upload/fileRepository/2010International_Arbitration_Survey_Choices_in_International_Ar
bitration.pdf.
Id.
This comment does not apply to the CISG, which is a multilateral treaty that is national law in the countries that have
adopted it. See id., Explanatory Note.
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case, adding a reference to lex mercatoria or “principles of international law” can give the
arbitral tribunal an avenue to avoid problematic provisions in the chosen law.61
a.
Applicability of CISG
Be aware that a contract for the sale of goods between parties from two different State parties to
the United Nations Convention on Contracts for the International Sale of Goods (1980) (better
known as the “CISG”) is governed by the CISG unless the parties expressly exclude it.62 The
CISG sets forth a comprehensive legal regime for contracts for the international sale of goods,
including for instance rules on offer and acceptance and remedies for non-performance. As of
April 19, 2016, UNCITRAL reports that 84 States have adopted the CISG.63 To exclude
application of the CISG, it is not sufficient to include a choice of law clause.64 You must instead
include express exclusionary language such as:
“The United Nations Convention on Contracts for the International Sale of
Goods (1980) shall not apply.”
B.
Optional Elements
The key advice in Chapter V regarding how to draft an arbitration clause in a contract was to
keep things simple. If a provision is not necessary, then do not include it. Chapter V.A
discusses two kinds of provisions that should be included in the arbitration clause: (a) provisions
that must be included to make the arbitration clause enforceable; and (b) provisions that should
be included to ensure the parties agree on fundamental issues relating to the arbitration
proceeding, such as the language of the arbitration and number and manner of selection of the
arbitrators, to avoid disagreement later that could prove to be a substantial hindrance.
This Chapter explores elements that parties could consider including when drafting the
arbitration clause. Arbitration is a creation of the parties’ consent. If the parties agree, they can
tailor the arbitration to suit their specific needs. That being said, no matter how prescient the
parties may be, they will not be able to predict with certainty the full panoply of disputes that
may arise out of or relate to a specific contract. Furthermore, although the parties may have a
sense of the facts and circumstances that may give rise to a dispute, they cannot predict with
certainty what their positions will be in the arbitration vis-à-vis the other party or parties.
Thus, there is a tension between the advantages of agreeing in advance on certain specifics of the
arbitration, and allowing room for flexibility should a dispute arise resulting in arbitration. This
Chapter considers what optional elements parties could consider when drafting the arbitration
clause, bearing in mind the pros and cons of actually including these elements. In particular, the
61
62
63
64
See infra Chapter V.B.12 (discussing amiable compositeur and ex aqueo et bono).
United Nations Convention on Contracts for the International Sale of Goods (CISG), Arts. 1, 6, available at
http://www.uncitral.org/uncitral/uncitral_texts/sale_goods/1980CISG.html.
Status, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), available at
http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html (last visited Apr. 19, 2016 [NTD: Use
consistent date format throughout the Manual]) [CONFIRM/UPDATE].
This may be sufficient in some jurisdictions, but it is not in many.
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inclusion of some of these elements may create unintentional tensions or conflicts with other
sources of rules that could be applicable to the arbitration, such as the arbitral rules selected by
the parties to govern the arbitration, or the lex arbitri of the seat of arbitration. Accordingly, it is
important to seek the advice of arbitration counsel when including these optional elements.
[NTD: Part of this introduction can be used in a general intro to Chapter V and deleted here.]
Affiliate and Parent Guarantors
As a general rule, only the parties that signed the agreement containing the arbitration clause will
be bound to arbitrate disputes arising under or relating to that agreement. This is because
arbitration is created by consent, and generally a party that has not consented to arbitrate a
dispute cannot be compelled to do so.
Admittedly, under exceptional circumstances, an arbitral tribunal may find that a non-signatory
may be required to participate in an arbitration even if it did not express its individual consent
through signature. Depending on the applicable law, a non-signatory may be required to
arbitrate a dispute under the following circumstances: (a) the non-signatory is an alter ego of an
affiliate company that signed an arbitration agreement; (b) an arbitral agreement may encompass
non-signatories when assent may be fairly implied by their conduct; (c) a successor in interest
may be bound to its predecessor’s arbitration agreement; (d) a principal may be bound by an
arbitration clause in its agent’s agreement; and (e) third-party beneficiaries may be bound under
the principle that they cannot avoid the burden of an agreement while accepting its benefits.65
Generally, guarantors and sureties are bound to arbitrate only if the guaranty or performance
bond either includes an arbitration clause or incorporates a contract containing an arbitration
clause. If at the time of contract drafting, it is clear that contract performance may involve
affiliates, or if contract performance is guaranteed by an affiliate (such as a parent company),
then that entity should sign the arbitration clause. Depending on the applicable law, the affiliate
may need to express its consent to be bound by the arbitration agreement both in that specific
provision and then generally at the end of the document.
Recommended language (to be accompanied by signature of the affiliate) [NTD: Introductions
to model language to be conformed throughout Manual.]:
[Affiliate] of the company expresses its consent to be bound by the
arbitration agreement.
Allocation of Costs and Fees
A frequent criticism that users voice about international arbitration is the considerable expense.
There are a variety of expenses associated with arbitration: (a) lawyer fees and expenses that
parties pay their legal counsel; (b) arbitrator fees, usually computed on an hourly or ad valorem
(i.e., depending on the amount in dispute) basis, as well as expenses incurred by the arbitrator
65
Note that this is not an exhaustive but rather an illustrative list of legal theories that may be available under the applicable
law to bind non-signatories.
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related to the arbitration (such as travel and hotel costs for attending a hearing); (c) institutional
fees if the arbitration is administered by an institution; and (d) other expenses associated with
presenting the claim or defense in the arbitration, such as expenses related to document
production (in particular, electronic document production), expert fees and expenses, witness
expenses, and expenses associated with the written and/or electronic submissions of the parties
(such as translation of documents, photocopying, couriering charges) and the hearing (such as
interpreter and court reporting services).
Uncertainty exists over how the arbitral tribunal will allocate these costs and fees at the end of
the proceedings in its final award. Most arbitration rules grant the arbitral tribunal wide
discretion as to how to allocate costs and fees and, to the extent arbitrators are influenced by
domestic practice, domestic approaches vary significantly by jurisdiction. Today, there are three
discernible trends regarding the allocation of costs and fees. First, the arbitrators may apportion
costs, including attorney fees, based on their perception of the parties’ respective success on the
merits, or “allocation pro rata.” Second, they may award the prevailing party all or substantially
all of the costs, without a view as to the degree of success on the merits, or “loser pays.” Third,
they may require each party to bear its own attorney fees and expenses and to split evenly the
shared costs of the arbitration, such as the arbitrators’ fees and expenses and/or the institution’s
fees, or “pay your own way.”66 In allocating costs, the arbitrators may also take into account
other factors, such as the conduct of an abusive party or counsel.
The parties could choose not to address the issue expressly in the arbitration clause. In such a
case, if the parties have chosen arbitration rules to govern the proceedings, the relevant provision
in the rules will govern. In some instances, the arbitration rules may simply grant discretion to
the arbitral tribunal regarding how to allocate fees and costs.67 Other arbitration rules may
specify a general principle for the arbitral tribunal to apply, although they typically leave the
final decision-making regarding allocation to the arbitral tribunal.68
If the parties agree with the approach used by the arbitration rules regarding allocation of costs
and fees, they do not need to specify any additional language in the arbitration clause. If,
however, they wish to modify such provision in the arbitration rules, or if the parties have not
66
67
68
Each of these approaches emphasizes a different policy objective. For example, “allocation pro rata,” employed by the
courts of many civil law jurisdictions (e.g., Swedish courts, among others) incentivizes the parties to calibrate carefully the
parity between amounts claimed and amounts that will likely be awarded, and invest proportionately in the proceedings,
resulting in efficient litigation or arbitration. “Loser pays,” also known as “costs follow the event,” applied by the English
courts, seeks to discourage unmeritorious actions or defenses, and to restore the prevailing party to the position it would
have been in had the wrong not occurred (i.e. had the litigation or arbitration not been initiated). Finally, “pay your own
way,” followed in US courts and thus sometimes known as the “US rule,” is meant to encourage access to justice where the
outcome on the merits is uncertain.
For example, Article 37(4) of the ICC Rules states, “The final award shall fix the costs of the arbitration and decide which of
the parties shall bear them or in what proportion they shall be borne by the parties.”
For example, Rule 19.2 of the CPR Rules Administered International Rules provides, “Subject to an agreement between the
parties to the contrary, the Tribunal may apportion the costs of arbitration between or among the parties in such manner as it
deems reasonable, taking into account the circumstances of the case, the conduct of the parties during the proceeding, and
the result of the arbitration.” Rule 28.4 of the LCIA Rules imposes some degree of constraint on the scope of this discretion,
providing in relevant part, “The Arbitral Tribunal shall make its decisions on both Arbitration Costs and Legal Costs on the
general principle that costs should reflect the parties’ relative success and failure in the award or arbitration under different
issues, except where it appears to the Arbitral Tribunal that in the circumstances the application of such a general principle
would be inappropriate under the Arbitration Agreement or otherwise.”
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selected applicable arbitration rules, they may wish to address the subject in their arbitration
clause. Such provisions may not be enforceable in certain jurisdictions where mandatory
applicable laws provide for how such costs and fees must be allocated; specific legal advice may
be required on this issue.
In specifying the approach to cost allocation in their arbitration clause, the parties have several
options available to them.

They could affirm that the arbitral tribunal has discretion to allocate costs and fees as it
deems appropriate. However, this approach does not address the uncertainty regarding
how the arbitral tribunal will go about doing so.

The parties could direct the arbitral tribunal as to how to allocate such costs and fees.
o For example, the parties could provide that each party will bear its own legal fees
and costs, and that any joint costs incurred by the parties shall be shared evenly.
o Alternatively, the parties could provide for allocation of costs and fees in
proportion to success. Under this approach, the parties may try to ensure that
costs and fees are allocated to the “winner” or the “prevailing party” on the
merits. The parties should avoid absolute language when drafting such a proposal
since identifying the “winner” or the degree of success of the “prevailing party”
may be difficult depending on the outcome in the final award, and the parties
should avoid unnecessarily constraining the arbitrators in such a situation.
The following recommended language can be used to implement each of the above three options:
The arbitral tribunal will in its award allocate the cost of the arbitration,
including legal fees, as the arbitral tribunal shall deem reasonable, taking
into account the circumstances of the case, the conduct of the parties
during the proceeding, and the results of the arbitration.
OR
Each party will bear its own costs and expenses, including legal fees, and
the costs and expenses of the arbitral tribunal [and of the arbitral
institution] shall be borne by the parties in equal shares.
OR
The arbitral tribunal will in its award allocate the cost of the arbitration,
including legal fees, according to the parties’ relative success on the
various claims and defenses as determined by the arbitral tribunal in its
discretion.
Occasionally, a party to an arbitration may submit a settlement offer to the other party during the
arbitration. This written offer may have significant implications regarding allocation of costs
depending on the law applicable to the arbitration. If the offer is rejected and the case proceeds
to judgment, and the offering party can show that given the final result, it was unreasonable for
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the other party to reject its offer, it can effect who will be ordered to pay the costs of the
proceeding, and how much. In jurisdictions such as Australia and the United Kingdom, such
offers of settlement are called “Calderbank Offers” or “Calderbank Letters.” The parties may
wish to include language in their arbitration clauses permitting or excluding the application of
such cost-shifting mechanisms.69
Arbitrator Qualifications
a.
Expertise
An often-touted advantage of international arbitration, compared to national court proceedings, is
that the parties have a degree of control over the selection of the arbitrators that constitute the
arbitral tribunal. Accordingly, the parties can choose individuals with expertise or knowledge
that is relevant to the specific dispute that has arisen under the agreement.
Generally, it is not considered advisable to specify in the arbitration clause the qualifications
required of arbitrators. At the time of drafting the arbitration clause, it is not possible for the
parties to foresee the full range of disputes that may arise under the agreement, or to predict with
certainty what their positions will be in a specific dispute. The expertise and qualifications
required to resolve one type of dispute may not be necessary or relevant for all of the disputes
that could arise under an agreement. Furthermore, specifying the expertise and qualifications in
advance could narrow the pool of available arbitrators, and a party seeking to delay the
proceeding may challenge an arbitrator on the basis that he or she does not satisfy the expertise
and qualification requirements specified in the arbitration clause. Usually, the parties will be in a
better position to know what they seek in an arbitrator, with respect to qualifications and
expertise, after the specific dispute has arisen. At that point in time, the parties will be able to
nominate specific individuals as their party-appointed arbitrators whom they believe possess the
requisite expertise and qualifications to resolve the dispute at hand. Furthermore, the parties
typically will be able to provide some input into the choice of the chair of the arbitral tribunal, 70
thereby ensuring that all members of the arbitral tribunal possess a degree of the expertise and
qualifications sought by the parties.
That being said, if the parties are certain that all types of disputes that may arise under the
agreement will require the same specialized knowledge or technical skills to resolve, they may
wish to specify such knowledge or skill in the arbitration clause, particularly if they agree to a
sole arbitrator. Even in that scenario, they should avoid overly specific or narrow requirements
(e.g., “at least ten years of experience in international fishery”) so as not to overly limit the pool
of potential arbitrators. For example, the parties could require, in relation to an IP contract, that
the arbitrator must be on the list of neutrals of the World Intellectual Property Organization
Center (“WIPO Center”)71 or members of the CPR Technology Panel.72
69
70
71
For a further discussion of “sealed” or “Calderbank” offers, see infra Chapter VII.B.1.c.
For example, CPR will typically convene the parties in a conference call. See Rule 6.2 of the CPR Rules for Administered
Arbitration of International Disputes.
The WIPO Center maintains a list of neutrals who may be appointed to an arbitral tribunal where the parties have selected
the WIPO Rules to govern the arbitration. The WIPO Center reasonably takes the view that IP disputes demand not only
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As another example, it may be important to the parties to ensure that the arbitrators are fluent in
a specific language. If the parties take the view that such expertise and qualifications would be
beneficial to resolve the most important disputes arising under their agreement, then they may
contractually require that any arbitrator appointed to the arbitral tribunal must satisfy those
requirements.
Recommended language:
Each arbitrator shall be [insert qualifications] [OR] [insert list of neutrals
on which arbitrators must be listed].
OR
Each arbitrator shall have experience relating to [specific industry].
OR
Each arbitrator shall be fluent in [language].
b.
Nationality
International parties may be concerned about the nationality of the arbitrators, especially the
presiding arbitrator or the sole arbitrator. If the parties choose arbitration rules to govern the
arbitration, then it typically is not necessary to specify a nationality restriction. This is because
the vast majority of arbitration rules provide that, unless the parties specify otherwise, the
presiding or sole arbitrator may not be of the same nationality as any of the parties.73
However, if the parties have not selected arbitration rules in their arbitration clause or the rules
they have selected do not contain nationality restrictions, then they may find it beneficial to
specify in their arbitration clause that the sole or presiding arbitrator shall be of a nationality
other than those of the parties (and, in appropriate circumstances, other than those of the parties’
respective parent companies).
72
73
procedural skills on the part of the decision-maker, but also specialized knowledge within the areas of patents, trademarks,
copyrights, designs or other forms of IP that may be the subject of the dispute. Accordingly, the WIPO Center categorizes
the area of IP law as well as the technical and business areas in which its neutrals have expertise.
The CPR Technology Panel is composed of neutrals with experience in all aspects of scientific and technological disputes.
They have backgrounds in natural sciences, computer science, electronics, engineering and similar technologies. Most have
backgrounds in patent and other intellectual property disputes. Technology and science disputants might also want to
consult CPR’s Bio, Health Care & Life Sciences, and Trademark Panels.
For example, Article 12(5) of the ICC Rules provides, “The sole arbitrator or the president of the arbitral tribunal shall be of
a nationality other than those of the parties. However, in suitable circumstances and provided that none of the parties
objects within the time limit fixed by the Court, the sole arbitrator or the president of the arbitral tribunal may be chosen
from a country of which any of the parties is a national.” Similarly, the UNCITRAL Rules provide that in the event the
parties are not able to agree upon the sole arbitrator or the two party-appointed arbitrators are unable to agree on the
presiding arbitrator, then the appointing authority (the Secretary-General of the Permanent Court of Arbitration, unless the
parties specified otherwise in the arbitration clause), will appoint the sole or presiding arbitrator. When doing so, Article
6(7) of the UNCITRAL Rules advises the appointing authority to appoint an individual of a nationality other than those of
the parties. Article 6(7) states, “The appointing authority shall have regard to such considerations as are likely to secure the
appointment of an independent and impartial arbitrator and shall take into account the advisability of appointing an arbitrator
of a nationality other than the nationality of the parties.”
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Recommended language:
The [sole arbitrator] [presiding arbitrator] shall not be of the same
nationality as any of the parties [or their parent companies].
c.
Impartiality and independence
Parties sometimes consider whether to include language specifying that the arbitrators making up
the arbitral tribunal shall be impartial and independent. Again, it is usually not necessary to do
so because the arbitration rules governing the arbitration will impose such requirements on the
arbitrators.74 The arbitration rules also typically provide the procedure for a challenge to an
arbitrator if circumstances exist that give rise to justifiable doubt regarding an arbitrator’s
independence or impartiality.
However, if the parties have chosen ad hoc arbitration in their arbitration clause, they may
consider including such language, particularly if the arbitration is seated in a jurisdiction that
does not require arbitrators to be independent or impartial for certain forms of domestic
arbitration.
Recommended language:
Each arbitrator shall be independent and impartial.
Confidentiality
One of the major reasons why parties choose to arbitrate their disputes, rather than litigate them,
is because international arbitration is a relatively private method of dispute resolution. It is
important to understand, however, that this does not mean that the arbitration proceedings
necessarily will be confidential. In most jurisdictions, parties do not have a duty to keep the
existence or the content of the arbitration proceedings confidential. In the few jurisdictions that
do impose a general obligation of confidentiality on the parties, the rule is subject to several
exceptions.
Several arbitration rules contain provisions on confidentiality. Accordingly, by selecting those
rules to govern the arbitration, the confidentiality provisions therein will be imported as well,
unless the parties specify otherwise in the arbitration clause.75 Here, it is important to check the
scope of the confidentiality provision in the arbitral rules to determine who is bound by the
provision. Where the arbitration rules chosen by the parties do not contain a provision on
confidentiality, or the parties wish to modify such a provision (in either direction of greater or
74
75
For example, Rule 7 of the CPR Administered International Rules states, “Each arbitrator shall be independent and
impartial.”
For example, Rule 20 of the CPR Administered International Rules provides, “Unless the parties agree otherwise, the
parties, the arbitrators and CPR shall treat the proceedings, any related disclosure, and the decisions of the Tribunal, as
confidential, except in connection with judicial proceedings ancillary to an arbitration, such as a judicial challenge to, or
enforcement of, an award, and unless otherwise required by law to protect a legal right of a party. To the extent possible,
any specific issues of confidentiality should be raised with and resolved by the Tribunal.”
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lesser confidentiality requirements), the parties should include language regarding confidentiality
requirements in the arbitration clause.
It is important to understand in advance the limitations on the bounds of confidentiality. It is not
advisable to draft an absolute requirement of confidentiality because the applicable law may
require disclosure of the existence or content of the arbitration proceedings under certain
circumstances. For example, a publicly traded company may need to make disclosures about the
existence of the arbitration and provide updates to its shareholders under applicable securities
laws. Furthermore, disclosure may be required to protect a party’s rights related to the
arbitration before the local courts, such as seeking judicial recognition and enforcement of an
arbitral award. Additionally, there are several non-party participants in an arbitration, such as
witnesses, experts, interpreters and translators, who may become exposed to confidential
information over the course of the arbitration proceeding.
Ultimately, it may not be possible to ensure absolute confidentiality (and, as noted above,
absolute confidentiality may not be desirable). And it should be noted that even if the arbitration
clause does not contain a confidentiality requirement, it may be possible for the parties to agree
upon some degree of confidentiality after an arbitration has been initiated. They may then enter
into a confidentiality agreement that governs the arbitration, or at the recommendation of the
parties, a provision regarding confidentiality may be included in a procedural order issued by the
tribunal at the outset of the arbitration.76
Recommended language:
The existence and content of the arbitral proceedings and any rulings or
award shall be kept confidential by the parties, members of the arbitral
tribunal [and the institution administering the arbitration] except to the
extent that (a) disclosure may be required of a party to fulfill a legal duty;
or (b) disclosure is required in proceedings related to the arbitration, such
as enforcing or challenging an award in legal proceedings before a state
court or other judicial authority. The parties shall require non-party
participants involved in the preparation or presentation of a claim or
defense in the arbitration to sign a confidentiality agreement that is in
accordance with this provision.
It may well be the case that the parties do not desire the existence and content of the arbitration
proceeding to be confidential, but rather to be made available in the public domain. This
typically would be the case when third parties may be affected by or have a reason to want to
know the outcome of the arbitration. For example, parties to an important licensing agreement
may want third parties in the industry to know of the outcome of an arbitration involving those
licensing rights.
Recommended language:
76
See infra Chapter VII.X [managing section on procedural orders].
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The parties shall not be under any confidentiality restrictions with regard
to any arbitrations initiated pursuant to this Agreement except as may be
required by law.
Currency of Award and Interest Rate
Typically, it is not necessary to specify the currency of the award in the arbitration clause
because the currency used by the parties in the agreement will be the currency selected by the
parties when preparing their claims and defenses regarding quantum of damages, and the arbitral
tribunal will employ this currency in its award (for damages, interest, and cost allocation).
Occasionally, it may be important for the parties to specify the currency of the award. For
example, if there is room for ambiguity because the agreement refers to multiple currencies, then
it may be prudent to specify the currency of the award. The parties may have to think ahead to
the kind of damages they will incur for breaches of the agreement, and then consider which
currency will best compensate them for those damages.
Alternatively, the parties may expressly choose a currency for the award that is different from the
currency generally used in this agreement. This may be especially important in long-term
agreements, or where the currency referenced in the agreement is unstable or subject to potential
depreciation. Under these circumstances, it is important that the currency chosen should not
result in damages amounts that would conflict with the economics of the contract.
The parties may also wish to provide the rate of interest that should be used to calculate
damages. The parties should choose between simple interest and compound interest (and, if the
latter, specify the compounding interval). The parties may also decide upon the rate of interest,
including pre-award interest (the rate of interest applicable to the period of time between when
the damage occurred and the date of the award) and post-award interest (the rate of interest
applicable to the period of time from the issuance of the award until the losing party pays
damages, or until the award is converted into an enforceable judgment by a court). If the parties
do not wish to specify a particular rate, they may consider specifying the law that applies to the
selection of the rate of interest.
Finally, when entering into contracts with a State-owned entity, it may be important to specify
the currency of the award if it is not clear from the agreement, especially if the preferred
currency is not the one used in the sovereign’s territory.
Recommended language:
Any monetary award in an arbitration initiated under this Article [ ] shall
be made in [currency].
Interest on the monetary award shall be [simple OR compound calculated
[insert interval basis]]
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The rate of interest shall be [insert rate OR governed by the law of [insert
chosen law]]. [Such rate of interest applies to pre-award interest as well as
post-award/pre-judgment interest.]
Disclosure Limitations
The extent and nature of disclosure in international arbitration will vary in each case depending
on several factors. These factors include the identity of the arbitral tribunal and the counsel
representing the parties in the arbitration, as their legal training (for example, whether in civil
law or common law) and professional experience will influence their approach to this phase of
an international arbitration. Other factors include the civil procedure rules of the seat of
arbitration and the involvement and legal training of corporate counsel. Typically, disclosure is
limited to document production between the parties. Other types of disclosure devices found in
US litigation, such as the use of depositions and interrogatories seeking written information, are
very rare in international commercial arbitration.
A related issue is which rules should govern whether certain documents may be exempt from
disclosure on the basis of privilege, such as the attorney-client privilege, the common interest
privilege and the work product doctrine. The rules relating to the scope and application of legal
privilege vary among jurisdictions. Again, the legal training and professional qualifications of
the arbitral tribunal, outside counsel, and corporate counsel will be relevant here.
The parties have several options regarding how to address the uncertainty over the extent and
nature of disclosure.
77
78

The parties could choose to do nothing. Arbitral rules chosen by the parties typically will
grant the arbitral tribunal discretion to address such issues.77 By choosing to stay silent,
the parties grant the arbitral tribunal the authority to decide the extent and nature of
disclosure. This is the generally recommended approach, in part because a party may not
know in advance whether it would benefit from a narrower or broader range of
disclosure, and may not want to commit itself ex ante before knowing the specific facts
and circumstances giving rise to a dispute. Typically, if there is silence in the arbitration
clause regarding disclosure, recourse will usually be made to the IBA Rules on the
Taking of Evidence in International Arbitration (whether as guidance or binding on the
arbitration if so provided for in a procedural order issued by the arbitral tribunal).78

The parties could agree upon the application of an international standard regarding
disclosure, such as the CPR Protocol on Disclosure of Documents and Presentation of
Witnesses in Commercial Arbitration (the “CPR Protocol”).

The parties could devise their own standards. On the one hand, this allows the parties to
eliminate some uncertainty by agreeing ex ante on applicable rules. On the other hand, if
For example, Rule 11 of the CPR Administered International Rules provides, in relevant part, “The Tribunal may require
and facilitate such discovery as it shall determine is appropriate in the circumstances, taking into account the needs of the
parties and the desirability of making discovery expeditious and cost-effective.”
See supra Chapter VII.B.X.
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the parties (and their counsel) come from different jurisdictions, they may not be able to
reach agreement on this subject. If the parties promulgate their own standard in the
arbitration agreement, they should be aware that such standard will override the default
disclosure standard set forth in the applicable arbitration rules chosen to govern the
arbitration.
a.
CPR Protocol
The CPR Protocol articulates best practices for an arbitral tribunal to follow when resolving
disclosure issues, bearing in mind the general principles that arbitration should be expeditious,
cost-effective as well as fundamentally fair. Section 1(a) provides guidance to the arbitral
tribunal that disclosure should be granted only for items that are relevant and material, and for
which a party has a substantial, demonstrable need in order to present its position in the
arbitration. Bearing in mind the importance of legal privileges that protect against disclosure of
certain documents, Section 1(b) instructs the arbitral tribunal that it should apply the provisions
of the applicable law that provide the greatest protection of attorney-client communications and
work product documents.
The CPR Protocol provides a menu of “modes” that the parties may agree upon in advance
regarding disclosure of documents and disclosure of electronic information. Schedule 1 lists four
modes of disclosure. The most narrow option, Mode A, does not allow for disclosure of
documents by the parties beyond what each party introduces into the record to present its case in
the arbitration. Mode B incorporates Mode A disclosure as well as pre-hearing disclosure of
documents that are essential to a matter of importance in the arbitration for which a party has
demonstrated a substantial need. Mode C incorporates Mode B disclosure as well as disclosure
of documents relating to issues in the case that are in the possession of witnesses in the
arbitration. Mode D permits pre-hearing disclosure of documents regarding non-privileged
matters that are relevant to any party’s claim or defense, subject to the limitations of
reasonableness, duplication and undue burden.
Schedule 2 of the CPR Protocol provides a menu of modes of disclosure of electronic
information, again ranging from most restrictive to least restrictive. Mode A permits disclosure
by each party of electronic information to be presented in support of its case. Mode B permits
disclosure by each party of electronic information subject to four restrictions or limitations: (a)
the electronic information must be in the possession of a designated set of custodians; (b) the
electronic information must have been created between the date of the signing of the agreement
that is the subject of the dispute and the date of the filing of the request for arbitration; (c) the
electronic information must be stored on primary storage facilities only; and (d) disclosure is in
any event limited to reasonably accessible, active data. Mode C incorporates Mode B disclosure
but extends to a larger number of custodians and a wider date range. The parties may also agree
to disclosure of deleted, fragmented or other electronic information that is difficult to obtain
except through forensic needs, upon a showing of special need for and relevance of the material.
Finally, Mode D permits disclosure of electronic information regarding non-privileged matters
that are relevant to any party’s claim or defense, subject to the limitations of reasonableness,
duplication and undue burden.
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Section 2 of the CPR Protocol addresses witness testimony, whether in written or oral form.
Schedule 3 provides a menu of modes of presenting witnesses. Mode A permits submission of
written witness statements, and then short oral testimony (in the form of direct examination)
before cross-examination that is limited to matters addressed in the witness statement at the
hearing. Mode B does not provide for witness statements; rather, witnesses will present direct
testimony orally at the hearing, followed by cross-examination. Mode C incorporates Mode B,
but also permits deposition of witnesses prior to oral testimony, subject to any conditions
imposed by the tribunal.] [Shorten previous paragraphs in this section on CPR Protocol into one
or two brief paragraphs.]
When drafting the arbitration clause, the parties could include language designating the mode of
disclosure and witness testimony to be used in the arbitration. If the parties are in agreement,
then the following language may be used (especially where the parties have chosen in the
arbitration clause for CPR Rules to govern).
With regard to disclosure of documents:
The parties agree that disclosure of documents shall be implemented by
the tribunal consistently with Mode [ ] in Schedule 1 to the CPR Protocol
on Disclosure of Documents and Presentation of Witnesses in Commercial
Arbitration.
With regard to disclosure of electronic information:
The parties agree that disclosure of electronic information shall be
implemented by the tribunal consistently with Mode [ ] in Schedule 2 to
the CPR Protocol on Disclosure of Documents and Presentation of
Witnesses in Commercial Arbitration.
With regard to presentation of witnesses:
The parties agree that the presentation of witnesses shall be implemented
by the tribunal consistently with Mode [ ] concerning witness presentation
selected from Schedule 3 to the CPR Protocol on Disclosure of
Documents and Presentation of Witnesses in Commercial Arbitration.
b.
IBA Rules of Evidence
In addition to the CPR Protocol, parties frequently agree to disclosure and document production
in accordance with the IBA Rules of Evidence. Like the CPR Protocol, the IBA Rules of
Evidence cover the different types of evidence that may be presented in an international
arbitration, such as: documents (both paper and electronic) (Article 3); witnesses of fact (Article
4); party-appointed experts (Article 5); tribunal-appointed experts (Article 6); inspection (Article
7) and an evidentiary hearing (Article 8).
Articles 3 and 9 of the IBA Rules of Evidence are especially relevant to disclosure. Article 3
sets forth the standard for document requests, requiring parties to identify the specific documents
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or categories of documents they are seeking that are relevant to the case and material to the
outcome. Article 9 provides the framework for determining the admissibility of evidence in an
international arbitration, and for assessing its weight.
The model clause recommended by the IBA for application of the IBA Rules of Evidence
imports the entirety of the text, which contains provisions beyond document disclosure. In the
event the parties want to ensure that the tribunal applies Articles 3 and 9 of the IBA Rules of
Evidence, the following language may be used:
Recommended language:
[In addition to the arbitration rules chosen by the parties], [t]he parties
agree that document disclosure and treatment of evidence shall be
conducted according to Articles 3 and 9 of the 2010 IBA Rules of
Evidence.
Appellate Review of an Arbitral Award
One of the perceived advantages of arbitration is that it is a quicker form of dispute resolution.
In part, this is because, generally speaking, there is no appellate review of the merits of a
tribunal’s award. Rather, a party that does not wish to comply with an arbitral award has limited
post-award recourse. It may seek annulment or set-aside of an award before the courts of the
jurisdiction in which the arbitration was seated. While national laws on the grounds available for
annulment or set-aside of an award vary, typically, they do not include appellate review of the
award on the merits. Additionally, a party may challenge recognition and/or enforcement of the
award. Again, the grounds are limited. If a party challenges recognition/enforcement of an
international commercial award in a jurisdiction that is a signatory to the New York Convention,
then the limited grounds set forth in Article V of that instrument will apply. Again, none of
those grounds permits appellate review.
However, if the contract containing the arbitration clause is of great commercial significance to
the parties, or involves novel or complex issues of law, then the parties may wish to provide for
appellate review of the award. In such “bet the company” arbitrations, companies may want to
retain the possibility of appellate review, especially if the tribunal’s decision is likely to turn on a
legal interpretation of the contract or a question of law (as opposed to a decision that is largely
fact-dependent).
In such cases, the parties may provide for appellate review in their arbitration clause. Many
institutions have created appellate procedures as part of the arbitral process. For example, CPR
promulgated the CPR Arbitration Appeal Procedure (“CPR Appeal Procedure”) to govern the
appeal of an award as part of the arbitral process. Such institutional rules typically contain
provisions regarding selection of the appellate tribunal79 and format of the arbitration (written
submissions and the possibility of an oral argument).80
79
80
See Section B of the CPR Appeal Procedure.
See Section C of the CPR Appeal Procedure.
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Most importantly, such institutional rules usually list the grounds upon which a party may appeal
an arbitral award. An appellate tribunal may modify or annul an award on a limited number of
grounds. Usually, these include the grounds for annulment or set-aside found in national
legislation.81 Additionally, they may also include the grounds that the award contains material
and prejudicial errors of law such that it is not supported by any appropriate legal basis, or that
the award is based on factual findings that are clearly unsupported by the record.82
Most institutional rules contain cost-allocation provisions that provide that if the appellant is not
successful, then it shall bear the costs of the appeal, including the appellee’s attorney’s fees and
other out-of-pocket expenses related to the appeal (unless the appellate tribunal decides
otherwise). Additionally, some institutional rules contain provisions that if, following the
issuance of an appellate award in favor of the appellee (the prevailing party in the underlying
arbitration), the unsuccessful appellant seeks set-aside/annulment of the award or challenges its
recognition and/or enforcement before the courts, then that appellant party shall bear the
appellee’s legal fees and out-of-pocket expenses incurred in connection with the judicial
review.83 The purpose of such cost-allocation provisions is to disincentivize the losing party
from appealing an award, and thereafter from engaging in additional judicial review that may
(largely) duplicate the appellate arbitral proceeding.
Recommended language if the parties wish to include the possibility of appellate review:
An appeal may be taken under [the institutional appellate rules] from any
final award of an arbitral panel in any arbitration arising out of or related
to this agreement. Unless otherwise agreed by the parties, the appeal shall
be conducted at the seat of the original arbitration.
Finality of Arbitration
A perceived advantage of arbitration is that arbitral awards are final and are not subject to
appellate review on the merits. The arbitration laws of most countries provide that arbitral
awards are not subject to appellate review by the local courts, and may only be annulled or set
aside for very limited grounds (essentially, lack of jurisdiction, serious procedural defects or
unfairness).
Typically, the arbitration rules chosen by the parties to govern the arbitration will contain a
provision specifying the finality of an arbitral award.84 Some arbitration rules also include a
81
82
83
84
Rule 8.2(b) of the CPR Appeal Procedure provides that an award may be modified or set-aside if “the Original Award is
subject to one or more of the grounds set forth in Section 10 of the Federal Arbitration Act for vacating an award. The
Tribunal does not have the power to remand the award.”
Rule 8.2(a) of the CPR Appeal Procedure provides that an award may be modified or set-aside if “the Original Award (i)
contains material and prejudicial errors of law of such a nature that it does not rest upon any appropriate legal basis, or (ii) is
based upon factual findings clearly unsupported by the record.”
See, e.g., Rule 14 of the CPR Appeal Procedure.
For example, Rule 15.7 of the CPR Administered International Rules provides, in relevant part, “The award shall be final
and binding on the parties, and the parties will undertake to carry out the award without delay.” Similarly, Article 34(2) of
the 2013 UNCITRAL Rules states, “All awards shall be made in writing and shall be final and binding on the parties. The
parties shall carry out all awards without delay.”
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provision indicating that by choosing the rules to govern the arbitration, the parties may be
deemed to have waived any form of recourse against an award to the extent permitted under
applicable law.85 Where the rules chosen by the parties address the issue of finality, additional
language is unnecessary.
Where the arbitration clause does not incorporate a set of arbitration rules, or where the specific
rules chosen do not address this issue of the finality of an award and waiver of recourse, then it
would be important to include specific language to this effect in the arbitration clause.
Furthermore, if the parties are of the view that the arbitration laws of the seat of arbitration are
unfriendly to arbitration, then it may be important to add language as to the finality of the award
and the waiver of recourse in the arbitration clause. Under these circumstances, it is important to
review the arbitration laws of the seat of arbitration to ensure that the proper language regarding
the finality of the arbitration is included to exclude recourse that may otherwise be available in
that jurisdiction beyond annulment/set-aside proceedings or challenging the
recognition/enforcement of the award.
When doing so, it is important that the parties review the law of the seat of arbitration to
determine the scope of what is being waived, and what language may be required under the lex
arbitri to satisfy any requirements of such a waiver.86
Recommended language:
Any award of the arbitral tribunal shall be binding on the parties,
including interim awards issued by the arbitral tribunal not subsequently
modified by the arbitral tribunal. The parties agree to comply with the
award without delay and waive their right to any form of recourse insofar
as such waiver may validly be made under applicable mandatory law.
Conversely, parties may be tempted to expand the scope of judicial review of an arbitral award.
It is not advisable for the parties to do so because permitting further judicial review undercuts the
overall efficiency of arbitration. Furthermore, it may not be possible to expand the judicial
review of an arbitral award under the applicable arbitration laws.87 Accordingly, to the extent
the parties wish, for some particular reason, to expand the scope of judicial review, they should
check whether this is legally possible under the law of the seat of arbitration.
Interim, Provisional and Conservatory Measures
85
86
87
Article 34(6) of the ICC Rules provides, “Every award shall be binding on the parties. By submitting the dispute to
arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived
their right to any form of recourse insofar as such waiver can validly be made.”
For example, in In re Wal-Mart Wage and Hour Employment Practices Litig., a US federal court of appeals held that the
statutory grounds for vacatur of an arbitral award set forth in Section 10 of the FAA may not be waived or eliminated by
contract. 737 F.3d 1262 (9th Cir. 2013).
For example, in Hall St. Assocs., L.L.C. v. Mattel, Inc., the US Supreme Court considered whether the parties could contract
to expand the statutory grounds for vacatur set forth in Section 10 of the Federal Arbitration Act (“FAA”). The Supreme
Court held that they could not do so because the statutory grounds listed in Section 10 are exclusive. 551 US 576 (2008).
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Typically, it is not necessary to provide in the arbitration clause that the arbitral tribunal or the
courts, or both, have the authority to order provisional and conservatory measures pending a final
decision on the merits. Usually, the arbitral rules chosen by the parties will recognize the
authority of the arbitral tribunal to issue such provisional and conservatory measures 88 and will
also recognize that a party may seek such relief from a court.89 In some cases, however, the rules
may specify that a party may only seek such judicial assistance before the arbitral tribunal has
been constituted, or, after the arbitral tribunal has already been constituted, only with its
consent.90 In addition, the arbitration law of the seat of arbitration will typically recognize the
authority of the arbitral tribunal to issue provisional and conservatory measures, and for local
courts to issue such relief (sometimes only in certain circumstances, for instance, while the
arbitral tribunal is being constituted).
While it is therefore generally not necessary to include language in the arbitration clause
regarding availability of provisional and conservatory relief, it may be appropriate to do so in
certain circumstances, including91:

If the governing arbitration law restricts the availability of provisional or conservatory
relief, then the parties may want to make the authority of the arbitral tribunal and/or the
courts explicit in the arbitration clause.

If the governing substantive or arbitration law limits the type of relief that may be
granted, and such relief is of special concern to the parties (such as the protection of trade
secrets in an agreement related to intellectual property), then the parties may want to
specify that such relief is available to the extent it may not be deemed incompatible with
applicable mandatory law.
o For example, arbitral rules typically provide that the other parties to an arbitration
will have the opportunity to respond to a party’s request for provisional and
conservatory measures. In this respect, arbitral rules may be more restrictive than
the civil procedure rules of many jurisdictions where a party may seek such relief
on an ex parte basis. If the parties are especially concerned that an adverse party
may be able to thwart the preliminary relief that a party may seek in an
arbitration, they may want to include language indicating that the arbitral tribunal
has the authority to issue provisional and conservatory measures in response to an
88
89
90
91
For example, Rule 13.1 of the CPR Administered International Rules provides, “At the request of a party, the Tribunal may
take such interim measures as it deems necessary . . . .” Article 28(1) of the ICC Rules provides, “Unless the parties have
otherwise agreed, as soon as the file has been transmitted to it, the arbitral tribunal may, at the request of a party, order any
interim or conservatory measure it deems appropriate.”
For example, Rule 13.2 of the CPR Administered International Rules provides, “A request for interim measures by a party to
a court shall not be deemed incompatible with the agreement to arbitrate or as a waiver of that agreement.” Article 28(2) of
the ICC Rules provides, “Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even
thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application
of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an arbitral
tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant
powers reserved to the arbitral tribunal.”
For example, Rule 25.3 of the LCIA Rules provides that a party may apply for interim or conservatory measures to a court
after the formation of the arbitral tribunal only in exceptional circumstances and with the arbitral tribunal’s authorization.
See also supra Chapter III.X (discussing the need to provide explicitly for interim relief in step clauses).
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ex parte application. That being said, ex parte relief ordered by an arbitral
tribunal may not always be enforceable by the courts under the applicable
arbitration law.

The parties may wish to modify the provisions regarding interim measures in the arbitral
rules they have selected. For example, they may wish for the parties to have recourse to
the local courts to seek provisional and conservatory relief even after an arbitral tribunal
has been constituted, which may run contrary to restrictions in this regard specified in the
chosen arbitral rules. In particular, the parties may wish to do so when they anticipate
that the type of relief they will be seeking may involve third parties who are not parties to
the agreement containing the arbitration clause, or when the relief sought may relate to
the parties in the arbitration, rather than the subject-matter of the arbitration, such as
obtaining freezing orders or anti-suit injunctions.

Occasionally, there is uncertainty as to whether an arbitral tribunal’s order granting
provisional and conservatory relief is enforceable by the local courts. Enforceability will
depend on the relevant arbitration law, and the arbitration laws of most jurisdictions
recognize that such orders are enforceable. That being said, if the parties want to be
extra-cautious, they may introduce language in the arbitration clause indicating that a
party that obtains any such measures from the arbitral tribunal may enforce such
measures in the courts of competent jurisdiction.
Any language permitting courts to grant provisional relief must make clear that the court’s role is
limited to providing provisional relief in aid of arbitration. Otherwise, if the arbitration clause is
drafted more broadly, indicating that a party may seek relief from the courts in the form of an
injunction or an equitable remedy, then it may appear that the court has concurrent jurisdiction
with the arbitral tribunal to issue such relief.
Additionally, recent versions of rules promulgated by various arbitral institutions generally
provide that unless the parties agree otherwise, a party may request that interim measures be
granted by a special arbitrator or an emergency arbitrator prior to the constitution of the
tribunal.92 If the rules chosen by the parties to govern the arbitration require the parties to
expressly consent to application of the provision, then the parties may do so in the arbitration
clause.
Recommended language:
The arbitral tribunal shall have the power to grant provisional
measures, and any such measures ordered by the tribunal shall, to
the extent permitted by applicable law, be deemed to be a final
award on the subject matter of the measures and shall be
enforceable as such.
92
For example, Rule 14 of the CPR Administered International Rules sets the framework for interim measures of protection
ordered by a special arbitrator prior to constitution of the tribunal.
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The parties shall also be able to seek provisional measures from a
court of competent jurisdiction in aid of arbitration, including after
the constitution of the tribunal.
[The parties shall also be able to seek provisional measures from
an emergency arbitrator prior to the constitution of the tribunal in
accordance with [the chosen rules]]
Remedies
It is generally not necessary to specify the scope of remedies available to an arbitral tribunal
when adjudicating the claims and defenses raised by the parties in the arbitration. When the
parties do not specify the scope of remedies, it is typically understood that all of the remedies
and relief available under the agreement or the law chosen by the parties to govern the agreement
will be available. Alternatively, the arbitration rules governing the arbitration may specify the
scope of remedies available to the arbitral tribunal.93 If they so desire, the parties may
incorporate language expressly limiting the scope of remedies that the arbitral tribunal may
award (e.g., to exclude punitive damages).
Recommended language:
The arbitral tribunal shall not have the power to award [e.g., punitive
damages].
Amiable Compositeur and Ex Aequo et Bono
Generally, the institutional rules provide that the tribunal shall not decide as amiable
compositeur or ex aequo et bono unless the parties have authorized it to do so in writing or on
the record.94 A tribunal deciding as amiable compositeur or ex aequo et bono is not strictly
bound by rules of procedure or substantive law. The tribunal may decide the outcome based on
what it considers to be fair and equitable, and may even modify the term of the contract that has
given rise to the dispute.
Given the considerable discretion afforded to the decision-maker acting in this manner, it is
generally recommended that commercial parties select rules that exclude the possibility of a
tribunal deciding as amiable compositeur or ex aequo et bono. If the rules do not contain such a
provision, or the parties choose ad hoc arbitration, then they should specify that a tribunal shall
not decide in this manner. On the other hand, if the parties conclude that it would be appropriate
for a tribunal to decide a dispute on this basis, then, in such rare circumstances the parties should
so provide by using the following language:
The tribunal shall [not] decide as amiable compositeur or ex aequo bono.
93
94
For example, Rules 10.4 and 10.5 of the CPR Administered International Rules set forth the scope of the relief that an
arbitral tribunal may grant the prevailing party.
For example, Rule 10.3 of the CPR Administered International Rules provides, “The Tribunal shall not decide as amiable
compositeur or ex aequo et bono unless the parties have authorized it to do so in writing or on the record.”
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Baseball Arbitration
Baseball arbitration, or “final offer” arbitration, is a type of arbitration in which the tribunal’s
discretion is limited to choosing among the resolutions proposed by the parties to the arbitration.
The name “baseball arbitration” arises from the use of this type of arbitration to resolve sports
salary disputes in the US.
In baseball arbitration, the parties present their cases as in any other arbitration. However, at the
close of the arbitration, each party presents a proposed resolution of the issue to be arbitrated and
the arbitrators are given the power to choose only one party’s proposal without making any
changes to the selected proposal.
There are several advantages to selecting baseball arbitration. In theory, baseball arbitration
should incentivize the parties to make reasonable proposals. After all, a party submitting a very
aggressive or unrealistic proposal runs the risk that the tribunal will choose the proposal of its
opponent. Baseball arbitration also eliminates the possibility that the arbitrators will fashion a
remedy that is entirely unexpected by either party and which may be difficult to administer for
reasons unknown to the arbitrator.
Providing for baseball arbitration can be very useful in contracts where the parties expect
recurring disputes to arise that can be resolved through the application of a simple formula
and/or the exchange of money between the parties. For example, baseball arbitration may be a
useful way to resolve price-adjustment disputes in long-term commodity supply contracts.
Baseball arbitration can also be a useful device for resolving the amount of license fees or
royalty rates in IP contracts in which a licensee faces uncertainty regarding the nature and value
of new markets for the licensed technology.
The use of baseball arbitration should be limited, however, to disputes that can be resolved by
the application of alternative formulas or assessments of value to reach a monetary amount to be
exchanged between the parties. Baseball arbitration is particularly poorly suited for disputes that
must be resolved with injunctive relief or arbitral resolution of complex and varied issues. For
example, baseball arbitration is unlikely to be an effective means of resolving disputes regarding
the governance of a joint venture.
The drafter of a baseball arbitration clause should take care to limit the scope of the clause to
only those types of recurring disputes to which it is best suited. The drafter should include a
more general arbitration clause to resolve other miscellaneous disputes about the interpretation or
performance of the agreement. The following language can be used to provide for baseball
arbitration for the resolution of certain disputes:
Notwithstanding the above [e.g. general arbitration clause], the parties agree that
the arbitration of any disputes relating to [specify scope] shall be resolved by a
final and binding ‘baseball arbitration.’ Each party shall submit to the arbitrator
and exchange with each other in advance of the hearing a single figure
representing the amount it believes should be awarded. The arbitrator shall be
limited to awarding only one of the two figures submitted. All provisions of
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Section [reference to general arbitration clause] shall apply to the baseball
arbitration, except insofar as they conflict with this Section [reference to baseball
arbitration clause] in which case this Section [reference to baseball arbitration
clause] shall control.
Time Limits and Fast-Tracking
One of the often-suggested advantages of international arbitration is that it is quicker than
litigation in the local courts, especially in some jurisdictions known for judicial delays and
backlogs. A 2011 survey conducted by the Chartered Institute of Arbitrators found that the
average length of arbitrations ranged from 17 to 20 months, depending on the nature of the
dispute. Most arbitration rules contain a provision specifying the period in which an award
should be rendered by the arbitral tribunal, although the rules incorporate flexibility in the event
the arbitral tribunal needs more time.95
Some arbitral institutions have promulgated rules that aim to accelerate the arbitral process.
Depending on the institution, the rules may be called “accelerated rules” or “fast-track rules.”
The types of accelerated procedures, the terminology (i.e. “accelerated “or “fast-track”), and the
specific deadlines, depends on the particular rules. The overall goal is to expedite the
proceedings, whether by giving the tribunal discretion regarding how to conduct a proceeding, or
specifying in detail the time periods during which certain milestones in a proceeding must be
completed (typically with the possibility for the parties or the tribunal to amend the accelerated
time limits under certain circumstances).
Fast-track arbitration usually contemplates a sole arbitrator and short time limits for pleadings,
appointment of the arbitrator, exchange of information, oral hearing (if any), and issuing the
award.. For example, Article 8 of the CPR Fast-Track Rules provides that unless the parties
have otherwise consented, hearings will commence within 60 days of the commencement of the
case. Additionally, Article 9 provides that the arbitrator shall render a written, reasoned award
within 14 days of the close of hearings.96
There are some instances when “accelerated” or “fast-track” arbitrations may be appropriate.
This would be the case if the dispute involves small amounts, or if the issues being adjudicated
are not critical to the relationship between the parties. Some fast-track rules, such as the CPR
Fast-Track Rules, apply only if the parties agree to them. Other fast-track rules, such as the
ICDR International Expedited Procedures, automatically apply to any ICDR arbitration in which
no disclosed claim or counterclaim exceeds USD $250,000 exclusive of arbitration costs and
95
96
For example, Rule 15.8(a) of the CPR Administered International Rules provides, “The final award should in most
circumstances be rendered within 12 months of the constitution of the Tribunal. The Tribunal and CPR shall use their best
efforts to comply with this schedule.” Rule 15.8(b) provides, “CPR must approve any scheduling orders or extensions that
would result in the final award being rendered more than 12 months after the constitution of the Tribunal. When such
approval is required, CPR in its discretion may convene a call with the parties and arbitrators to discuss factors relevant to
such request.”
CPR has also issued Global Rules for Accelerated Commercial Arbitration (“CPR Accelerated Rules”). As described in
Section I of the CPR Accelerated Rules, the purpose is to give the tribunal flexibility to set the proceeding on its own track
to resolve a dispute as quickly as the parties desire, but in not longer than six months (except as permitted by the agreement
of the parties or by the CPR Accelerated Rules).
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interest. If the parties desire that the accelerated rules or the fast-track rules of an arbitral
institution shall apply to all or a subset of the disputes arising out of an arbitration agreement,
and the selected institutional rules do not provide for fast-track arbitration by default, the
arbitration agreement can specify that an institution’s fast- track rules will apply.
Recommended language:
[Specify category of disputes] arising out of or relating to this contract,
including the breach, termination or validity thereof, shall be finally
resolved by arbitration in accordance with the [institution’s accelerated
arbitration rules] [institution’s fast-track rules]
Alternatively, instead of importing the entirety of an institution’s “accelerated” or “fast-track”
rules, parties may want to specify only that the arbitrator(s) shall render an award within a
specified period of time. If the parties choose to do so, it is strongly recommended that language
be included that gives the arbitrator a degree of flexibility to extend this period of time.
Otherwise, if an arbitrator fails to render the award within the specified period of time, even if
his/her inability to do so is justified because of the complexity of the proceedings or for another
legitimate reason, the losing party may be able to set aside the award on the basis that the
arbitration was not conducted in accordance with the arbitration clause as drafted.
Recommended language:
The award shall be rendered within [ ] months of the [constitution of the
arbitral tribunal OR conclusion of the hearing on the merits], unless the
arbitral tribunal decides it is appropriate to extend such time limit.
States, State Entities and International Organizations as a
Contracting Party: Waiver of Immunity
States, State-owned entities and international organizations generally benefit from two forms of
immunity: jurisdiction and execution. Immunity from jurisdiction generally protects the entity
from a lawsuit. In most jurisdictions, an agreement to arbitrate a dispute arising under an
agreement suffices for demonstrating a waiver of immunity from jurisdiction by that entity.
However, the presence of an agreement to arbitrate on its own will not be construed as a waiver
of immunity from provisional relief (such as attachment of property in aid of arbitration while
the arbitration proceeding is imminent or underway).
Additionally, such entities may also benefit from immunity from execution, such that it would be
improper for the courts of one State to seize its property. As a general proposition, under most
legal systems, certain assets should not be available for satisfaction of the execution of an arbitral
award (for example, a State’s foreign embassies or consular possessions). It may be possible –
although not likely – that an entity that benefits from immunity from execution will agree to
waive such immunity with regard to other property that it owns (generally speaking, property
that may be considered as “commercial” in nature).
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When negotiating with a State, State-owned entity or international organization, it is important to
consider the laws of immunity that could apply, which may include the laws of (a) that entity; (b)
the seat of arbitration; and (c) the jurisdiction where enforcement likely will be sought. The
language of the waiver is jurisdiction-dependent, and therefore advice from local counsel should
be sought when negotiating the waiver of immunity provision in an arbitration clause. Issues to
consider include (a) waiver of immunity from suit; (b) waiver of immunity from actions seeking
provisional or pre-judgment relief (such as attachment of property in aid of arbitration); (c)
manner of service of process; and (d) waiver of post-judgment immunity from execution or
attachment of assets (to the extent they are attachable under the applicable law).
Recommended language:
Each party hereby agrees that the activities contemplated hereby are
commercial in nature. To the extent that any party has or hereafter may
acquire any immunity from jurisdiction of any court, or from attachment
in aid of execution or any other legal process [(other than prejudgment
attachment)] in any action or proceeding in any manner arising out of this
agreement with respect to itself or its assets, such party hereby irrevocably
agrees not to invoke such immunity as a defense and irrevocably waives
such immunity.
On the other hand, it is important for the State, State-owned entity or international organization
to consider how to limit the scope of its waiver from immunity. As a matter of course, such
entities may decide that they will not waive their immunity ex ante, even though, in practice,
they may waive immunity from jurisdiction. Accordingly, such an entity should limit the scope
of the language above as appropriate depending on its practice and position.
Protective Measures when Counterparty Hails from, or the Contract
is to be Performed in, a Jurisdiction that Is Unreliable or Hostile to
Arbitration
If the default venue courts in a jurisdiction where you may sue or be sued by a counterparty are
unreliable or hostile to arbitration, arbitration may be preferable to litigation. Arbitration does
not, however, occur in a vacuum sealed off from national court systems. If a counterparty is
from a jurisdiction that is unreliable or hostile to arbitration, or the contract is to be performed in
such a jurisdiction, the local courts in that jurisdiction can be used to obstruct the arbitral process
(e.g., by ordering an anti-arbitration injunction, staying the arbitration pending the outcome of
local court proceedings, and/or vacating an award).
In these circumstances, the following precautions can be taken when drafting the contract to limit
the possibility of interference by local courts and to ensure that arbitration can achieve
meaningful relief.
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
Avoid seating the arbitration in the jurisdiction of the counterparty or the jurisdiction
where the contract will be performed and seat the arbitration in an arbitration-friendly
country that has ratified the New York Convention.97
o Note of caution: Understand any national laws that may limit your ability to seat
an arbitration outside a counterparty’s home jurisdiction or the place of
performance of the contract. For example, some countries have laws that
prohibit foreign arbitration of disputes between local entities or disputes
involving governmental institutions or natural resources.98 Local counsel should
be consulted when drafting an arbitration clause involving a counterparty or
place of performance that lacks a reliable, independent judicial system or is
hostile to arbitration.

State explicitly that the arbitration laws of the chosen seat (and not the laws of the
relevant arbitration-hostile country) will govern the agreement to arbitrate and any
annulment application. Without such a provision, the courts of certain countries may
claim license to review or set aside the award, even if it is rendered in a foreign
jurisdiction. An example of such language is:
The seat of arbitration shall be [seat of arbitration]. The laws of [the seat
of the arbitration] shall apply to the validity, scope, interpretation and
enforceability of this agreement to arbitrate and any petition to annul any
award that is rendered pursuant to this clause.
97
98
99

Choose another country’s substantive law to govern the merits of the dispute. Selecting
the unreliable country’s substantive law as the law applicable to the dispute could vest the
local courts with the authority to conduct a substantive review of an arbitral award.

Provide for institutional arbitration. As noted, arbitral institutions can help keep an
arbitration on track when a party is recalcitrant.99 In addition, even if a jurisdiction does
not require institutional arbitration, experience suggests that courts in some jurisdictions
are more likely to enforce awards resulting from institutional rather than ad hoc
arbitration.

Insist that the other party provide collateral, a guarantor with assets, or another form of
security in an arbitration-friendly New York Convention jurisdiction.

To the extent permitted by law, prohibit provisional relief by your counterparty in your
counterparty’s local courts (to make this acceptable, you can mutually prohibit each party
from seeking provisional relief in its own country) and/or, if you are comfortable that you
See supra Chapter V.A.2 [necessary elements/place of arbitration].
For example, in Saudi Arabia, under the 2012 Arbitration Regulation (Royal Decree No. M/34),public bodies are not
allowed to agree to foreign or domestic arbitrations, unless approved by the Prime Minister. The Thai Cabinet resolved in
2009 that government entities could not agree to foreign or domestic arbitration, unless approved by the Cabinet.
[Statements to be checked and citations to be added.]
See supra Chapter V.A.1 [necessary elements/institutional v. ad hoc arbitration].
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will not need this option yourself or that it will in any event be futile to you, the courts of
the place of performance.

Provide that any award is final and that the parties waive all rights to recourse against the
award to the fullest extent of the law.100 Such a provision may help to limit the review of
arbitral awards by jurisdictions that view arbitration with suspicion. The impact of such a
waiver, however, will vary by jurisdiction (in some jurisdictions it could include loss of
the right to make an application to vacate an award). It is essential to research the full
implications of such a waiver in a particular jurisdiction before deciding whether to
include it in the contract.
Sole Option Clauses
Sole option clauses or asymmetrical clauses are dispute resolution provisions that typically set
arbitration or litigation as the default method of dispute resolution, but grant only one party the
option of choosing the other method and compelling its counterparty into it.
Sole option clauses are not uncommon in certain types of agreements, such as cross-border loan
agreements. They are enforceable in London101 and New York [note: at time of publication,
check that citations are still current. As of 4/15/2016, all US cases referenced in this section
were shepardized and are good law.],102 two of the world’s main international financial centers
where there is a preference for providing flexibility to lenders.103
However, in certain jurisdictions sole option clauses are unenforceable.

100
101
102
103
104
A 2012 decision of the Presidium of the Supreme Arbitration Court of the Russian
Federation (Russia’s highest commercial arbitration court) effectively held that sole
option clauses are not enforceable in Russia and that in such cases the Russian courts can
assume jurisdiction.104
See supra Chapter V.B.x (providing model language to specify that an award is final and not subject to review).
NB Three Shipping v. Harebell Shipping Ltd. [2004] All E.R.(D) 152 (Eng.); Law Debenture Trust Corp plc v. Elektrim
Finance BV and others [2005] 1 All E.R. 476 (Eng.).
Sablosky v. Edward S. Gordon Co., Inc., 535 N.E.2d 643 (N.Y. 1989) (enforcing asymmetrical clause under New York
law).
Sole option arbitration clauses are also generally valid and enforceable in US federal courts in commercial (but not
necessarily consumer) agreements governed by the US Federal Arbitration Act. See, e.g., Oblix, Inc. v. Winiecki, 374 F.3d
488, 490-91 (7th Cir. 2004) (concluding that an asymmetrical arbitration agreement is enforceable); Harris v. Green Tea Fin.
Corp., 183 F.3d 173, 183 (3d Cir. 1999) (“[T]he mere fact that [one party] retains the option to litigate some issues in court,
while the [other] must arbitrate all claims does not make the arbitration agreement unenforceable.”); Doctor’s Associates,
Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (enforcing agreement that required franchisees to submit to arbitration while
reserving to franchiser the right to seek summary eviction against the franchisees); Wilson Electrical Contractors, Inc. v.
Minotte Contracting Corp., 878 F.2d 167, 168 (6th Cir. 1989) (enforcing clause that provided for arbitration “at the election
of Contractor”). Some federal courts, however, have refused to enforce sole option clauses in consumer and employment
contracts. Iberia Credit Bureau v. Cingular Wireless, 379 F.3d 159, 171 (5th Cir. 2004) (refusing to enforce an asymmetrical
clause in a consumer contract); Ingle v. Circuit City Stores, 328 F.3d 1165, 1174 (9th Cir. 2003) (refusing to enforce an
asymmetrical clause in an employment contract). [Shorten footnote.]
Sony Ericsson Mobile Communications Rus (Sony Ericsson) v. ZAO Russkaya Telefonnaya Kompaniia (RTK), Supreme
Arbitrazh Court of the Russian Federation,June 19, 2012, judgment No. 1831/12. Only Sony Ericsson (and not RTK) had
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
In Germany, courts have held that asymmetric arbitration clauses in certain types of
contracts (such as contracts of adhesion) are unenforceable.105

The highest court in Bulgaria refused to enforce an arbitral award on the ground that the
sole option clause was invalid under Bulgarian law.106 [Consider merging bullets into a
single, shorter footnote after above statement that they may be unenforceable in some
jurisdictions.]
Therefore, the following guidelines should be followed when including a sole option clause in a
contract:

If the sole option is for litigation, include the sole option provision in a clause that is
separate and distinct from the arbitration clause so as to avoid the risk of the whole
dispute resolution clause being invalidated if the sole option clause is struck down.

Choose a seat of arbitration in a jurisdiction that enforces sole option clauses, such as
London or New York. It is important to understand that locating the seat of arbitration in
London or New York addresses only part of the problem, however, as the award or
judgment could ultimately be refused recognition and enforcement in a jurisdiction that
does not recognize sole option clauses. Ideally, local advice should be sought in (i) the
country of the counterparty, and (ii) any country where enforcement of the award or
judgment may need to be sought.
The following language is recommended for a sole option clause where arbitration is the default
dispute resolution method:107
(a)
(b)
105
106
107
Any dispute arising out of or relating to this contract, including the
breach, termination or validity thereof, shall be finally resolved by
arbitration in accordance with [designated arbitration rules]. The
seat of the arbitration shall be [New York / London]. The
language of the arbitration shall be [designated language]. There
shall be [one or three] arbitrators, selected in accordance with the
[designated rules].
The parties agree for the benefit of [party A] that, at the sole option
of [party A] and, regardless of whether [party B] has commenced
arbitration proceedings under [Section (a)], [party A] may elect by
notice in writing to [party B], and, in the event arbitration has
the option to choose litigation in the Russian courts, instead of ICC arbitration, but RTK nevertheless attempted to sue Sony
Ericson in the Russian courts.
Bundesgerichtshof [BGH] [Federal Court of Justice] Sept. 24,1998, III ZR 133/97, NJW 1999, 282, 283; Bundesgerichtshof
[BGH] [Federal Court of Justice] Jan. 26, 1989, X ZR 23/87, NJW 1989, 1477.
Bulgarian Supreme Court, Sept. 2, 2011, judgment No. 71, commercial case No. 1193/2010.
You should also consider addressing the following issues in the choice of court part of the sole option clause: designation of
an agent for service of process, consent to jurisdiction, waiver of objections based on venue and inconvenient forum, and
waiver of the right to removal and the right to a jury trial.
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previously been initiated by [party B], [the administering authority,
if institutional arbitration is chosen and] any arbitrator(s) already
nominated and/or appointed in the arbitration (the “Election
Notice”), that any Dispute shall be resolved by legal action, suit or
proceeding (“Proceedings”) in the courts of [designated forum]. In
the event [party B] has commenced arbitration proceedings under
[Section (a)], [party A] must submit is Election Notice to [party B]
within [30] days of receiving the [notice/request/demand for
arbitration] or [party A] forfeits its right to elect litigation.
(c)
C.
Upon timely receipt by [party B] of the Election Notice
contemplated in [Section (b)], [party B] shall take all steps
necessary to withdraw the request for arbitration and/or file notice
of discontinuance of the arbitration proceedings and take such
other steps as may be necessary to bring the arbitration
proceedings to an immediate end.
Multi-Party and Multi-Contract Arbitration Clauses
Cross-border transactions often involve more than two parties and more than one contract. In
such transactions, if the parties do not consent at the time of contracting to arbitration between
multiple parties and/or involving multiple contracts, there is a risk that claims or disputes will
have to be adjudicated in separate proceedings, increasing the time and costs of dispute
resolution and the likelihood of conflicting decisions by different tribunals.
With advance planning, parties can craft a dispute resolution procedure that allows for the
effective resolution of multi-party and/or multi-contract disputes in a single arbitration. Multiparty and multi-contract arbitrations can involve complex jurisdictional or threshold issues over
who may bring an arbitration against whom, how, when, and in what forum. Collateral
proceedings to resolve these procedural issues can stall an arbitration and increase costs. This
chapter serves as an introduction to the key threshold issues that may arise in a multi-party or
multi-contract arbitration and proposes recommendations for how counsel can plan effectively
for multi-party or multi-contract arbitration when drafting an arbitration agreement.
It should be emphasized that even with advance planning, such arbitrations are complex and the
resolution of threshold procedural issues may add time and expense to the arbitration. Drafting
multi-party and multi-contract clauses is also complex and it is generally advisable to consult
counsel with experience in this area.
Multi-Party Arbitration Clauses
The standard model language set forth in Chapter V.A.1 can give rise to both bilateral and multiparty arbitrations. However, multi-party contracts raise special considerations that should be
taken into account in drafting an arbitration clause, particularly if the goal is to provide for a
dispute resolution process that will allow for the resolution of multiple claims by multiple parties
in a single arbitration.
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a.
Choice of institutional or ad hoc arbitration
In the multi-party context, the arbitration agreement should always provide for institutional
arbitration because arbitral institutions can assist in managing the complex procedural issues that
are likely to arise in such arbitrations. It is not advisable to agree to ad hoc arbitration for the
resolution of disputes involving more than two parties. This Manual therefore does not discuss
drafting considerations when selecting ad hoc arbitration for multi-party contracts.
The choice of institutional arbitration rules is critical. By selecting the right institutional rules
with multi-party provisions that meet your business objectives, you will eliminate the need to
negotiate complex multi-party provisions in the arbitration agreement. The chosen institution’s
rules relating to multi-party arbitration will apply by default unless the parties state otherwise in
the arbitration agreement. All major institutional arbitration rules have been amended in recent
years to address many of the procedural issues arising in multi-party arbitrations (and, in some
cases, multi-contract arbitration),108 but some rules are more conducive to multi-party arbitration
than others. You should understand an institution’s rules on multi-party arbitration before
proposing (or agreeing to) those rules and be strategic in the choice of institution. For example,
a party that wishes to avoid multi-party arbitration may advocate for LCIA arbitration because
the LCIA Rules have more limited joinder and consolidation provisions than some of the other
major institutional rules. A party that is likely to be a claimant and have business dealings with
multiple other parties under the contract should propose rules with more expansive multi-party
procedures, such as the CPR Administered International Rules.
b.
Consent and notice
With contracts involving multiple parties, it can be difficult to foresee in advance which parties
or even how many of them may be involved in a given dispute. If you wish to ensure maximum
flexibility for multiple parties to resolve related claims in a single proceeding, the clause should
explicitly allow for multi-party arbitration and provide that each party to the contract consents to
arbitration with every other party.
The clause also should provide for notice of any claims, counterclaims, or cross-claims to every
contracting party. Most arbitration rules require notice only to the party against which the claim
is being brought. If the parties do not explicitly provide in the arbitration clause for notice to all
contracting parties, it is possible that one or more contracting parties with related claims that
could be adjudicated as part of a single arbitration may not receive prompt notice of the
arbitration and therefore be unable to timely seek to participate. Model language is provided in
Chapter V.C.3 below.
Note of caution: Consider whether exceptions to any multi-party notice provision may be
necessary, such as for certain categories of disputes or disputes between certain
contracting parties that may need to be kept confidential from other contracting parties.
108
All the major institutional rules listed in Chapter X above were amended between 2012 and 2014 to provide inter alia
enhanced procedures for multi-party and multi-contract arbitration, with the exception of the SCC Rules. While the SCC
Rules have not been amended in this period, the 2010 SCC Rules include provisions relating to arbitrator selection and
consolidation in the multi-party context. SCC Rules, Arts. 11, 13(4).
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c.
Arbitrator selection
In the multi-party context, there is usually no need to deviate from the model language
recommended in Chapter IV.A regarding the number of arbitrators and the method of their
selection.109 The major institutional rules discussed in this Manual provide default selection
provisions for both bilateral and multi-party arbitration. These default provisions are typically
satisfactory. For the most part, they provide in the event of a three-member tribunal that all
claimants will jointly nominate an arbitrator and all respondents will jointly nominate an
arbitrator and the institution will select the chairperson if the parties do not reach agreement.110
In the event of a sole arbitrator, they provide that all parties will jointly nominate the arbitrator.
They also provide back-up procedures that apply if all of the claimants and/or all of the
respondents are unable to reach agreement on an arbitrator or if an additional party is joined after
the initial pleadings. Importantly, all of the rules provide that if the multiple parties on any one
side cannot agree, all arbitrators will be appointed by the institution.111
In some transactions, a dominant party may wish to be given sole and exclusive authority to
select the party-appointed arbitrator on behalf of a group of claimants or respondents, or may
otherwise seek disproportionate nomination authority. Arbitration clauses that give one party
exclusive or dominant authority to appoint the arbitrator for a group of claimants or respondents
may in certain jurisdictions be considered in violation of public policy and unenforceable.112
The applicable national law in any jurisdiction where the courts may be called on to set aside or
enforce the award should be considered before agreeing to or proposing such a selection
procedure. As a general rule, this type of clause is not recommended.
109
110
111
112
See supra Chapter V.A (recommending the following language: There shall be [one or three] arbitrators, [selected in
accordance with the [applicable rules]].”).
As noted in Chapter V.A.5 above, many practitioners recommend including language that gives the parties or the coarbitrators the right to choose the chairperson by agreement if the default institutional rules vest the institution with the
power to choose the chair. The model language in Chapter V.A.5 can be used for this purpose, although it will need to be
modified to provide for selection of the chair by all parties (rather than stating that the chair will be selected by the two
parties).
The institutional rules on default arbitrator selection were developed in response to a seminal decision of the French Cour de
Cassation in a 1992 case, Siemens A.G. & BKMI Industrienlagen GmbH v. Dutco Constr. Co., relating to an arbitration
brought against two different respondents under a single arbitration agreement where the respondents did not have aligned
interests and each respondent wanted to nominate its own arbitrator. The respondents eventually agreed to a joint
nomination under protest after the ICC stated that it would proceed as if the respondents had failed to appoint an arbitrator
(which would have resulted in the ICC appointing an arbitrator on behalf of the respondents). The French court struck down
an interim award on jurisdiction, finding that the tribunal had not been properly constituted because the principle of equality
of the parties in arbitrator selection was a matter of public policy that had been violated.
In certain jurisdictions, this is the case because of the emphasis on the principle of equality of the parties in the arbitral
tribunal appointment process. See, e.g., German Code of Civil Procedure (ZPO), Section 1034(2) (“If the arbitration
agreement grants preponderant rights to one party with regard to the composition of the arbitral tribunal which place the
other party at a disadvantage, that other party may request the court to appoint the arbitrator or arbitrators in deviation from
the nomination made, or from the agreed nomination procedure. The request must be submitted at the latest within two
weeks of the party becoming aware of the constitution of the arbitral tribunal. . .”); Siemens A.G. & BKMI Industrienlagen
GmbH v. Dutco Constr. Co., Cour de cassation [Cass.] [supreme court for judicial matters] Jan. 7, 1992, 18 Y.B. COM. ARB.
140 (1993) (deciding that “the principle of the equality of the parties in the appointment of arbitrators is a matter of public
policy (ordre public) which can be waived only after a dispute has arisen”); X v. Y, Obergericht Zürich [Zurich Superior
Court] Sept. 11, 2001, 20 ASA BULL. 694 (2002) (an arbitration clause giving the respondents a predominant role in the
arbitral tribunal's appointment was deemed partially invalid for not respecting the principle of equality).
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Another general rule is not to provide that each party in a multi-party arbitration can name its
own arbitrator. A panel of more than three arbitrators is unwieldy and in practice is used rarely.
In addition, some institutional rules and/or national laws may require an odd number of
arbitrators in order to prevent a deadlock between the tribunal members.113 Even if not required
by applicable rules, use of an even number of arbitrators is strongly discouraged to avoid the
possibility of deadlocks.
d.
Joinder and intervention
In a multi-party contract, it is possible that a party named as respondent in the request for
arbitration may wish to join to the arbitration another party to the arbitration agreement that was
not named in the request for arbitration (“joinder”) or that such party may seek to intervene in
the arbitration of its own volition (“intervention”). Absent explicit language in the arbitration
agreement, whether joinder and intervention are allowed – and under what circumstances – will
be governed by the applicable arbitration rules or possibly the law of the seat of the arbitration if
the rules are silent on the issue.
With the exception of the SCC Rules, all of the major institutional rules contain joinder
provisions, although some are more detailed and joinder-friendly than others.
113
114
115
116

The HKIAC Rules are arguably the most permissive of the major institutional rules.
They authorize a tribunal to join an additional party at any time as long as “the additional
party is bound by an arbitration agreement under these Rules giving rise to the
arbitration.”114 They also specify procedural rules for initiating and responding to a
request for joinder.

The CPR Administered International Rules, ICDR Rules, and ICC Rules all permit the
institution to allow joinder at the request of a party as long as no arbitrators have been
appointed.115 After the appointment of any arbitrator, all parties must agree to the joinder
at the time of the proposed joinder or else it will not be permitted. All three rules specify
procedures applicable to the notice and filing of a request for joinder.

The LCIA Rules are the most restrictive. They authorize joinder only if the party
requesting joinder and the party to be joined expressly consent to joinder in writing in the
arbitration agreement or at the time of the proposed joinder.116 They do not specify the
procedure that should be followed in relation to a request for joinder.
Belgian Judicial Code, Art. 1684(1) (requiring the arbitral tribunal to be composed of an odd number of arbitrators); Italian
Code of Civil Procedure, Art. 809 (“There may be one or more arbitrators, provided that their number is uneven.”); Dutch
Code of Civil Procedure, Art. 1026(1) (“The arbitral tribunal shall be composed of an uneven number of arbitrators. The
arbitral tribunal may also consist of a sole arbitrator.”). The ICC Rules provide for one or three member tribunals, unless the
parties agree otherwise. ICC Rules, Art. 12(1). Commentators have opined that this means that the ICC may consider an
arbitration clause providing for an even number of arbitrators invalid, unless the parties have provided explicit solutions for
potential deadlocks (such as appointment of an umpire to rule in deadlock situations). Herman Verbist, Erik Schäfer, et al.,
ICC Arbitration in Practice (2d edition, Kluwer Law International 2015) at 234-235.
HKIAC Rules, Art. 27.1.
CPR Administered International Rules, Rule 3.12; ICDR Rules, Art. 7; ICC Rules, Art. 7.
LCIA Rules, Art. 22.1(viii).
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The simplest way to allow for joinder is to select institutional rules with default joinder
provisions that will suit your business objectives, rather than negotiating a complex joinder
provision in the arbitration agreement. The default rules all protect against one of the key risks
of joinder: that a joined party could challenge an award by claiming that it was not given fair
and equal rights in the arbitrator selection process117 or that one of the previously appointed
arbitrators had a conflict of interest vis-à-vis the joined party.
Unlike joinder, the right to intervention is not typically addressed in the major institutional
arbitration rules. The only rules that explicitly provide for intervention are the HKIAC Rules. 118
Additionally, because the major institutional rules require a party to provide notice of claim to
the opposing party only, other contracting parties may not receive (prompt) notice of the
arbitration, which could hinder their ability to intervene. Thus, a party that wants to ensure a
right of intervention should provide explicitly for (i) notice of any claims to all contracting
parties and (ii) the right of intervention by any party during a specified period of time. Model
language is provided in Chapter V.C.3 below.
e.
Consolidation
Another procedural mechanism to facilitate efficient resolution of claims by multiple parties is
consolidating two or more pending arbitrations into a single arbitration (“consolidation”). Many
of the major institutional arbitration rules now include default provisions allowing for the
consolidation of two or more arbitrations.
These rules are generally satisfactory for the
consolidation of two or more arbitrations involving multiple parties under the same arbitration
agreement. It is therefore advisable to select an institution with consolidation provisions that
meet your objectives, rather than including customized consolidation language in the arbitration
agreement.
You should also consider any statutes regarding consolidation from the seat of the arbitration.
For example, in England and Wales, national courts do not have the power to order consolidation
of multiple arbitrations and a tribunal can order consolidation only if the parties expressly agree
to confer such power on the tribunal in the arbitration agreement (directly or by reference to
arbitration rules conferring such power [To be checked]) or by subsequent agreement after the
dispute has arisen. The default consolidation rule in the LCIA Rules allows a tribunal to
consolidate only if all parties to the potential consolidation provide explicit consent at the time of
consolidation. If you wish to facilitate consolidation, it is thus advisable to select a seat of
arbitration outside of England and Wales and to avoid the LCIA Rules.
Multi-Contract Arbitration Clauses
117
118
For example, Rule 3.12 of the CPR Administered International Rules allows joinder after the appointment of any arbitrator
only with the consent of all parties at that time. This rule reduces significantly the likelihood that a joining party can later
bring a successful challenge to an award on the ground that it did not have equal arbitrator selection rights.
HKIAC Rules, Art. 27.6.
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Most of the major institutional arbitration rules are silent with respect to multi-contract
arbitration.119
In many cases, the best solution to facilitate multi-contract arbitration is to execute a stand-alone
dispute resolution agreement that will be signed by all parties and incorporated by reference into
all related contracts. A stand-alone agreement eliminates the need to insert a separate dispute
resolution clause into each agreement and the risk of inconsistent clauses in the related contracts.
Given the complexities and length of a stand-alone agreement, this Manual does not provide
model language.
For relatively simple multi-contract scenarios, such as those involving only two different
contracts between two parties, it is unnecessary to have a stand-alone dispute resolution
agreement. In such scenario, or if a stand-alone agreement is not a workable option in a
particular transaction, the dispute resolution provision in each separate agreement can be drafted
to facilitate multi-contract arbitration by following the below guidelines.
First, select institutional arbitration, rather than ad hoc arbitration. An institution is a near
necessity to handle the potential procedural complexities of multi-contract arbitration.
Second, make sure that the separate dispute resolution clauses in each related contract are
identical or, at the very least, consistent. If any of the necessary elements of the clauses are
different (such as procedural rules, place of arbitration, or number of arbitrators), a single
arbitration of claims under the related contracts will not be possible, absent subsequent
agreement to modify the arbitration clause(s).120
Third, each separate arbitration clause in the contractual matrix should state explicitly that a
tribunal constituted under the clause may exercise jurisdiction over the related agreements.
While such language is not mandatory to achieve a multi-contract arbitration, it will ensure that a
party cannot subsequently challenge a tribunal’s jurisdiction in a multi-contract arbitration on
this ground. Model language is provided in Chapter V.C.3 below.
Fourth, consider whether to address consolidation and, if the transaction involves multiple
parties, whether to allow for joinder and intervention.
If the transaction involves multiple parties and the parties wish to allow for joinder and
intervention, you should select joinder-friendly arbitration rules and provide explicitly in each
arbitration clause of the contractual matrix for notification of the request for arbitration to all
119
120
Of the major institutional rules discussed in this Manual, only the ICC Rules and the HKIAC Rules provide explicitly that
claims under multiple contracts can be brought in one arbitration. ICC Rules, Art. 9 (“claims arising out of or in connection
with more than one contract may be made in a single arbitration, irrespective of whether such claims are made under one or
more than one arbitration agreement under the Rules.”); HKIAC Rules, Art. 29 (providing that claims arising out of one or
more contracts may be brought in a single arbitration if certain requirements are met).
Note that it is possible for the various contracts to be governed by a different substantive law. This will not defeat multicontract arbitration as the arbitrators need not be qualified in the applicable substantive law.
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contractual counter-parties and for intervention. For these purposes, the guidance in the previous
subchapter can be used.121
Similar to consolidation of multiple arbitrations under a single arbitration agreement, the
simplest way to facilitate consolidation in the multi-contract context is to select institutional rules
with satisfactory default consolidation provisions (in particular, the CPR, ICC, ICDR, or HKIAC
rules). This will mostly eliminate the need to draft customized consolidation language.
Keep in mind that the CPR, ICC, and ICDR rules have a significant limitation on consolidation
in the multi-contract context: consolidation of two or more arbitrations involving different
parties will not be allowed unless all parties consent explicitly to consolidation.122 This
limitation precludes a subsequent challenge of the award in the consolidated proceedings on the
ground that the consolidation violated the fundamental principle of equality of the parties in
relation to arbitrator selection, but it restricts the scope of possible consolidation.
There is only one institution that allows for consolidation of two or more pending arbitrations
under different arbitration agreements and that do not involve the same parties without the
consent of all parties at the time of consolidation: HKIAC.123 The more expansive consolidation
authority under the HKIAC Rules involves a trade-off. The parties waive their right to appoint
the arbitrator(s) in the event of consolidation and take the risk that HKIAC may revoke any prior
arbitrator appointments and reconstitute a new tribunal for the consolidated proceedings.124
It is not advisable to deviate from any of these institutional rules, or to draft a stand-alone dispute
resolution agreement, without consulting an experienced arbitration practitioner.
Model Clauses
[Consider whether it would be feasible to present model clauses in table form at beginning of this
chapter to facilitate consistency with other chapters.]
The following model arbitration clause can be used in a multi-party contract in which the parties
wish to encourage the efficient resolution of related disputes by multiple parties in a single
arbitration. It assumes that the parties select institutional arbitration under arbitration rules with
adequate default provisions on joinder and consolidation. It allows explicitly for intervention on
the assumption that the chosen institutional rules are silent in this respect. To avoid any potential
claim by a joined or intervening party that it was deprived of a right to participate in the
121
122
123
124
See Chapter V.C.1.d for a discussion of joinder and intervention in the context of multi-party arbitration. The same
considerations apply in the multi-contract setting.
The CPR, ICC, and ICDR rules permit consolidation in the multi-contract context either when (i) all parties have agreed to
consolidation; or (ii) the arbitrations are between the same parties, the disputes arise in connection with the same legal
relationship, and the arbitration agreements are found to be compatible. CPR Administered International Rules, Rule
3.13(a); ICC Rules, Art. 10; ICDR Rules, Art. 8.
HKIAC Rules, Art. 28.1 (allowing consolidation of “two or more arbitrations pending under these Rules where . . . (c) the
claims are made under more than one arbitration agreement, a common question of law or fact arises in both or all of the
arbitrations, the rights to relief claimed are in respect of, or arise out of, the same transaction or series of transactions, and
HKIAC finds the arbitration agreements to be compatible”).
HKIAC Rules, Art. 28.6.
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arbitrator selection process, it calls for arbitrator appointment after the expiration of the period
for joinder and intervention.
Any dispute arising out of or relating to this agreement, including the
breach, termination or validity thereof, shall be finally resolved by
arbitration in accordance with the [insert institutional rules (the “Rules”)],
as modified herein.
The seat of the arbitration shall be [insert place].
The language of the arbitration shall be [insert language].
There shall be [three] arbitrators to be appointed as follows:125
if the [request/notice/demand for arbitration] names only one
claimant and one respondent, and no party has exercised its right of
joinder or intervention as provided for below or in the Rules, the
claimant and the respondent shall each nominate one arbitrator
within [30] days after the expiry of the period during which parties
can exercise their right to joinder or intervention. The third
arbitrator, who shall act as [chairperson/president/presiding
arbitrator], shall be nominated by agreement of the co-arbitrators
within [30] days of the appointment of the second arbitrator. If any
arbitrator is not nominated within these time periods, the [selected
institution] shall make the appointment; and
if more than two parties are named as either claimants or
respondents in the [request/notice/demand for arbitration], or at
least one party exercises its right of joinder or intervention as
provided for below or in the Rules, the claimant(s) shall jointly
nominate one arbitrator and the respondent(s) shall jointly
nominate the other arbitrator, both within [30] days after the expiry
of the period during which parties can exercise their right to
joinder or intervention.126 If any of the parties fail to nominate an
arbitrator during the foregoing time period, the [selected
institution] shall, upon the request of any party, appoint all three
arbitrators and designate one of them to act as president. If the
claimant(s) and respondent(s) nominate the arbitrators as provided
above,
the
third
arbitrator,
who
shall
act
as
125
126
The language in Chapter V.A.x (page x) can be used to provide for a sole arbitrator.
If it is highly unlikely that the multiple parties will be aligned into two groups (i.e. multiple claimants and/or multiple
respondents), then you may wish to forego the above language and provide directly for arbitrator selection by the institution.
The following language can be used: if more than two parties are named as either claimants or respondents in the
[request/notice/demand for arbitration], or at least one party exercises its right of joinder or intervention as provided for
below or in the Rules, the arbitrator(s) shall be appointed by the [designated arbitral institution] within [30] days after the
expiration of the period for intervention under this clause. If replacement of an arbitrator becomes necessary, the
[institution] shall make the selection.
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[chairperson/president/presiding arbitrator], shall be nominated by
agreement of the co-arbitrators within [30] days of the appointment
of the second arbitrator. If the parties fail to nominate the
[chairperson/president/presiding arbitrator] as provided above, the
[chairperson/president/presiding arbitrator] shall be appointed by
the [selected institution].
Any contracting party may, either separately or together with any other
contracting party, initiate arbitration proceedings pursuant to this clause
against one or more other parties to this Agreement.
Any contracting party serving a [request/demand for arbitration] under this
clause or any other document in the arbitration notifying a claim (a
“Notice”) shall send a copy of the Notice to every other contracting party.
A “Notice” shall include, without limitation, notice of any claim,
counterclaim, cross-claim, and claim by or against any party or any joined
or intervening party.
In addition to any right to join parties and consolidate arbitrations in
accordance with the Rules, any contracting party that is not already a party
to the arbitration may intervene and become a party to the arbitration (the
“Intervening Party”) by submitting a written notice of intervention to all
contracting parties within [30] days of receipt of the Notice. The
provisions of the Rules governing the form and content of requests for
joinder shall apply mutatis mutandis to the form and content of the written
notice of intervention.
The above clause can also be modified as follows to facilitate multi-contract arbitration
(modifications are italicized):
Any dispute arising out of or relating to this agreement and/or one or
more of the Related Agreements,127 including the breach, termination or
validity thereof (“Dispute”), shall be finally resolved by arbitration in
accordance with the [insert institutional rules (the “Rules”)], as modified
herein.
The seat of the arbitration shall be [insert place].
The language of the arbitration shall be [insert language].
There shall be [three] arbitrators to be appointed as follows:128
127
128
“Related Agreements” should be a defined term in the contract. The definition should name with particularity each of the
related agreements. Alternatively, all of the related agreements could be identified by name in the arbitration clause.
The language in Chapter V.A.x can be used to provide for a sole arbitrator.
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if the [request/notice/demand for arbitration] names only one
claimant and one respondent, and no party has exercised its right of
joinder or intervention as provided for below or in the Rules, the
claimant and the respondent shall each nominate one arbitrator
within [30] days after the expiry of the period during which parties
can exercise their right to joinder or intervention. The third
arbitrator, who shall act as [chairperson/president/presiding
arbitrator], shall be nominated by agreement of the co-arbitrators
within [30] days of the appointment of the second arbitrator. If
any arbitrator is not nominated within these time periods, the
[selected institution] shall make the appointment;
if more than two parties are named as either claimants or
respondents in the [request/notice/demand for arbitration], or at
least one party exercises its right of joinder or intervention as
provided for below or in the Rules, the claimant(s) shall jointly
nominate one arbitrator and the respondent(s) shall jointly
nominate the other arbitrator, both within [30] days after the expiry
of the period during which parties can exercise their right to
joinder or intervention.129 If any of the parties fail to nominate an
arbitrator during the foregoing time period, the [selected
institution] shall, upon the request of any party, appoint all three
arbitrators and designate one of them to act as
[chairperson/president/presiding arbitrator]. If the claimant(s) and
respondent(s) nominate the arbitrators as provided above, the third
arbitrator, who shall act as [chairperson/president/presiding
arbitrator], shall be nominated by agreement of the co-arbitrators
within [30] days of the appointment of the second arbitrator. If the
parties fail to nominate the [chairperson/president/presiding
arbitrator] as provided above, the [chairperson/president/presiding
arbitrator] shall be appointed by the [selected institution].
Any contracting party may, either separately or together with any other
contracting party, initiate arbitration proceedings pursuant to this clause
against one or more other parties to this Agreement and/or the Related
Agreements. The parties agree that an arbitral tribunal appointed
hereunder or under any of the Related Agreements may exercise
jurisdiction with respect to both Disputes arising out of or relating to this
agreement and/or Disputes arising out of or relating to any of the Related
Agreements.
129
If it is highly unlikely that the multiple parties will be aligned into two groups (i.e. multiple claimants and/or multiple
respondents), then you may wish to forego the above language and provide directly for arbitrator selection by the institution.
The following language can be used: if more than two parties are named as either claimants or respondents in the
[request/notice/demand for arbitration], or at least one party exercises its right of joinder or intervention as provided for
below or in the Rules, the arbitrator(s) shall be appointed by the [designated arbitral institution] within [30] days after the
expiration of the period for intervention under this clause. If replacement of an arbitrator becomes necessary, the
[institution] shall make the selection.
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Any contracting party serving a [request/demand for arbitration] under this
clause or any other document in the arbitration notifying a claim (a
“Notice”) shall send a copy of the Notice to every other contracting party.
A “Notice” shall include, without limitation, notice of any claim,
counterclaim, cross-claim, and claim by or against any joined or
intervening party.
In addition to any right to join parties and consolidate arbitrations in
accordance with the Rules, any contracting party to this Agreement and/or
the Related Agreements that is not already a party to the arbitration may
intervene as a party to the arbitration (the “Intervening Party”) by
submitting a written notice to all contracting parties within [30] days of
receipt of the Notice.
D.
Battle of the Forms and Master Agreements
Contracts for goods and services commonly are entered into and performed without any
involvement of corporate counsel on the basis of an exchange between business representatives
of commercial documents such as quotations, purchase orders and acknowledgments. These
informal business dealings could increase the time and cost of dispute resolution as the parties
fight preliminary procedural battles over whether a given document constitutes a legally
enforceable contract, which party’s standard terms and conditions control, or which of several,
different dispute resolution clauses in different documents should apply to a particular dispute
(often referred to as the “battle of the forms”). The risk of delay and uncertainty is increased in
the cross-border context as parties from different legal cultures may have vastly different
expectations about contract formation based on different national laws.
Even though corporate counsel likely will not review all or even most of these forms, the risks of
costly and inefficient dispute resolution can be mitigated by establishing best practices for the
business side to follow when negotiating contracts to buy or sell goods using commercial forms,
such as:

Set monetary thresholds and type of transaction criteria that require the employee on the
business side to bring the prospective order to the attention of corporate counsel before
any binding documents are exchanged.

Insist that the counterparty explicitly acknowledge and agree to the terms in your
company’s form document by requiring signature of your form by the counterparty.

Require that the same dispute resolution mechanism be specified in all forms issued by
your company, particularly where multiple forms will be used in a repeat business
relationship because this will help to facilitate efficient resolution of related claims in a
single forum. Even with such a precaution, however, there is a risk that the other party
will attempt to introduce its own dispute resolution clause through its own forms that is
different from the template used by your company and that the conflicting provisions will
stall the dispute resolution process.
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Where there is an ongoing purchasing relationship between your company and the supplier,
service provider or customer, it is advisable to establish a Master Agreement that sets forth (i)
the terms and conditions for all orders between the parties for a specific period of time; and (ii) a
dispute resolution procedure that will govern all disputes arising out of the relationship.
The Master Agreement should specify what goods or services it applies to [or that it applies to all
transactions between the parties? TBD with Committee] and that it supersedes the terms of any
forms exchanged between the parties. The following language can be used:
It is understood and agreed between the Parties that the terms and
conditions set forth in this Master Agreement shall govern all purchases of
[describe goods/services] from [seller] by [buyer] for the period [insert
dates]. Notwithstanding any terms and conditions on either party’s
quotation, purchase orders or acknowledgment forms (or any other form
exchanged between the parties), the terms and conditions set forth in this
Master Agreement shall apply to the exclusion of any terms and
conditions that differ from or conflict with the terms and conditions
contained herein.
You can follow the recommendations and model language in Chapters V.A and V.B to draft an
arbitration provision to include in the Master Agreement with one caveat: the clause must make
clear that it applies to any disputes relating to the Master Agreement and any forms executed by
the parties that fall within the scope of the Master Agreement. For this purpose, the following
language can be used at the outset of the arbitration clause:
Any dispute arising out of or relating to this Master Agreement or any
quotation, purchase order, acknowledgment form or other form exchanged
between the parties that is governed by this Master Agreement, including
the breach, termination or validity thereof, shall be finally resolved by
arbitration in accordance with the [insert selected rules].
E.
Agreement to Submit Existing Dispute to Arbitration
Most international commercial arbitrations arise out of arbitration clauses in agreements
executed before any dispute between the parties. But parties can also agree to submit an existing
dispute to arbitration without a pre-existing arbitration agreement. Such agreement is referred to
as a “submission agreement.”
A submission agreement must include, at a minimum, the necessary elements discussed in
Chapter V.A. It may also include the optional elements discussed in Chapter V.B. Indeed, use
of optional elements is often more appropriate in a submission agreement than a pre-dispute
arbitration agreement because the parties know the subject of the dispute and can customize the
submission agreement accordingly.
The key difference between a submission agreement and a standard pre-dispute arbitration clause
is that the submission agreement should describe with specificity the dispute that will be subject
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to arbitration, rather than making a broad and generic statement that any disputes under the
contract will be subject to arbitration. The following language can be used to specify the scope
of the submission agreement:130
We, the undersigned parties, hereby agree to submit to arbitration in
accordance with [the International Institute for Conflict Prevention and
Resolution (“CPR”) Rules for Administered Arbitration of International
Disputes (the “Rules”)] the following dispute:
[Describe dispute briefly]
Another potential difference is that the parties may agree on the arbitrator(s) in the submission
agreement, rather than specifying an arbitrator selection method in the agreement or relying on
default institutional rules. In such event, the submission agreement should specify (i) a
procedure for arbitrator replacement that will govern if it becomes necessary to replace an
arbitrator; and (ii) if you choose a three-member panel instead of a sole arbitrator, which of the
arbitrators will serve as chair. The following language would work for the designation of a
three-member panel in a submission agreement:
There shall be three arbitrators. The parties hereby designate [insert
names of selected arbitrators] to serve as arbitrators. [Insert name] shall
act as [chairperson or presiding arbitrator]. If replacement of an arbitrator
becomes necessary, the parties shall jointly select the replacement. If a
replacement is not selected within [30] days, the [designated institution /
appointing authority] shall make the selection.
STRUCTURING FOREIGN INVESTMENTS TO ATTRACT INVESTMENT
TREATY PROTECTION AGAINST POTENTIAL GOVERNMENT ACTION
[Add brief introduction to content and purpose of chapter. Note that content and structure of this
chapter remain under consideration in order to render this chapter consistent with structure and
content of other Manual sections.]
A.
The Protection Offered by Bilateral Investment Treaties, Investment
Chapters in Free Trade Agreements, and International Investment
Arbitration
BITs and FTAs differ in their content, but they generally cover similar subjects, including (i) the
right of nationals (individuals and legal persons) of each treaty country to make investments in
the other treaty country; (ii) standards for the host government’s treatment of those investments;
(iii) the standard for nationalization or expropriation of those investments by the host
government; and (iv) resolution of disputes between a foreign investor and the host government
if the government fails to honor its treaty commitments. BITs typically guarantee foreign
investors and investments the following standards of treatment:
130
The submission agreement must also include necessary elements 2 through 6 in Table X of Chapter V.A.
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
National treatment, which guarantees foreign investors/investments treatment no less
favorable than that accorded to domestic investors/investments;

Most favored nation treatment, which guarantees treatment no less favorable than that
accorded to investors/investments from any third country;

Fair and equitable treatment, which is a broad standard that may protect against a wide
range of State conduct including, discrimination against foreign nationals; arbitrariness of
State conduct; lack of good faith or due process; acts by States that shock or at least
surprise; idiosyncrasy; injustice; and proportionality131;

Absence of unreasonable or discriminatory measures;

Full protection and security; and

Free transfer of money.
A number of BITs also contain a broadly worded clause that provides language along the
following lines: “Each Party shall observe any obligation it may have entered into with regard to
investments.”132 Some (but not all) arbitral tribunals have construed such “umbrella clauses” to
raise a State’s breach of an investment contract from a breach of contract to a treaty violation,
thereby entitling the investor to pursue its claim under the BIT.133
BITs do not prohibit nationalization or expropriation, but they set the conditions under which
those events can occur, and they require fair compensation. Article 6 of the NetherlandsVenezuela BIT provides an example of such a clause:
Neither Contracting Party shall take any measures to expropriate or
nationalize investments of nationals of the other Contracting Party or take
measures having an effect equivalent to nationalization or expropriation
with regard to such investments, unless the following conditions are
complied with:
131
132
133
(a)
The measures are taken in the public interest and under due process of
law;
(b)
The measures are not discriminatory or contrary to any undertaking which
the Contracting Party taking such measures may have given;
(c)
The measures are taken against just compensation . . . [which] shall
represent the market value of the investments affected immediately before
Some States have tried to limit the scope of fair and equitable treatment and full protection and security clauses by providing
explicitly in the treaty that such standards do not accord additional substantive rights beyond fair and equitable treatment
and full protection and security. For example, Article 5 of the 2012 US Model BIT states that “[t]he concepts of ‘fair and
equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is
required by that standard, and do not create additional substantive rights.” [Add reference.]
See, e.g., US-Argentina BIT, supra note 5, at art. II(2)(c).
See, e.g., Eureko BV v. Republic of Poland Partial Award, ¶ 244 (Aug. 19, 2005), 12 ICSID Rep. 335 (2007).
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the measures were taken or the impending measures became public
knowledge, whichever is the earlier . . . .134
The above formula for compensation is typical of the anti-expropriation safeguards found in
modern BITs, which call for “prompt, adequate, and effective” compensation.135 The right to
such compensation for an expropriation is one of the most beneficial features of a BIT for
investors.
“Expropriation” includes not only outright seizure of property but also interference with the use
of property that deprives the investor of the economic benefit of the property.
Other common claims in investor-State disputes may arise out of: the State’s breach of an
investment contract; changes to industry regulation; changes in taxation; revocation of operating
permits; restrictions on reparation of dividends; and discrimination against foreign companies.
When a host government violates one of the substantive treaty commitments, BITs give foreign
investors the right to seek damages. Foreign investors may also seek restitution or specific
performance, but these remedies are less common in investment arbitration (and are less likely to
be granted than such relief in purely private commercial arbitrations because of the host State’s
status as a sovereign nation).
Many BITs contain an “essential security” clause which confirms the State’s right to take actions
to preserve its national security interests notwithstanding the strictures of the BIT. For example,
article XI of the US-Argentina BIT states “[t]his Treaty shall not preclude the application by
either Party of measures necessary for . . . the Protection of its own essential security interests.”
[Some commentators have suggested that such clauses may curtail investors’ rights to damages
by serving as an absolute defense to a State’s action. Others assert that the provisions only allow
the State a reasonable delay in providing compensation. While the wording of many “essential
security” clauses tracks that of article XI of the US-Argentina BIT, some such as article 12 of the
2012 US Model BIT, provide for the State to take measures “it considers necessary” for its
essential security. Some commentators describe the latter clauses as “self-judging” clauses and
suggest that they give States greater discretion to determine what measures are necessary for the
State’s “essential security.” Even with “self-judging” clauses, the doctrines of good faith and
effective jurisdiction preserve the right of tribunals to review the State’s defense that the
complained-of measures were necessary for the protection of its “essential security” interests.]
[Bracketed language to be deleted or shortened significantly and potentially moved to a FN.]
B.
134
135
The Agreement to Arbitrate in Investment Arbitration
Agreement on Encouragement and Reciprocal Protection of Investment, Neth.-Venez., art. 6, Oct. 22, 1991 [hereinafter
Netherlands-Venezuela BIT].On Apr. 30, 2008, Venezuela gave notice that it was terminating the Netherlands-Venezuela
BIT effective Nov. 1, 2008. While the treaty will no longer protect investments made after the date of termination, Article
14(3) provides that the protections will remain effective for another ten years for those investments made prior to
termination. See, US-Argentina BIT at art. IV(1), and 2012 US Model BIT, supra note 5, at art. 6, for alternative
constructions of expropriation clauses.
See, e.g., 2012 US Model BIT, supra note 5, at art. 6.
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The agreement to arbitrate in a treaty is between two or more States. As a non-party to the
treaty, the foreign investor has not itself consented to the arbitration and must demonstrate its
consent through other means. A State’s agreement to arbitrate foreign investment disputes in a
BIT has been analogized to an “offer” for arbitration. Generally, the consent to investment
arbitration is not perfected until the investor “accepts” the arbitration clause, by invoking its
provisions through a request for arbitration or alternatively expressing consent to the application
of the clause in correspondence with the host State.
C.
Arbitral Institutions for Investment Arbitration
While most international commercial arbitration takes place under the auspices of the abovediscussed arbitral institutions (the ICC, ICDR, LCIA, etc.), most BITs and FTAs provide for
arbitration under the auspices of the International Centre for the Settlement of Investment
Disputes (“ICSID”) or ad hoc arbitration under the UNCITRAL Rules.136
ICSID is an autonomous international arbitration center established pursuant to the 1965
Convention on the Settlement of Investment Disputes Between States and Nationals of Other
States (the “ICSID Convention”).137 The ICSID Convention is currently in force in 159
States.138 [Confirm before publication of Manual.] State parties that are signatories to the ICSID
Convention are bound to comply with any ICSID-rendered award in accordance with its terms,
without domestic judicial review or vacatur.139 As a result, ICSID is a highly popular system for
investment arbitration, when available, because ICSID creates a final, enforceable arbitration
award. However, the ICSID rules themselves create a system of annulment140 and corrections141
for awards, so State parties can raise internally within the ICSID system issues of law or facts on
certain limited grounds. In the case of an annulment application, the Chairman of the ICSID
Administrative Council, rather than the parties, appoints an ad hoc Committee of three
arbitrators from ICSID’s Panel of Arbitrators to adjudicate the annulment application.142 In
136
137
138
139
140
141
142
Other, less common, forums for investment arbitration include the PCA, the SCC, the ICC, and the ICDR.
Opened for signature Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 160.
Member States, INT’L CENTRE FOR SETTLEMENT OF INV. DISPS., https://icsid.worldbank.org/ICSID/
FrontServlet?requestType=CasesRH&actionVal=ShowHome&pageName=MemberStates_Home
(last
visited
[ADD B/F PUBLICATION]).
ICSID Convention, at art. 53(1) (“The award shall be binding on the parties and shall not be subject to any appeal or to any
other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the
award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.”).
ICSID Convention, at art. 52 (“Either party may request annulment of the award by an application in writing addressed to
the Secretary General on one or more of the following grounds: (a) that the Tribunal was not properly constituted; (b) that
the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d)
that there has been a serious departure from a fundamental rule of procedure; or (e) that the award has failed to state the
reasons on which it is based.”).
See id. At art. 50(1) (“If any dispute shall arise between the parties as to the meaning or scope of an award, either party may
request interpretation of the award by an application in writing addressed to the Secretary-General.”); see also id. At art.
51(1) (“Either party may request revision of the award by an application in writing addressed to the Secretary-General on the
ground of discovery of some fact of such a nature as decisively to affect the award, provided that when the award was
rendered that fact was unknown to the Tribunal and to the applicant and that the applicant’s ignorance of that fact was not
due to negligence.”).
Id. at art. 52(3).
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order to be appointed to the ad hoc Committee, the arbitrators must not have played a role in the
underlying ICSID arbitration either as arbitrator or conciliator.143
In contrast, arbitration pursuant to the UNCITRAL Rules, or other arbitral rules, is subject to the
New York Convention, which means that the defenses against recognition and enforcement
provided by the New York Convention would apply.144 In addition, the enforcement of the
award, and execution on the State’s assets, must either occur in the State’s own judiciary, raising
the possibility of domestic bias, or, alternatively, in a foreign judiciary, where that foreign
judiciary’s application of State sovereignty principles might delay or hinder enforcement.145 On
the other hand, increasing annulments by ICSID ad hoc Committees in recent years have led
some to conclude that UNCITRAL arbitration may be the better alternative based on the belief
that the courts of States applying the New York Convention have, in some cases, shown more
restraint in the review of arbitral awards.
D.
Some Salient Issues That Frequently Arise in Investment Arbitration
The below sections attempt to identify some of the issues that arise most frequently in
investment arbitration. They are neither exhaustive nor do they provide an in-depth analysis of
how you should deal with these issues when confronted with them in the course of an investment
arbitration. Expert advice should be sought on these questions.
Fork in the Road v. Exhaustion of Local Remedies and Other PreConditions to Arbitration
Some BITs provide that if the investor chooses to submit the dispute to the local courts of the
host State, the investor may forfeit the right to submit the same claim to the international
arbitration mechanism provided in the BIT. This provision is commonly referred to as the “fork
in the road” provision.
143
144
145
Id.
See infra Chapter V.B.x [managing chapter / enforcement].
While Article 53(1) of the ICSID Convention obligates State parties to “abide by and comply with the terms of” tribunal
awards, and Article 54(1) obligates Contracting States to “recognize an award rendered pursuant to th[e] Convention as
binding and enforce the pecuniary obligations imposed by that award within its territories,” ICSID tribunals lack power to
enforce their awards. Should a Contracting State fail to comply with its obligation to honor an ICSID award, an investor
would have to enforce the award in the courts or before some other designated agency of a Contracting State. Such court or
other authority should limit its review to determining the authenticity of the award--and not re-examine issues of
jurisdiction, procedures, merits, or quantum of damages. If after an investor obtains recognition of an award, the State still
refuses to honor the award, the investor would have to execute through local courts. Article 54(3) of the ICSID Convention
provides that “[e]xecution of the award shall be governed by the laws concerning the execution of judgments in force in the
State in whose territories such execution is sought,” and Article 55 specifies that “[n]othing in Article 54 shall be construed
as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from
execution.” Thus, if a State party breaches its obligation to comply with an ICSID award, the foreign investor may still face
some of the obstacles that investors trying to enforce non-ICSID awards face at the stage of execution. See WANG DONG,
U.N. CONFERENCE ON TRADE & DEV., Dispute Settlement: International Centre for Settlement of Investment Disputes:
Binding Force and Enforcement, in 2.9 COURSE ON DISPUTE SETTLEMENT IN INTERNATIONAL TRADE, INVESTMENT AND
INTELLECTUAL PROPERTY 11-14 (2003), available at http://unctad.org/en/Docs/edmmisc232add8_en.pdf. [Consider moving
substance here to managing chapter.]
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Conversely, other BITs provide that a foreign investor must first exhaust local remedies before
proceeding to arbitration, although such clauses are less common.146
In addition, some BITs contain other procedural pre-conditions to arbitration, such as a
requirement to notify the host state of the potential arbitration and allow it time to negotiate a
settlement (a so-called “waiting period” or “cooling off period”).147
Jurisdiction
a.
Jurisdiction rationae materiae – is there a covered investment?
To arbitrate a BIT claim under the auspices of ICSID, the tribunal will need to have jurisdiction
rationae materiae or subject matter jurisdiction over the dispute. The proponent investor will
need to satisfy not only the jurisdictional requirements of the BIT but also those of the ICSID
Convention. In particular, article 25(1) of the ICSID Convention mandates that a dispute arise
“directly out of an investment,” but the Convention does not define “investment.” BITs, on the
other hand, often define “investment,” and many do so in broad terms.
BIT definitions of “investment” often include general language referring to “every kind of
investment in the territory of one Party owned or controlled directly or indirectly by nationals or
companies of the other Party.”148 These broad definitions are often supplemented by a nonexhaustive list of examples, such as:
146
147
148
(i)
“tangible” and “intangible property”;
(ii)
“a company or shares of stock or other interests in a company or interests
in the assets thereof;”
(iii)
“a claim to money or a claim to performance”;
(iv)
“intellectual property”; and
See e.g., Agreement on the Promotion and Protection of Investments, China-Côte d’Ivoire, art. 9(3), Sept. 23, 2002,
[hereinafter China- Côte d’Ivoire BIT] (“If such dispute cannot be settled amicably through negotiations, any legal dispute
between an investor of one Contracting Party and the other Contracting Party in connection with an investment in the
territory of the other Contracting Party shall have exhausted the domestic administrative review procedure specified by the
laws and regulations of that Contracting Party, before submission of the dispute to the aforementioned arbitration
procedure.”).
See e.g., US-Argentina BIT, supra note 5, at art. VII(2)–(3); (“In the event of an investment dispute, the parties to the
dispute should initially seek a resolution through consultation and negotiation.” Accordingly, parties must wait six months
from the date the dispute arose to submit the dispute for arbitration); China- Côte d’Ivoire BIT, at art. 9(1)–(2). During the
cooling-off period, the parties may wish to engage in mediation. Various arbitral institutions, including CPR, have
mediation
rules.
E.g.,
CPR
Mediation
Procedure,
available
at
http://www.cpradr.org/Portals/0/Resources/ADR%20Tools/Clauses%20&%20Rules/Mediation%20Procedure.pdf
(list
visited [ADD B/F PUBLICATION].)
BIT, supra note 5, art. 1 (“‘[I]nvestment’ means every asset that an investor owns or controls, directly or indirectly, that has
the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the
expectation of gain or profit, or the assumption of risk . . .”).
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(v)
“any right conferred by law or contract, and any licenses and permits
pursuant to law”.149
There is a debate in international investment case law about whether the BIT’s definition of
“investment” should apply in determining a tribunal’s jurisdiction rationae materiae and what
needs to be satisfied to meet ICSID’s jurisdictional requirement.
If a BIT’s definition of “investment” is not deemed the definition of “investment” for purposes
of the ICSID Convention, ICSID’s jurisdiction over a dispute will depend on an “objective”
definition of investment determined by the sitting arbitral tribunal. This determination requires
what is called the “double-barreled” approach or “double test” to ICSID jurisprudence.
The criteria by which the “double-barreled” approach defines an investment for the purposes of
the ICSID Convention are not straightforward, and differ by tribunal, although a number of
decisions rely on the case law outlined in Salini v. Morocco.150 The Salini tribunal considered
that the typical characteristics of an investment included “contributions, a certain duration of
performance of the contract and a participation in the risks of the transaction,” and additionally,
“the contribution to the economic development of the host State of the investment.”151
b.
Jurisdiction rationae personae – is there a covered investor?
Both the ICSID Convention and the applicable BIT may also raise issues of jurisdiction rationae
personae, or standing. As Article VII of the US-Argentina BIT quoted above indicates, BITs
require that the dispute be between the host government and “a national or company” of the other
State that is party to the BIT. When a claim involves a foreign affiliate of a multinational
company, disputes frequently arise as to whether the affiliate is the “investor” and whether the
affiliate can claim under the BIT of the foreign country in which the affiliate is located. Even if
both parties to the arbitration fall within the coverage of the BIT, they cannot arbitrate under the
ICSID Convention unless both the host country and the country of which the foreign investor is a
national have ratified the Convention.152
149
150
151
152
US-Argentina BIT, supra note 5, at art. I.
At least 74 awards have cited to Salini in some form.
See KLUWER ARBITRATION, http://www
.kluwerarbitration.com/default.aspx (follow “Advanced Search” hyperlink; then search “Free Text” for “Salini” and select
“Text Type” to be “Awards”; then follow “Find” hyperlink) (last visited [ADD B/F PUBLICATION]). Disagreements also
arise as to whether an objective definition of “investment” must apply in non-ICSID cases, although in those cases reliance
on the Salini decision is extra-textual as the tribunals generally have no equivalent to Article 25 of the ICSID Convention
upon which to rely.
Salini Construttori S.P.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, (July 23, 2001), 42
I.L.M. 609, 622 ¶ 52 (2003).
See ICSID Convention, at art 1(2). Some countries require investors to organize under local law. Article 25(2)(b) of the
ICSID Convention permits the host government and the investor to agree to treat a local company that is under “foreign
control” as a national of another Contracting State for the purposes of the ICSID Convention. A provision implementing this
provision is found in many BITs. See e.g., Agreement for the Promotion and Reciprocal Protection of Investments, IndiaSwed.,
art.
1(d),
July
4,
2000
(entered
into
force
Apr.
1,
2001),
available
at
http://www.aseanbriefing.com/userfiles/resources-pdfs/India/BIT/Asia_BIT_India_Sweden.pdf (“‘[C]ompanies’ mean any
corporations, firms and associations incorporated or constituted under the law in force in the territory of either Contracting
Party, or in a third country if at least 51 per cent of the equity interest is owned by investors of that Contracting Party, or in
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The private right of a foreign investor (which can include both direct and indirect shareholders in
the company making the investment) to bring an investment arbitration may not preclude the
company itself, in its own right (under municipal law or contract), from raising parallel claims
for the damages it has suffered. Such parallel proceedings – where a company brings suit based
on the same underlying wrongs that harmed its shareholders – can raise complicated issues of
double recovery and compensation, but they are not necessarily a jurisdictional bar to the
shareholders’ investment arbitration claims.
c.
Jurisdiction rationae temporis – timing of the dispute
Investment arbitration is also subject to the international legal requirement of jurisdiction
rationae temporis, or the temporal elements of jurisdiction. This jurisdictional requirement deals
with whether the relevant investment and dispute occurred within the timeframe protected by a
BIT, and also whether the investment was made before or after the dispute occurred.
Applicable Law
Issues of applicable law frequently complicate investment arbitration. Article 42(1) of the ICSID
Convention states that if the parties have not agreed upon the applicable law, the tribunal should
apply “the law of the Contracting State party to the dispute (including its rules on the conflict of
laws) and such rules of international law as may be applicable.” As BITs are treaties,
international law applies even when the parties have specified a governing law by virtue of the
Vienna Convention on the Law of Treaties, which provides that treaties are “governed by
international law” and must be interpreted in light of “any relevant rules of international law
applicable.”153
Merits, Damages and Remedies
Parties pursue arbitration for their own unique ends—requests for relief on the merits, for
damages, or for other, alternative remedies. The possibility of injunctive relief in investment
arbitration may be limited, given the international legal deference to the sovereign’s prerogative
to conduct its own affairs. Instead, monetary damages are generally a tribunal’s preferred
remedy.154
The measure of monetary damages depends on the nature of the investor’s underlying complaint.
For a lawful expropriation – one which conforms to the legal requirements laid out in Chapter
VI.A] above – the prevailing measure of damages (depending in part on the relevant BIT
language) is the greater of the fair market value of the expropriated property or right at the time
153
154
which investors of that Contracting Party control at least 51 per cent of the voting rights in respect of shares owned by
them.”).
Vienna Convention on the Law of Treaties art. 31(3)(c), May 23, 1969, 1155 U.N.T.S. 331.
ICSID Convention art. 54(1) obligates Contracting States to “recognize an award rendered pursuant to the Convention as
binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a
court in that State.” A Contracting State’s obligation to “recognize” an ICSID award applies to pecuniary and nonpecuniary (if any) obligations mandated in the award. The State’s obligation to “enforce” the award applies only to “the
pecuniary obligations” in the award. While non-pecuniary obligations in awards are binding on the host State party, the
enforcement provision in art. 54(1) does not apply to them. See WANG DONG, at 12–14.
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of the expropriation, or – to protect against the decline in value experienced when a property is
about to be expropriated – the fair market value at the time the expropriation is made public,
even if the property later increases in value after the expropriation. For unlawful expropriations,
and other unlawful acts such as a breach of the fair and equitable treatment standard, the measure
of damages that a tribunal might apply follows the so-called Chorzów Factory principle, under
which an investor receives such money damages as would put it in the position in which it would
have been had the State's unlawful conduct not occurred (which might cover, for example,
increases in the value of expropriated property after the expropriation occurred).155
E.
The Importance of Planning – Protecting Investments Before It’s Too Late
Structuring Foreign Investments to Attract Investment Treaty
Protection Against Potential Government Action
[NTD: All of the content in this section E has been copied into Chapter II.D. This section is thus
entirely duplicative with Chapter II in its current form.] Investment arbitration is not a panacea
for all investor ills, and such cases are likely to raise complex issues of public international law –
including questions of jurisdiction – that may take a while to develop and be decided. As a
result, such cases may last several years (depending on the procedure adopted by the particular
tribunal). Nevertheless, the possibility of investment arbitration can provide much-needed
protection for investors making foreign investments, especially when an investor seeks a neutral
venue for dispute resolution with a government. Investors have recovered hundreds of millions,
if not billions, of dollars through investment arbitration cases in the past.
Investors should therefore plan ahead. In a manner similar to tax planning of an investment,
well-advised investors hedge against State interference by structuring their investments to take
advantage of an investment treaty to which the host State is a party. For example, if a company
is not incorporated in a country that has a BIT with a country in which the company is
contemplating an investment, the company may want to consider structuring the investment
through an affiliate that is afforded specific protections under a relevant BIT of that affiliate’s
host State. When doing so, care must be taken not to run afoul of a so-called “denial of benefits”
clause found in some BITs, which precludes the application of the treaty to corporations without
substantial business activities in the State of their incorporation.
Consulting an investment arbitration specialist when structuring an investment is the surest
means of obtaining treaty coverage. Under some BITs, protection may be put in place after the
initial investment, but treaty coverage must be established before the State action that gives rise
to the dispute or else the investor will be precluded from relying on the investment treaty
protection.156
155
156
See generally Timothy G. Nelson, A Factory in Chorzów: The Silesian Dispute that Continues to Influence International
Law and Expropriation Damages Almost a Century Later, 1 J. DAMAGES INT’L ARB. 77, 92 (2014) (“Within BIT law, the
aspect of Chorzów Factory that has generated perhaps the most intense interest relates to the quantification of damages for
unlawful expropriation.”).
Investment arbitration case law accepts that an investor can plan to protect its investment at the time the investment is made
and can even make changes to the structure of the investment after the investment is made in order to protect against adverse
governmental action. See.e.g., Tidewater, Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision
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Political Risk Insurance
Investors often purchase political risk insurance to mitigate their potential exposure; such
insurance typically covers political risks like currency inconvertibility, expropriation and
political violence. Political risk insurance can be obtained from State-sponsored agencies like
the US Overseas Private Investment Corporation (“OPIC”), private agencies like Lloyds of
London, and the World Bank’s Multilateral Investment Guaranty Agency (“MIGA”).
PRACTICAL TIPS FOR MANAGING CROSS-BORDER ADR AND
ARBITRATION
A.
Managing Negotiation, Mediation, Expert Determination and Dispute Board
Proceedings
[Currently being drafted by Felix Weinacht]
[NTD: Include reference to CPR European Mediation and ADR Guide somewhere in this
section.]
B.
Managing an International Commercial Arbitration
This section discusses matters that corporate counsel should consider at various stages of the
arbitration.
Amicable Settlement
Amicable settlement of a dispute is possible at any time before, during, or after an arbitration. A
settlement does not necessarily reflect the parties’ predictions of the ultimate outcome of the
dispute. It reflects what the parties deem acceptable given not only the facts and the law but also
the time and expense of arbitration or proceedings to enforce an award, the related disruption of
on-going business, and considerations unrelated to the dispute, including the parties’ past
relationship and hopes of future relationships. A settlement can take many forms, including an
agreed payment by one party to the other, a revision of an existing contract, or a new agreement
that will offset any losses.
As noted in Chapter II, the best time to settle many disputes comes before the filing of a request
for arbitration—before positions harden and emotions block settlement. In other cases,
on Jurisdiction ¶ 194 (Feb. 8, 2013) (inquiring into the foreseeability of expropriation because “[a]t least one of the reasons
for [Claimants restructuring] is accepted to be a desire to protect themselves against the risk of nationalization.”). An
investor will not, however, receive the benefit of investment treaty protection if an investment is restructured after events
giving rise to the dispute have transpired. See e.g., Venezuela Holdings B.V. v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/07/27, Decision on Jurisdiction ¶¶ 203–206 (June 10, 2010) (finding that the Tribunal had jurisdiction over
the disputes arising after Mobil restructured its investment through a Dutch entity, but that the Tribunal did not have
jurisdiction over the disputes that were pre-existing at the time of Mobil’s restructuring); see also Phoenix Action, Ltd. v.
Czech Republic, ICSID Case No. ARB/06/5, Award ¶ 92 (Apr. 15, 2009) (“[A]ccording to ICSID case law, a corporation
cannot modify the structure of its investment for the sole purpose of gaining access to ICSID jurisdiction, after damages
have occurred. To change the structure of a company complaining of measures adopted by a State for the sole purpose of
acquiring an ICSID claim that did not exist before such change cannot give birth to a protected investment.”).
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settlement discussions may be more productive after the parties submit a round of substantive
pleadings, which may more fully reveal the strengths and weaknesses of each party’s case. The
danger of putting off settlement efforts until that point is that the parties may be in litigation
mode and may be reluctant to broach the subject of settlement for fear of conveying weakness.
To avoid the emotional barriers to settlement, and even if not required by the arbitration
agreement,157 parties should consider, before the arbitration begins, ways to resolve the dispute
short of arbitration or, at least, ways to structure the arbitration to facilitate settlement as the
arbitration proceeds, such as building mandatory settlement discussions into the procedural
timetable. 158
After arbitration has commenced, counsel should continue to assess the possibility of amicable
settlement. Do not rely on the arbitral tribunal to encourage settlement at appropriate junctures.
Unlike judges in some national courts, many arbitrators are reluctant to suggest settlement talks
for fear of subjecting the award to challenge.159
Corporate counsel can play an important role in keeping open lines of communication for
reaching an amicable resolution of the dispute. Having the attorneys who are preparing the case
for hearing simultaneously craft a settlement strategy can distract and strain those preparing the
case. If external counsel has been retained, one option is for external counsel to focus on the
arbitration, while corporate counsel handle ongoing settlement discussions.
If the parties negotiate a settlement during the arbitration, they should consider whether to have
the tribunal record the settlement as an award by consent.160 Doing so gives the settlement
agreement the status of an arbitral award enforceable under the New York Convention.
a.
Tolling statutory time limits to allow resolution by agreement
When a statute restricts the time available to assert a claim, the applicable law may permit the
parties to enter a tolling agreement to forestall the deadline and allow for negotiation, mediation,
or other efforts to resolve the dispute.161
157
158
159
160
See supra Chapter III (discussing step clauses which require arbitration or mediation as first steps in the dispute resolution
process).
A number of companies have committed to the CPR Corporate Policy Statement on Alternatives to Litigation (“CPR
Corporate Pledge”), which provides, “[i]n the event of a business dispute between our company and another company which
has made or will then make a similar statement, we are prepared to explore with that other party resolution of the dispute
through negotiation or ADR techniques before pursuing full-scale litigation. If either party believes that the dispute is not
suitable for ADR techniques, or if such techniques do not produce results satisfactory to the disputants, either party may
proceed with litigation..” Counsel should check to see if the other party(ies) to the dispute have signed the CPR Corporate
Pledge or one of the other CPR pledges that commit them to attempting amicable settlement (e.g., the 21st Century Pledge
or
an
Industry
Specific
Pledge).
See
CPR
21st
Century
ADR
Pledge,
available
at
http://www.cpradr.org/PracticeAreas/ADRPledges.aspx.
In an attempt to address the reluctance of arbitrators to propose settlement talks, the CPR Administered International Rules
provide that the tribunal may suggest at any time that the parties explore settlement. CPR Administered International Rules,
Rule 21.1. These rules were adopted in late 2014. Time will tell whether they will result in more active encouragement of
settlement negotiations in CPR arbitrations.
Various sets of arbitration rules provide for entering settlements as awards by consent—e.g., CPR Rules for NonAdministered Arbitration of International Disputes (2007), Rule 19.4 and CPR Rules for Administered Arbitration of
International Disputes, Rule 21.4; ICC Rules of Arbitration, (2012), Art. 32.
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Parties can enter a tolling agreement before or after the initiation of the arbitration. Tolling
agreements allow time to attempt to resolve a dispute without the worry of a statutory deadline
expiring. The motivation for entering a tolling agreement will depend on whether a party is the
claimant or the respondent. From the claimant’s perspective, the tolling agreement preserves the
claim. From the respondent’s perspective, a tolling agreement delays the commencement or the
continued pursuit of a proceeding with the attendant expense and burden. Before a claimant
enters into a tolling agreement, it should try to determine whether the respondent wants to make
a serious effort to resolve the dispute or merely wants to prolong an already lengthy period of
inaction. Similarly, a respondent will want to determine if the claimant wants the agreement to
pursue serious negotiations or if the motivation is to keep alive a dispute that the claimant has
shown little willingness to pursue or settle.
A respondent should understand that a tolling agreement may not interrupt the running of preaward interest unless the parties expressly stipulate that the agreement also tolls the running of
interest.
The parties should check the applicable law for any restrictions on tolling agreements. For
example, under New York law tolling agreements that purport to toll the statute of limitations
indefinitely in contract disputes have been found invalid.162
The parties should also confirm that the deadline they want to toll is a statute of limitations as
opposed to a “statute of repose” (often referred to as a “period of prescription” in civil law
countries). Statutes of limitation provide a defense to assertion of a claim, but the defendant
must plead the statute of limitations or the defense is waived. Such statutes do not extinguish the
right, but if pleaded, they block the remedy. Statutes of repose are less forgiving than statutes of
limitations. They mandate that a party assert a claim within a specified period of time, or the
party loses the right to make the claim. As a general rule, parties cannot toll a statute of repose
by agreement.163
[Consider whether necessary to include section on tolling here or whether this can be merged
with the tolling section in Chapter III.]
b.
“Last offer” or “high-low” arbitration
Sometimes during settlement negotiations, parties can narrow the range of the amount in dispute
even though they are unable to agree on a final number. In such cases, the parties can simplify
161
162
163
In the event the contract itself imposes a deadline for the initiation of a claim, the parties can agree at any time to extend
such deadline or to do away with it altogether. Depending on the wording of the parties’ agreement and the applicable law,
the statute of limitation may still apply.
T & N PLC v. Fred S. James & Co. of New York, 29 F.3d 57, 61 (2d Cir. 1994). Subsequent cases have limited the
prohibition against indefinite tolling agreements to contract actions. E.g., WYS Design P’ship Architects, P.C. v. Bd. of
Managers of the 285 Lafayette St. Condominium, 958 N.Y.S.2d 311 (Sup. Ct. 2010) (unpub.) (upholding a tolling agreement
that indefinitely extended the three-year statute of limitations for a malpractice claim against an architect).
Similarly, as a general rule, parties cannot extend a period of prescription in civil law jurisdictions by agreement. If a period
of prescription governs a claim, check the law of the applicable jurisdiction for exceptions to the general rule. Claimants in
civil law jurisdictions may also be able to prolong a period of prescription by strategically timing the sending of a notice of
default.
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the dispute and limit their exposure by agreeing that, regardless of the tribunal’s determination,
the award will not be more than the claimant’s offer or less than the respondent’s counteroffer.
The parties can agree to vary this form of arbitration. They can make the arbitrator aware of
their arrangement, or they can seal their offers and not tell the arbitrator the amounts or even that
they have entered a last offer/high-low agreement. They can agree that the award will be one of
the two numbers, whichever is closer to the arbitrator’s award, or they can agree that if the
arbitrator’s award falls between the two numbers, they will abide by the arbitrator’s decision.
Often once the parties have agreed on the range of the outcome, they ultimately agree to settle
for a number within the range before the arbitration ends.
c.
“Sealed” or “Calderbank” offer
“Calderbank” or “sealed” offers provide a party the potential to shift liability for the costs of the
arbitration (including attorneys’ fees) in the event of an adverse award. As such costs can be
substantial, the possibility of shifting them can be attractive, especially to a respondent in an
arbitration in which an adverse award is likely, the costs of the arbitration are likely to be
substantial, and the arbitral tribunal is likely to adopt the “loser pays” or apportionment approach
to cost allocation.
The basic tenor of a Calderbank/sealed offer is that if a party makes a settlement offer, and the
award on the merits results in recovery lower than the offer, the party rejecting the offer (i)
should not recover its own costs incurred after the date of the offer and (ii) should also be liable
for the costs incurred by the offering party after the date of the offer.164 The objective is to avoid
needless arbitration by encouraging parties to make and accept reasonable settlement offers.
Calderbank/sealed offers have made their way into domestic arbitration in England and in
jurisdictions that follow English law, such as Australia, Canada, and Hong Kong. 165 While the
procedure has not become mainstream in international arbitration, parties have used it with
success. It can be a useful tool for reducing a client’s exposure to an adverse cost award. The
possibility that a tribunal might consider such an offer when allocating costs may also encourage
an opponent to consider settlement more seriously than it otherwise would.
The following general guidelines apply when making a Calderbank offer:

164
165
As the cost protection may start as of the date of the offer, the earlier in the dispute that a
party sends the offer, the greater potential protection the offering party receives and the
greater the pressure on the offeree to settle.
The “Calderbank” or “sealed” offer originated in an English Court of Appeal case, Calderbank v. Calderbank. Calderbank
v Calderbank [1976] Fam. 93. In that case, the defendant sent the plaintiff a written “without prejudice letter” offering a
settlement. The plaintiff ultimately prevailed on the merits, but recovered less than the defendant had offered. The Court of
Appeal ruled that the defendant could introduce the settlement offer in the cost phase of the trial and that the plaintiff (the
winning party) was responsible for the costs that the defendant (the losing party) had incurred after the date of the offer.
See Poupak Anjomshoaa, Tips for Making “Sealed Offers” in International Arbitration to Cap Liability for Costs (2008),
available
at
http://www.lexology.com/library/detail.aspx?g=b0b80669-a5fc-465c-be0e-8aa1ae58c649
[hereinafter
Anjomshoaa, Tips for Making “Sealed Offers].
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
To serve its intended purposes, the offer must be an amount greater than the offeree is
likely to receive in the final award. A pro forma low ball offer serves no purpose.166

The offer must be in writing and marked “without prejudice save as to costs.” If there is
any doubt about whether the offeree will understand those words, the offer letter should
explain that the offer cannot be revealed to the tribunal until it starts allocating costs after
the determination on the merits.167 The impact of the offer remains within the discretion
of the arbitrator(s).

To make favorable consideration of an offer more likely, it should remain open for a
reasonable time, and the terms should be unambiguous and unconditional so that the
offeree cannot justify delaying its response beyond the deadline.

The offer should specify a procedure for when and how it will be brought to the tribunal’s
attention. In English litigation, the court does not learn that a party has made a
Calderbank/sealed offer until the cost phase of the proceeding, after the court has
rendered the decision on the merits. An arbitral tribunal, by contrast, generally
determines liability and cost allocation in a single award, after which the tribunal
becomes functus officio and has no power to revise its award. The effective use of a
Calderbank/sealed offer in arbitration, therefore requires the parties to consider this issue
in advance. Options include:
o Ask the tribunal to bifurcate the arbitration and rule on liability and costs
separately, with the Calderbank/sealed offer being provided to the tribunal only
after the liability determination. Bifurcation could, however, lead to increased
costs.
o Give the tribunal the offer in a sealed envelope and request that the tribunal open
the envelope only after it has reached its result on the merits but before it makes
its decision on costs. The potential downside to this procedure is that the tribunal
will know that the party submitting the envelope has made a settlement offer, and
the arbitrator(s) may assume that the party is not sure of the strength of its case on
the merits.
o In the event of institutional arbitration, give the sealed offer to the arbitral
institution and request that the institution inform the tribunal that one of the
parties has submitted a sealed offer. This option has the advantage that the
tribunal will not know until after it has decided the merits which party has
submitted the offer.
166
167
See Olswang, Using Calderbank Offers to Protect Your Costs in Arbitration Proceedings, available at
https://singaporeinternationalarbitration.files.wordpress.com/2012/05/guidance-note-using-calderbank-offers-to-protectyour-costs-in-arbitration-proceedings.pdf; Anjomshoaa, Tips for Making “Sealed Offers.”
Poupak Anjomshoaa, Costs Awards in International Arbitration and the Use of “Sealed Offers” to Limit Liability for Costs,
available at http://www.lexology.com/library/detail.aspx?g=d967835d-23a1-4418-b8d7-e1f8223e61a9 (2007) [hereinafter
Anjomshoaa, Costs Awards].
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Given the complexity of Calderbank/sealed offers, corporate counsel not familiar with such
offers, should seek the advice of experienced counsel.
Initial Stages
Corporate counsel typically will be the first attorneys to receive and review a request for
arbitration, or the first to discuss with the client the need to initiate an arbitration. Issues that
should be considered during the early days of the dispute include the following.
a.
Review of the arbitration provision
When a dispute arises or when the company receives a demand for arbitration, the first step is to
read the applicable arbitration provision carefully to determine if arbitration is mandatory or
optional and to see what it provides with regard to scope of disputes covered, applicable
arbitration rules, number and selection of arbitrators, language, governing law (including
whether the CISG applies),168 place of arbitration, and any special procedures, such as fast-track
arbitration, deadlines for awards, etc.169 For example, the arbitration agreement may include a
“step clause,” requiring the parties to engage in settlement discussions or formal mediation
proceedings prior to filing a request for arbitration.
If the arbitration clause provides for institutional arbitration, the institution can be contacted both
prior to and during the arbitration with any questions. Ex parte communications with the staff of
an arbitral institution are generally permissible. The staff will make any disclosure to the other
parties that it deems necessary.
b.
Early case assessment
Corporate counsel may learn the critical facts of a dispute before senior management. At the
early stages of a problem with a contract or transaction or as soon as a request for arbitration
arrives, corporate counsel are likely to be part of the internal group discussing and analyzing the
critical issues.
As part of the early assessment, corporate counsel should look at key documents and meet with
those within the company directly involved with the dispute to prepare a preliminary assessment
for senior management and advise on next steps, which often include the selection of outside
counsel. If the client retains outside counsel, corporate counsel should explain the facts known at
that point and share their preliminary assessment to assist outside counsel to provide their own
preliminary assessment. Assessing the likelihood of success and potential challenges is an
ongoing effort on the part of all counsel assigned to the case. Such assessments and
reassessments will help align expectations and will assist in developing an arbitration and
business strategy as additional documents and further interviews with key personnel uncover
more relevant information. Senior management can deal with bad news, but they like to see it
coming; they do not like surprises.
168
169
See supra Chapter V.A.6.a.
Managing time limits is addressed further in Chapter VII.B.x below.
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c.
Retention of outside counsel/staffing
A key threshold matter is whether to retain, external counsel. Internal experience and expertise,
capacity for staffing, the amount in dispute, and the complexity of the claims all play a part in the
decision to engage outside counsel. Protecting the attorney-client privilege and attorney work
product will also be a relevant consideration. In some jurisdictions, communications between
corporate counsel and employees on the business side as well as attorney work product that is
prepared in connection with litigation are not protected by legal privilege. If the privilege rules
of such jurisdiction may apply, then use of external counsel is advisable.
If the client determines that retention of outside counsel is appropriate, the retention should occur
promptly. Prior international arbitration experience is an important consideration when selecting
counsel. Experienced international arbitration counsel will be well-positioned to advise on the
selection of arbitrators, which is a key step in ensuring that the arbitration will proceed fairly and
efficiently and that the arbitral award will be well-reasoned and enforceable. Experienced
international arbitration counsel will be familiar with the procedures and tools for gathering and
presenting evidence, which will likely be more limited in international arbitration than in
litigation or even domestic arbitration. Experienced international arbitration counsel may also
have particular language skills or a particular understanding of how to present a case
convincingly before arbitrators from different backgrounds.
The benefits of specialized arbitration counsel will be weighed against other considerations,
including preferences for attorneys with whom the company has a preexisting relationship.
Those counsel may understand the client’s business and have knowledge of the subject matter of
the dispute.
d.
Arbitrator selection
One of the benefits of international arbitration is the opportunity to select the individual(s) who
will decide the dispute. Given that arbitral awards are generally not appealable for errors of fact
or law, selection of a knowledgeable tribunal that will resolve the dispute expeditiously and in
accordance with the facts and the law is critical. Corporate and outside counsel should work
together to select a tribunal that will have the requisite skills and qualities to bring the arbitration
to a speedy and just conclusion.
Cooperate with opposing counsel
In general, the best strategy when constituting the tribunal is to cooperate with opposing counsel.
Having a say in the selection of the arbitrator(s) who will decide the case is critical. When the
arbitration agreement or the applicable arbitral rules call for the parties to select one of more of
the arbitrators jointly, the parties must cooperate in good faith. If they fail to agree, the arbitral
institution administering the arbitration, a court, or some other third-party will make the selection
and impose its choice(s) on the parties. Parties are usually more satisfied and arbitrations run
more smoothly if the parties select the tribunal promptly and in good faith even if selection
requires the parties to compromise.
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Number of arbitrators
The arbitration clause may specify the number of arbitrators and the method of their selection.
As noted in Chapter V.A.5.a above, most arbitration rules contain default provisions that will
govern the number of arbitrators and selection procedures if the arbitration agreement does not
specify these matters or if the parties fail to follow the agreed procedures.
If the parties need to decide whether to have one or three arbitrators, counsel should consider the
points set forth in Chapter V.A.5.a above.
Arbitrator selection criteria
The principal criteria for arbitrator(s) are that he or she be objective and will reach a decision
based on the facts and the law. Other important criteria may be language skills, familiarity with
the applicable arbitration rules, knowledge of the applicable substantive law, and subject matter
expertise. Availability is also critical to ensure that the arbitration proceeds expeditiously and
the award is rendered without undue delay.
When selecting a party-appointed arbitrator for a three-member tribunal, the candidate should be
a person who will command the respect of the other arbitrators. Although party-appointed
arbitrators in international arbitration must remain neutral, the appointing party will want a
person who commands enough respect of the other tribunal members to ensure that its arguments
receive fair consideration by the entire tribunal.170
When considering candidates to chair a tribunal, the person should have proven management
skills, including the ability to deal with counsel, clients, and fellow arbitrators who might seek to
delay proceedings.
Many of these qualities are intangible and not discernible from the candidates’ resumes. Both
corporate counsel and outside attorneys may have contacts within the international arbitration
community who have sat on tribunals with or appeared before the candidates. Counsel can call
upon those contacts to learn whether candidates possess the requisite intangible qualities.
Repeat appointments
Parties should minimize repeat appointments of the same arbitrator—especially if the arbitrator
consistently rules in the party’s favor. Repeated appointments create the impression that the
arbitrator may be biased in favor of the company. The IBA Guidelines on Conflicts of Interest in
International Arbitration (“IBA Conflicts Guidelines”), which are a common reference point in
the international arbitration community even though they are not typically binding, provide that
170
Note that under CPR’s screened selection procedure, parties can have no such expectation as the party-appointed arbitrators
do not know who appointed them. Rule 5.4 of the CPR Rules for Administered Arbitration of International Disputes
provides for a “screened” selection of party-appointed arbitrators whereby the parties do not approach candidates directly,
but discuss potential arbitrators with the CPR. The CPR vets the candidates, so that the eventual nominees do not know
which party selected them.
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arbitrators should disclose when the same party has appointed them on two or more occasions
within the past three years.171
Candidate interviews
Interviewing candidates, to the extent the applicable law and arbitration rules allow, may be
beneficial. But tread with caution. While interviews may help to judge a candidate’s suitability,
they can establish a basis for challenging the candidate’s neutrality if not conducted properly.
As a general rule, you should not have ex parte interviews or communications with candidates
for sole arbitrator or chairperson. Joint interviews are generally permitted. You may have
unilateral interviews with candidates to serve as your party-appointed arbitrator on a three-person
tribunal.
Interviews must be limited in scope. Although most practitioners agree that a candidate can be
informed of the general subject matter of the dispute to assess the candidate’s qualifications for
the particular matter, you should not inquire into a candidate’s views on the substance of the
dispute. Other permissible topics typically include:

Confirming the candidate’s availability to devote time to the case and determining if the
candidate will commit not to take on other matters that will compromise his availability.
Although many arbitral institutions require arbitrators to provide information on their
time commitments,172 getting confirmation of availability from the candidates
themselves provides added assurance.

Inquiring about any potential conflicts of interest, including what, if any disclosures, the
candidate would need to make concerning his independence or impartiality. Knowing
about any such disclosures in advance is critical to making an informed judgment as to
whether to proceed with the appointment.
In order to confirm the permissible scope of candidate interviews, you should consult the
selected institutional arbitration rules, if any. For example, the CPR Administered International
Rules explicitly address the topic of arbitrator candidate interviews and reflect the generally
accepted standard for conducting such interviews. Rule 7.4 states:
171
172
Guideline 3.1.3 of the IBA Conflicts Guidelines categorizes repeat appointments on the so-called “Orange List.” IBA
Conflicts Guidelines Part II (3) defines the Orange List as “a non-exhaustive list of specific situations that, depending on the
facts of a given case, may, in the eyes of the parties, give rise to doubts about the arbitrator’s impartiality or independence.”
IBA Conflicts Guidelines at 18.
For example, Rule 7.2 of the CPR Administered International Rules provides, “By accepting appointment, each arbitrator
shall be deemed ... to have represented that he or she has the time available to devote to the expeditious process
contemplated by these Rules.” Article 13(1) of the ICC Rules of Arbitration provides, “In confirming or appointing
arbitrators, the Court shall consider the prospective arbitrator’s ... availability and ability to conduct the arbitration in
accordance with the Rules. The same shall apply where the Secretary General confirms arbitrators pursuant to Article
13(2).” Article 13(2) of the ICDR Rules provides, “Upon accepting appointment, an arbitrator shall sign the Notice of
Appointment provided by the Administrator affirming that the arbitrator is available to serve . . . .” Article 5.4 of the LCIA
Rules provides, “the candidate shall sign a written declaration stating: . . . whether the candidate is ready, willing and able to
devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration.” [Consider
deleting this FN or else shorten.]
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No party or anyone acting on its behalf shall have any ex parte
communications concerning any matter relating to the proceeding with
any arbitrator or arbitrator candidate, except that a party may advise a
candidate being considered for designation as its party-appointed arbitrator
of the general nature of the case and discuss the candidate’s qualifications,
availability, and independence and impartiality with respect to the parties,
and a party may also confer with its designated arbitrator after the
arbitrator’s appointment by CPR regarding the selection of the chair of the
Tribunal, if the chair is to be selected by agreement of the party-appointed
arbitrators or the parties. . . .173
If the arbitration clause calls for the party-appointed arbitrators to appoint the chair, Rule 7.4 of
the CPR Administered International Rules allows for a party to consult its appointee on this
issue.174 Parties should avail themselves of this rule in order to ensure that they have some input
in the selection of the chair. When selecting your party-appointed arbitrator, you should gauge
the candidate’s willingness to have such discussions if the clause calls for the party-appointees to
select the chair.
e.
Consideration of time limits and fast-track procedures
Most arbitration rules specify time limits for filing the initial pleadings,175 making or amending
claims,176 and rendering the final award.177 Be aware of these time limits. The time limits in the
major institutional rules are the result of thoughtful discussion of committees of experienced
arbitrators, outside attorneys, and corporate counsel, and are reasonable in most cases. If
173
174
175
176
177
Rule 7.4 does not apply in the event the parties select the screened selection procedure under Rule 5.4, which prohibits ex
parte communications with any arbitrator candidate. CPR Administered International Rules, Rules 5.4 (d), 7.4.
Several of the major arbitral institutions have rules similar to Rule 7.4 of the CPR Rules for Administered Arbitration of
International Disputes. E.g., ICDR Rules, Art. 13(6); HKIAC Administered International Rules, Art.11(5) (2013). The
LCIA Rules are slightly more restrictive regarding consultation between a party and its co-arbitrator appointee on the choice
of chairman. Article 13.5 of the LCIA Arbitration Rules (2014) states: “Prior to the Arbitral Tribunal’s formation, unless
the parties agree otherwise in writing, any arbitrator, candidate or nominee who is required to participate in the selection of a
presiding arbitrator may consult any party in order to obtain the views of that party as to the suitability of any candidate or
nominee as presiding arbitrator, provided that such arbitrator, candidate or nominee informs the Registrar of such
consultation.” At least one major institution, the ICC, is silent on the topic of candidate interviews.
See, e.g., CPR Rules for Administered Arbitration of International Disputes, Rule 3.5 (respondent has 30 days from
commencement date to submit notice of defense); ICC Rules of Arbitration, Art. 5 (respondent has 30 days from receipt of
the Request from the Secretariat to submit an answer); ICDR Rules, Art. 3 (respondent has 30 days after commencement of
the arbitration to answer); LCIA Rules, Art. 2.1 (respondent has 28 days after commencement of the arbitration to respond).
See, e.g., CPR Rules for Administered Arbitration of International Disputes, Rule 3.10 (parties may freely amend claims
prior to establishment of the tribunal and thereafter with the consent of the tribunal); ICC Rules, Art. 23(4) (parties may
make no new claims after the ICC Court has signed the terms of reference, unless the tribunal authorizes the new claim);
ICDR Rules, Art. 9 (parties may amend claim unless the tribunal considers it inappropriate); LCIA Rules, Art. 22.1(i) (the
tribunal has the power to allow a party to amend any claim).
See, e.g., CPR Rules for Administered Arbitration of International Disputes, Rule 15.8 (a) (the final award should in most
circumstances be rendered within 12 months of the constitution of the tribunal.); ICC Rules, Art. 30(1) (the tribunal “must”
render its final award 6 months after the last signature on the terms of reference unless the ICC court fixes a different time
limit); ICDR Rules, Art. 30 (1) (Unless otherwise agreed by the parties, specified by law, or determined by the
Administrator, the final award shall be made no later than 60 days from the date of the closing of the hearing); LCIA Rules,
Art. 15.10 (the tribunal will “seek to make” its final award as soon as reasonably possible following the last submission from
the parties).
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circumstances of a particular case justify an extension of a time limit, the institution or the
arbitrators will usually grant reasonable extensions. For instance, most institutions will extend
the deadline for filing an Answer if a respondent makes a reasonable request for an extension.
Parties sometimes agree in their arbitration clause to modify deadlines set by the arbitral rules or
to set additional deadlines. Look for any such modifications during the initial review of the
arbitration provision. Failure to observe such agreed upon deadlines can stall or disrupt the
arbitration, and in some cases, render an award unenforceable unless both parties agree to modify
or waive the applicable deadlines.
If time limits agreed upon in a pre-dispute arbitration provision prove unrealistic, parties may
negotiate reasonable modifications. If one party opposes modifying the time limit, the party
wanting the modification may request the arbitrators to extend the deadline. The power and
willingness of the arbitrators to grant such requests depend on the wording of the contract, the
applicable arbitration rules, and the reasonableness of the request.
Alternatively, parties may wish to provide for fast-track arbitration after the dispute arises, even
if they have not called for fast-track arbitration in the arbitration agreement (or have not selected
institutional rules with fast-track procedures that apply by default).178 While designing fast-track
procedures after the dispute arises reduces the risk that deadlines and procedures will not fit the
arbitration, procedures that appear efficient and cost-saving in the early stages of the arbitration
still may prove problematic as the arbitration develops. Fast-track arbitration is most commonly
used for disputes that involve moderate amounts of money and relatively inconsequential issues.
When important issues are in question and large sums at risk, the best way for parties to ensure a
just and speedy resolution of their dispute is to select arbitrators who will devote time to the case
promptly and who have management skills that prevent delay.
f.
Document preservation measures
Laws and ethical rules would most likely prevent parties or counsel to any litigation or
arbitration from knowingly destroying information that is relevant and material to resolution of
the dispute. But given routine document destruction and information deletion procedures in
place in most companies, the possibility of inadvertent destruction of essential information could
arise—especially with respect to electronically stored information (“ESI”).
The International Bar Association Guidelines on Party Representation in International
Arbitration (2013) (“IBA Party Representation Guidelines”) address document preservation in
international arbitration. Although typically not binding on the parties or the tribunal, the
guidelines were designed to provide a common set of expectations for parties and counsel from
different legal traditions and are widely consulted. They recommend, “When the arbitral
proceedings involve or are likely to involve Document production, a Party Representative should
inform the client of the need to preserve, so far as reasonably possible, Documents, including
electronic Documents that would otherwise be deleted in accordance with a Document retention
178
See supra Chapter V.B.14 (discussing fast-track arbitration and how to provide for the same in an arbitration clause).
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policy or in the ordinary course of business, which are potentially relevant to the arbitration.”179
This provision reflects US practice and may not accord with general practice around the globe.
If your company does not already have litigation hold procedures and wishes to put preservation
measures in effect for a particular arbitration, this can be achieved by issuing a memorandum
that will serve two purposes: (i) to inform relevant employees of the matter, the need to preserve
related information, and how such information should be preserved; and (ii) to create a paper
trail establishing that steps were taken in good faith to preserve information.
In jurisdictions in which document preservation is not mandatory or routine when litigation or
arbitration occurs, or if concern arises that another party may not take appropriate steps to
preserve critical information, consider writing a letter to that party’s counsel to request that the
party take appropriate preservation measures. While this request will not guarantee that the other
party will comply, it will create a record to show the tribunal if a document preservation dispute
arises. If the other party refuses to comply with the document preservation request, you can
consider asking the tribunal to issue a preservation order. Given the limits on document
disclosure in international arbitration, broad, burdensome document preservation orders common
in litigation in the US are rare and would generally be inappropriate.
g.
Document collection and organization
In addition to considering the need to preserve documents, corporate counsel should take steps to
identify and retrieve key documents necessary to understand the dispute and assess the merits of
the claims. Starting an electronic repository of “key documents” early on will facilitate locating
such documents at later stages of the arbitration when needed to educate new lawyers assigned to
the matter, advise management, respond to document requests, and prepare witnesses.
Document steps taken to collect information, both during the initial document collection phase
and as part of any subsequent document collection undertaken in response to document requests
from other parties.
When preserving, collecting, and producing ESI, keep in mind that ESI contains two sources of
potentially relevant information: (i) the text on the face of the document; and (ii) hidden
metadata, which gives information about the document, such as who drafted and modified the
document, the dates of modification, the content of changes made, and other data that may give a
more complete understanding of the information. Metadata can be altered or damaged during
document collection unless those collecting the data take steps to prevent alteration or damage.
While the likelihood of having to produce metadata in international arbitration may be low, 180
counsel may find the information useful for understanding and supporting their client’s claims.
If third-party vendors are involved in the collection, storage, and organization of client
information, especially ESI, corporate counsel should verify that the vendor has adequate
systems in place to preserve and safeguard that information.
h.
179
180
Early retention of experts
IBA Party Representation Guideline 12.
See, IBA Taking Evidence Rules, Arts. 3.3(a-c) and 3.12(b)
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Expert analysis and advice are often necessary to assess and prepare a case for international
arbitration, and expert testimony is sometimes critical to proving or defending against claims.
Even when a business organization has employees with the necessary expertise, arbitrators,
especially those from civil law jurisdictions, may discount their credibility. In fields in which
the pool of qualified experts is limited, you should consider the need for outside experts early on
and retain them, before the other side has a chance to do so.
As the attorney-client privilege or similar protections may not cover communications between
testifying experts and corporate or outside counsel in some jurisdictions, in cases that can bear
the expense, the retention of two sets of experts, one to help assess and prepare the case and the
other to testify, may be prudent. As both sides face the same issue, the other party(ies) may be
willing to agree to procedures that would protect communications between counsel and expert
witnesses and would exclude draft and preliminary expert opinions and reports from evidence.181
When choosing testifying experts, inquire not only about their subject matter expertise but also
about their experience writing reports and testifying. Experienced outside counsel can often help
identify experts who have written quality reports and done well under cross-examination by
opposing counsel and questioning by arbitrators. Corporate law departments may also have lists
of experts that have done well in the past.
i.
Initial pleadings
All major arbitration rules provide for initial pleadings from the claimant and the respondent.
The rules require only bare bone descriptions of the claims/counterclaims and defenses. 182 If all
of the critical information is available and time limits permit, consider submitting more robust
pleadings and certain key documents, so as to make a forceful first impression on the tribunal
and to give the arbitrator(s) a complete understanding of the issues and the company’s positions.
Regardless of the completeness of the initial pleadings, the parties will have ample opportunity
to present briefs and documents at later stages of the arbitration and will have a chance to present
witnesses and exhibits and make oral argument at the hearing. Corporate and outside counsel, if
any, should discuss the preferable approach to drafting the initial pleadings in the circumstances
of their particular case.
j.
Insurance and third-party funding
Many companies insure themselves against a wide variety of potential losses. Applicable
insurance policies should be checked early on to determine if insurance will cover any part of an
adverse award and any arbitration costs.
If your company wants to bring an arbitration but does not want to bear the costs, you may want
to seek a “third party funder” to finance all or part of the arbitration costs, in exchange for a
share of the potential recovery. Third-party funding raises issues, such as business
181
182
See Chapter VII.B.3.
See, e.g., CPR Rules for Administered Arbitration of International Disputes, Rule 3.2 (d) & (e); id. Rule 3.7(b) & (c); ICC
Rules of Arbitration, Art. 4(3) (c) & (d); id. Art. 5(1) (c) & (d); ICDR Rules, Art. 2(3) (e) & (f); id. Art. 3(1); LCIA Rules,
Art. 11.1(iii) & (iv); id. Art. 2.1(ii) & (iii).
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considerations, conflicts of interest, and waiver of privilege, that are beyond the scope of this
chapter.183
Case Management Conference
Once constituted, the tribunal typically will convene a case management conference after which
it will issue a procedural order setting forth the procedural rules and the timetable for the
arbitration. The most important objective of the case management conference is to set clear
deadlines and expectations for the conduct of the proceedings. Corporate counsel should be
involved in each of the key strategic decisions that will need to be made at or in the run up to the
case management conference, even if outside counsel has been retained.
It is good practice to discuss a timetable and basic procedures in advance of the meeting and to
exchange draft procedural rules and timetables. These exchanges, including any written
exchanges with the tribunal itself, are important opportunities to influence the course of the
arbitral proceedings in order to ensure that they are conducted efficiently and are tailored to the
particular dispute. As a result of these exchanges, the procedure and timetable often can be
agreed to a large extent in advance of the conference, allowing focus on the areas of
disagreement.
a.
Crafting the procedural rules and timetable
The first order of business at the case management conference will be to discuss the procedural
rules that will govern the arbitration. Counsel and arbitrators often fall back on existing
templates when deciding on the procedural rules and timetable. Such templates may be useful to
consult. At the same time, however, it is important to bear in mind that procedural flexibility is
one of the hallmarks of international arbitration. Accordingly, corporate counsel should not
accept that there is only one way to structure an arbitration.
Key topics that typically are addressed regarding the procedural rules for the arbitration include:
183

General provisions. The procedural rules will include general provisions governing
communications with the tribunal and the conduct of the proceedings. Particularly in
cases involving IP or trade secrets, the parties might consider requiring that submissions
be exchanged through a secure electronic portal rather than through e-mail.

Document disclosure. The tribunal often will ask that the parties express their views on
(i) whether the parties should be allowed to make requests for documents of the other
side; (ii) the timing of any such requests; (iii) the procedure for making objections to such
requests; (iv) the standards that the tribunal will apply in ruling upon objections; and (v)
the form of and deadlines for document production. The parties may also wish to seek
clarification on the scope of their obligations to locate responsive documents, including,
One resource for more information on this topic is the Joint Task Force on Third-Party Funding sponsored by the
International Counsel on Commercial Arbitration (ICCA) and Queen Mary University. The Task Force is in the process of
drafting a “best practices” guide to Third-Party Funding. See ICCA-QMUL Task Force Website, http://www.arbitrationicca.org/projects/Third_Party_Funding.html.
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for example, by searching ESI. Frequently, international arbitral tribunals will refer to
the IBA Evidence Rules when resolving prehearing disputes over disclosure. Sometimes
the arbitration agreement will make the Rules binding on the tribunal, but this is rare.
More often, tribunals will seek to include a reference to the IBA Evidence Rules in the
procedural rules for the arbitration.
Counsel therefore should be prepared at the case management conference to defend
whatever positions their client takes on disclosure in light of the principles codified in the
IBA Evidence Rules. Resist the temptation to advocate automatically for litigation
practices with which you are comfortable. Not every case requires US-style discovery.
As a general matter, depositions, interrogatories and requests for admissions are not used
in international arbitration.

Confidentiality. Another issue that often arises during the case management conference
is confidentiality. Parties often are surprised to learn that arbitration, while typically
private (at least outside the investor-State context), is not necessarily confidential. Some
of the major arbitration rules include one or more provisions governing confidentiality.
Some mandate that the parties, arbitrators, and the arbitral institution keep matters
relating to the arbitration and the award confidential.184 Others limit the confidentiality
requirement to the arbitrators and the arbitral institution, but do not extend the mandate to
the parties.185 Still others do not mandate confidentiality, but give the parties the right to
request the tribunal to order confidentiality.186 If the subject matter of the dispute or the
information that will be disclosed in the proceedings is particularly sensitive, the parties
might consider entering into a confidentiality agreement.
Note that a confidentiality agreement between the parties will not bind the tribunal. And,
if issues arise over whether one side is failing to abide by the agreement, the tribunal may
lack jurisdiction to enforce it.187 The parties therefore should consider having their
confidentiality agreement incorporated into a procedural order signed by the tribunal.
This will make the agreement binding on the tribunal and vest it with authority to resolve
any confidentiality-related disputes. It may also be necessary to involve the tribunal if
one party wants enhanced confidentiality and the other refuses to agree.
Where sensitive intellectual property related matters or trade secrets are at issue, the
parties may wish to adopt a procedure whereby certain documents are designated as
184
185
186
187
See e.g., CPR Rules for Administered Arbitration of International Disputes, Rule 20, LCIA Rules, Art. 30, SCC Arbitration
Rule, Art. 46
See e.g., ICDR Rules, Art. 37; Convention on the Settlement of Investment Disputes between States and Nationals of Other
States, Oct. 17, 1966, 575 U.N.T.S. 159, Art. 48(5) [hereinafter ICSID Convention], ICSID Arbitration Rules 6(2), 15, &
32(2); ICSID Administrative and Financial Regulation 22(2).
Art. 22.3 of the ICC Rules applies to arbitrations before tribunal proceedings under the ICC Rules. The ICC’s Court of
International Arbitration, which is a body within the ICC that scrutinizes awards, has internal rules that protect the
confidentiality of its proceedings. See Statutes of the International Court of Arbitration, Art. 6 (Appendix I of the ICC Rules
of Arbitration) & Rules 1-8, Internal Rules of the International Court of Arbitration (Appendix II of the ICC Rules of
Arbitration).
This can be resolved by including a dispute resolution clause in the confidentiality agreement itself that vests the tribunal in
the pending arbitration with jurisdiction to resolve any disputes arising out of the confidentiality agreement during the
pendency of the arbitration.
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“attorneys’ eyes only.” If such a provision is included with the procedural rules, the
parties can also establish a procedure for challenging such designations before the
tribunal.
Even if the arbitration agreement requires that the proceedings be confidential, the parties
should discuss their expectations regarding confidentiality at the case management
conference to ensure that they are in agreement and head off potential disputes down the
road.

Privilege Issues. Another issue that the parties may consider at the case management
conference is how to deal with privilege issues that may arise in the arbitration,
particularly during the document disclosure phase. As indicated above,188 laws regarding
attorney-client privilege or similar protections differ greatly from jurisdiction to
jurisdiction. Moreover, determining what privilege applies in the context of international
disputes often involves thorny choice-of-law issues. Parties may preempt such disputes
by agreeing, for example, that the most protective of the potentially applicable privilege
laws will apply. The parties may also endeavor to agree upon a process for challenging
privilege assertions. One option is for the parties to agree that the party withholding a
document on privilege grounds must state the basis for the privilege and produce a socalled “privilege log” identifying the author and recipients of the document and other
relevant information that will allow the tribunal to rule upon any objections.

Costs. The parties may also wish to address how the tribunal will allocate costs during
the course of the arbitration. The tribunal often will request that the parties’ file a
statement of their costs along with or shortly after the post-hearing brief.
Another key agenda item at the case management conference is the procedural timetable. The
procedural timetable sets the dates for key milestone in the arbitration—e.g., the submission of
pleadings, the document disclosure process, and the hearing. Key issues that will need to be
addressed in connection with the procedural timetable include:
188
189

Interim relief applications. Sometimes one of the parties will have filed a request for
interim relief even prior to the constitution of the tribunal. But to the extent interim relief
remains an issue by the time of the case management conference, the parties will need to
raise it and agree upon deadlines for filing and resolving interim relief applications.

Early determination of issues/summary determination of claims. The rules of most
arbitral institutions provide the tribunal with wide discretion to adopt appropriate
procedures, including the ability to resolve claims in a summary fashion.189 And even
where it is not appropriate for the tribunal to resolve claims in this manner, it nonetheless
may make sense for the tribunal to resolve certain disputed issues, e.g., choice of law,
early on in the process. Doing so can streamline the proceedings by, for example,
See Chapter V.B.7.
See CPR Administered International Rules, Rule 9.1; ICC Rules of Arbitration, Art. 20; LCIA Arbitration Rules, Art. 14.3;
UNCITRAL Arbitration Rules, Art. 15.2.
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eliminating the need for the parties to brief the issues in the case under the various
different laws that may apply.

Bifurcation of Issues. It is not uncommon for tribunals to formally bifurcate (or even
trifurcate) the proceedings into separate phases devoted to jurisdictional, merits, or
damages issues. Whether it makes sense to do so depends on the circumstance of each
case and, in particular, on the degree to which these issues are intertwined. Bifurcation
can have the benefit of saving the parties time and expense. But it can also have the
downside of making the proceedings longer and more complex.

Number and timing of submissions. The procedural timetable will also address the
number and timing of written submissions. Typically, each party will submit legal briefs
before the merits hearing, accompanied by all supporting evidence relied on by the party
(factual exhibits, legal authorities, witness statements, and expert reports).190 In most
cases, the parties’ submissions are sequential with the respondent’s submission(s) to
follow the claimant’s submissions(s). Typically, there will be at least two rounds of
written submissions prior to the hearing—a Statement of Claim/Statement of Defense
followed by a Statement of Reply/Statement of Rejoinder. One option is for the parties to
file their briefs simultaneously in each round. This has the advantage of shortening the
process, but can carry the disadvantage of resulting in briefs that “talk past” each other.
Sequencing the parties’ briefs will elongate the process but can be more useful to the
arbitrators, as it will be easier to crystallize the key points of dispute.

Dates, length, and structure of the hearing. It is possible for arbitral tribunals to
resolve certain disputes without convening a merits hearing. But in most cases at least
one of the parties will demand a hearing, and tribunals are reluctant to deny such
requests. Given the number of schedules that need to be coordinated (i.e., those of the
parties, their counsel, and the arbitrators), it is important to set the hearing dates well in
advance – typically in the timetable that is issued after the initial case management
conference. This means that prior to the case management conference the parties need to
think through issues such as how many witnesses they likely will have, how many
witnesses they anticipate the other side will have, how long they need for cross
examination, and whether they wish to have opening or closing statements. After
determining in light of these considerations how much time will be required, it is best
practice to include one or two “buffer days” to accommodate unforeseen events.
One factor that will affect the length of the hearing is the mode by which the tribunal will
receive direct testimony. In international arbitrations, tribunals typically require that the
witness submit a written witness statement and will allow only a brief direct examination
(the same is true for experts, although they tend to be allowed a somewhat longer direct
examination or presentation as this is considered helpful for the tribunal). But there is no
190
This procedure is not fixed and may vary. For instance, in international arbitrations where a majority of the participants
practice in England or jurisdictions that follow the English system, the documentary, witness and expert evidence may be
exchanged before briefs are exchanged. Also, in international arbitrations with a majority of civil law practitioners, there
may be tribunal-appointed experts (possibly in conjunction with party-appointed experts).
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set rule that requires tribunals to proceed in this fashion if the parties wish to allow more
lengthy direct examinations.
Tribunals often will keep track of time using the “chess clock” method—i.e., each side
will be allocated an equal amount of total hearing time to be used as it wishes. The
tribunal typically will allocate some time to itself so that questions or comments from the
tribunal do not eat into the parties’ time.
b.
Importance of cooperating with opposing counsel
At the start of any arbitration, the parties know the complexity of the dispute better than the
arbitrators. They can better judge the extent of any information exchange needed, the
reasonableness of deadlines for other steps leading to the hearing on the merits, and the length of
time each will need to present its case at the hearing. If practicable, they should discuss
procedures and scheduling and seek agreement on as many matters as possible before the first
case management conference and as needed throughout the arbitration. Procedural wrangling
takes time and costs money. If the parties cooperate in setting a reasonable schedule and
mutually agreeable procedures tailored to their case, they will reduce the arbitrators’ hours spent
on the case, and they will increase the likelihood of an expeditious, cost-effective and equitable
resolution.
c.
In-person versus telephonic or video conferences
Case management conferences typically take place via a teleconference and sometimes via video
conference. This has the obvious advantage of saving on travel costs and accommodating the
schedules of participants in different locales. That said, there can be advantages to bringing all
of the relevant constituents—the parties, their counsel, and the tribunal—together in one place at
the beginning of the dispute. Particularly if the parties disagree over the procedure or scheduling
matters, having everyone physically present in the same room may facilitate agreements on these
issues.
An in-person case management conference also provides what likely will be the only opportunity
prior to the hearing to observe opposing counsel and the tribunal in action. Counsel often gain
insights in these sessions about, inter alia, the dynamics on the tribunal, the idiosyncrasies and
preferences of tribunal members, and the style and effectiveness of opposing counsel. Although
difficult to quantify, the value of such insights may be worth the incremental cost of holding the
case management conference in person.
Ongoing Involvement (When Outside Counsel Has Been Retained)
Even where the decision is made to bring in outside counsel, corporate counsel should remain
involved and work closely with outside counsel on every facet of the arbitration. Corporate
counsel may wish appear as counsel of record alongside outside counsel and should, in all
events, participate in all key strategic decisions. Below are a series of suggestions for how
corporate counsel can partner effectively with outside counsel.
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a.
Serving as a liaison between business personnel and outside
counsel
One of the primary roles of corporate counsel will be to function as a liaison between personnel
on the business side of the company and outside counsel. How closely corporate counsel will
need to monitor these interactions depends on a number of factors, including the corporate
culture and the degree to which key personnel already are familiar with outside counsel. But, in
all events, corporate counsel should keep close tabs on these interactions and ensure both that
outside counsel are receiving the cooperation and information they need and that the process is
not unduly disruptive or burdensome to the operations of the business.
b.
Role in case developing and setting strategy
Outside counsel typically will manage the case on a day-to-day basis. But it is important that
corporate counsel be made aware of key developments and participate in formulating the overall
strategy for the arbitration. It may make sense to schedule a regular conference call during
which outside counsel can give updates on the case. Another technique that can be helpful is to
schedule periodic in-person progress reviews during which outside counsel make a more formal
presentation previewing arguments that will be made in the pleadings and at the hearing.
c.
Witness identification and preparation
Corporate counsel often will be best positioned to determine with whom outside counsel should
meet with in order to learn the facts of the case and who the key fact witnesses for the company
are likely to be. Proactive engagement by corporate counsel on this issue may enhance the
efficiency of outside counsel’s fact development efforts and reduce legal fees as a result.
Corporate counsel also may need to help communicate to potential fact witnesses the importance
of the matter and ensure that they are able to devote sufficient time to meeting with outside
counsel and preparing for the hearing.
In addition to serving in a liaison capacity, corporate counsel may wish to become more
substantively involved by, for example, working with the witness to do a preliminary draft of the
witness statement. Corporate counsel may also wish to sit in on examination preparation
sessions and participate in the questioning.
d.
Reviewing submissions
Corporate counsel should review all major pleadings in the arbitration, not only to ensure that
outside counsel has produced a quality draft but also to spot issues that may not be apparent to
outside counsel. It might be the case, for example, that outside counsel recommends making
arguments that are inconsistent with prior positions the company has taken or may prove
problematic for the company in future disputes. Corporate counsel often will be in a better
position than outside counsel to identify issues of this nature.
If corporate counsel will be reviewing the pleadings, it is imperative that corporate and outside
counsel discuss and agree upon internal circulation deadlines that are set sufficiently in advance
of filing deadlines to ensure time for adequate review and feedback. Particularly if corporate and
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outside counsel have not worked together in the past, their expectations for what constitutes
sufficient lead time may differ. Open communication will help to eliminate misunderstandings.
Corporate counsel should pay particular attention to the relief that is being requested in the
opening pleadings. Outside counsel may become preoccupied with the main arguments in the
case and may not turn their attention to the relief requested section of the brief until late in the
drafting process. Corporate counsel should give thought in the early stages of the arbitration to
what an ideal outcome would be and instruct outside counsel accordingly.
e.
Budget
Budgeting for an international arbitration can be a difficult exercise. Ideally, corporate and
outside counsel will be able to foresee accurately what resources will be required, agree upon a
budget for the arbitration at the outset, and outside counsel will stay within the limitations set.
Particularly in complex matters, however, it may not be possible to predict at the outset exactly
what will be required to litigate the case to a successful conclusion. For instance, the opposing
party may submit more experts than were anticipated, which may necessitate retaining rebuttal
experts; a respondent may file unexpected counterclaims; the tribunal may request supplemental
briefing on issues that the parties did not anticipate. That said, not every new development in a
case is unexpected, and a budget serves little purpose if it is nothing but a moving target. In all
events, corporate and outside counsel should communicate openly about the budget, the
assumptions that go into it, and which line items are the most uncertain. Doing so will help to
set expectations and avoid unpleasant surprises.
f.
Document production
Corporate counsel likely will need to have some role in conducting document productions.
Corporate counsel may have collected key documents prior to the initiation of the arbitration and
will be able to identify potential custodians and locations of key documents. It therefore may
make sense for corporate counsel to play an active role in identifying and collecting documents
for production as well.
Corporate counsel should also help to spot issues that can arise during the course of collecting
and producing documents. For example, documents sought by the other side may be privileged
or contain sensitive business or personal information that should be redacted or included within
the scope of a protective order. Corporate counsel should also be attuned to and discuss with
outside counsel any data protection laws (particularly in EU jurisdictions) that may restrict the
transfer of documents between jurisdictions and require written employee consent prior to
collection.
g.
Attendance at case management conferences and hearing
Corporate counsel, outside attorneys, and when appropriate, a client representative from the
business side should attend case management conferences and evidentiary hearings. Having a
senior corporate representative at hearings on the merits may be especially important to impress
upon the tribunal the importance of the case, to give the attorneys immediate access to a person
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with authority to make decisions when the unexpected happens, and to have a company
representative witness the proceedings firsthand. Even when outside counsel has been retained,
corporate counsel may be best positioned to deal with certain-hearing-related tasks, such as
witness preparation and reviewing the daily hearing transcripts for transcription errors (in
particular when witness evidence was translated from corporate counsel’s native language).
Post-Award Involvement
Once the tribunal renders its award, corporate counsel will have a number of key decisions to
advise upon.
a.
Assessment of and internal communication about the award
It often will fall to corporate counsel to communicate the result to personnel on the business side.
Arbitral awards often make for dense reading, particularly for non-lawyers. It therefore may
make sense quickly to prepare a brief summary indicating what was sought and how that
compares to the relief awarded by the tribunal. This truncated summary may be supplemented
with a more comprehensive analysis of the tribunal’s reasoning and any effects on the company
going forward. In any such communications, corporate counsel should inform the recipients if
there is any obligation to keep the contents of the award confidential.
b.
Request for interpretation / correction
Most arbitral rules provides a procedure whereby the parties can request correction or
clarification of the award. This is not an opportunity to ask the tribunal to reconsider its ruling.
Most arbitral rules restrict the tribunal’s ability to issue post-award addendums. For example,
Article 35 of the ICC Rules provides that the tribunal may only entertain requests to correct any
“clerical, computational or typographical error, or any errors of similar nature.” The time limit
for filing requests for correction or interpretation typically is short—the CPR Rules for
Administered Arbitration of International Disputes allows 20 days after receipt of the award .191
Inadvertent errors may have significant consequences – for instance, when the amount awarded
inadvertently has one “0” too many. It therefore is important that corporate counsel work with
outside counsel to quickly scrutinize the award for any computational errors or latent
ambiguities. To the extent that the computations at issue relate to the subject matter of an expert
report, it may make sense to consult with the expert and have him or her verify the tribunal’s
calculations.
c.
Voluntary compliance/settlement
Most international arbitral awards are complied with voluntarily. Indeed, many arbitration
agreements and rules contain provisions waiving any judicial recourse and obligating the losing
party to comply with the award. If a party has prevailed in the arbitration, it often will make
sense either for outside or corporate counsel to reach out to the losing party to ascertain whether
it intends to comply. If the party has not prevailed and wishes to comply, it may make sense for
191
CPR Rules for Administered Arbitration of International Disputes, Rule 15.6.
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outside or corporate counsel to proactively reach out to the other side to prevent it from
prematurely initiating confirmation proceedings that will cause the losing party to incur
additional expenses.
When the losing party chooses to comply voluntarily with the award, the logistics of compliance
will need to be sorted out. Logistics may range from coordinating the transfer of funds between
two jurisdictions to negotiating an agreement setting forth how the parties will comply with a
specific performance order. Corporate counsel can play an important role in resolving these
issues by working directly with their counterparts on the other side and serving as an internal
liaison with the business.
Even when the losing party is not willing to comply with the award in full, corporate counsel
should consider whether there are ways to resolve the dispute post-award without having to
endure potentially costly set-aside and/or enforcement proceedings. Depending on the
circumstances, it may make sense for the winning party to accept payment at a discount in order
to avoid further litigation. The window for reaching such an accommodation may be short,
however. Once the parties become embroiled in post-award proceedings, the appetite for
compromise may decrease.
d.
Set-aside proceedings
If the company has been unsuccessful in the arbitration, corporate counsel may advise the
company to initiate set-aside proceedings, which take place at the seat of the arbitration and are
governed by national arbitration statutes. The grounds for set-aside are very narrow in most
common seats of arbitration192 and aim to address fundamental problems such as lack of
jurisdiction, lack of due process, and arbitrator bias.193 A mistake of fact or law is usually not a
ground for annulment. In some jurisdictions such as England, however, limited review of merits
issues is possible under certain circumstances.194
In a scenario where the company plans to resist enforcement and has assets in multiple
jurisdictions, it may be advisable to act quickly in order to bring a set-aside action at the seat
192
193
194
Common arbitral seats are discussed in Chapter V.A.3.b above.
For example in France, a court can set aside the award only where: (i) the arbitral tribunal wrongly upheld or declined
jurisdiction; (ii) the arbitral tribunal was not properly constituted; (iii) the arbitral tribunal ruled without complying with the
mandate conferred upon it; (iv) due process was violated; or (v) recognition or enforcement of the award is contrary to
international public policy. French Civil Procedure Code, Art. 1520. In the US, the Supreme Court has ruled that the
exclusive grounds for set-aside are those set forth in Article 10 the Federal Arbitration Act: “(1) where the award was
procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or
either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the
rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them
that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10. Section 11 of the
FAA provides limited grounds under which a court may correct or modify an award. In Hall Street Associates, L.L.C. v.
Mattel, Inc., 552 US 576, 584 (2008), the Supreme Court held that Sections 10 and 11 constitute “the FAA’s exclusive
grounds for expedited vacatur and modification.”
See Arbitration Act 1996, c. 23, § 69(1) (Eng.) (“Unless otherwise agreed by the parties, a party to arbitral proceedings may
. . . appeal to the court on a question of law arising out of an award made in the proceedings.”). This appeal is available only
if English law was the applicable substantive law.
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before any enforcement proceedings are launched in other jurisdictions. Some jurisdictions will
then stay the enforcement proceedings pending the outcome of the set-aside action.
e.
Enforcement proceedings
If the company is the beneficiary of the award and the other party refuses to comply, a decision
will need to be made whether, when, and where to initiate enforcement proceedings. Whether it
makes sense to initiate enforcement proceedings depends on a number of factors, including
whether the losing party has assets in an arbitration-friendly jurisdiction where enforcement can
be sought. Corporate counsel should also bear in mind that initiating enforcement proceedings
may have the effect of making an otherwise confidential award public. Enforcement proceedings
may also take time and require a substantial expenditure of resources.
Enforcement proceedings are typically brought in a jurisdiction where the counterparty has assets
that can be attached in order to satisfy the award. If the jurisdiction is a signatory to the New
York Convention, the national courts in that jurisdiction must enforce an award subject to certain
narrow exceptions.195
Some jurisdictions may grant a request to enforce an award even where it has been set aside by
the courts at the seat of arbitration.196 Corporate counsel should manage expectations about the
likelihood of success in such proceedings.
f.
Decide whether to retain new outside counsel
When considering a post-award strategy, corporate counsel should consider whether to bring on
new outside counsel. New counsel may bring a fresh perspective. And bringing on new outside
counsel may be necessary when set-aside or enforcement proceedings will take place in a
jurisdiction where existing counsel is not qualified to practice. On the other hand, bringing new
outside counsel up to speed will require additional time and expense, which may not be
warranted.
g.
Feedback / Database
After post-award issues are resolved, corporate counsel should take the opportunity to reflect on
the process and provide feedback to outside counsel. Valuable lessons likely will have been
learned during the course of the proceedings that should be memorialized. In particular,
corporate counsel may wish to record their impressions of the arbitrators. Some corporate
195
196
The five grounds for refusing recognition are: (i) The arbitration agreement is invalid under the law governing the
agreement, or one of the parties entered into the agreement while acting under some incapacity; (ii) the party against whom
enforcement is sought did not receive proper notice of the proceedings or the appointment of the tribunal; (iii) the award
goes beyond the scope of the matter submitted to arbitration; (iv) the arbitral tribunal was constituted in a way that was not
in accordance with the agreement to arbitrate; or (v) the award has been set aside by a court at the seat of arbitration. United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330
U.N.T.S. 38, Art. V(1)(a)-(e) [hereinafter New York Convention].
See, e.g., Judgment of 29 September 2005, XXXI Y.B. Comm. Arb. 629 (Paris Cour d’appel) (2006) (recognizing award
annulled in arbitral seat); Baker Marine Ltd v. Chevron Ltd, 191 F.3d 194 (2d Cir. 1999) (holding that under Article V(1)(e)
the enforcing court has discretion to recognize an award annulled at the seat).
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counsel keep databases recording their impressions of arbitrators and arbitrator candidates that
can be consulted in future matters. The company’s experience in the arbitration may also lead to
suggestions about how to revise the company’s standard arbitration agreements going forward.
C.
Managing an Investment Arbitration
Many of the issues discussed above in connection with international commercial arbitrations
apply equally to investment arbitrations. Yet there are important differences between
commercial and investment arbitrations that corporate counsel should bear in mind.
Selection of Counsel and Arbitrators
As noted in Chapter VI, investment arbitration is a specialized field. As such, it will almost
certainly be necessary to retain experienced outside counsel to handle such disputes. That said,
the substantive issues that arise in such matters—be they engineering or quantum-related
disputes—often are no different in kind than those that arise in commercial arbitration or
domestic litigation. As such, it may make sense to hire an investment arbitration specialist to
advise on treaty interpretation and procedural issues and other counsel to handle factual and
technical issues in the case.
The pool of arbitrators with experience in investment arbitration is much smaller than in the
commercial arbitration context. And given that ICSID awards are public, it is possible to do
more thorough due diligence on potential ICSID arbitrators. Moreover, there are a number of
recurring issues in investment arbitration, from jurisdictional issues to the calculation of discount
rates. Most experienced ICSID arbitrators will have expressed views on these subjects that
should be considered before an appointment is made.
Early Case Assessment
Early case assessment is particularly important in investment arbitrations. Compared to
commercial arbitrations, investment arbitrations generally will take longer and be more
expensive to litigate. Likewise, it can be more difficult to enforce an arbitration award against an
uncooperative state respondent because of sovereign immunity issues. As discussed in Chapter
VI, whether the dispute in question is subject to resolution by arbitration in the first place often is
a difficult question to answer. As such, tribunals often will decide to bifurcate the arbitration and
decide these threshold jurisdictional issues first. This can have the practical effect of delaying
the ultimate award on the merits and, potentially, increasing the all-in costs of the arbitration.
Corporate counsel should be aware of these issues and seek proper advice before initiating an
investment arbitration.
Arbitrating Against State Actors
Arbitrating against state actors is different from arbitrating against commercial actors. Political
considerations may create barriers to settlement. It may be difficult to identify much less
communicate effectively with decision makers on the other side. Moreover, the arbitration will
not be a private affair. Pleadings and the award are more likely to be made public. The hearing
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may be public as well. Corporate counsel should ensure that the client fully understands these
dynamics before initiating an investment arbitration.
Post-Award
The ICSID Convention provides a mechanism similar to those that exist under commercial
arbitral rules for seeking correction or interpretation of the award.197
The ICSID Convention provides for a separate proceeding with limited grounds for annulment of
the award: “a) that the Tribunal was not properly constituted; b) that the Tribunal has manifestly
exceeded its powers; c) that there was corruption on the part of a member of the Tribunal; d) that
there has been a serious departure from a fundamental rule of procedure; or e) that the award has
failed to state the reasons on which it is based.”198 Annulment requests are put not to state courts
but to a new three-person annulment committee appointed by the Chairman of ICSID’s
Administrative Council from a panel.
The ICSID Convention has an even greater pro-enforcement bias than the New York
Convention. The ICSID Convention requires that contracting states recognize and enforce
monetary awards immediately without further scrutiny by local courts.199
[Consider
197
198
199
overlap
with
investment
arbitration
chapter.]
See ICSID Convention, Arts. 50 & 51.
ICSID Convention, Art. 52(1).
See ICSID Convention, Art. 53(1) (“The award shall be binding on the parties and shall not be subject to any appeal or any
other remedy except those provided for in this Convention.”).
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ANNEX
USEFUL RESOURCES200
INTERNATIONAL ARBITRATION RULES & INSTITUTIONS201
I.


CPR: http://www.cpradr.org
-
CPR Rules for Administered Arbitration of International Disputes (2014)
-
CPR Rules for Administered Arbitration (2013)
-
CPR Rules for Non-Administered Arbitration (2007)
CIETAC: http://www.cietac.org
-

HKIAC: http://www.hkiac.org
-


200
201
ICDR International Dispute Resolution Procedures (Including Mediation and Arbitration
Rules) (2014)
ICSID: https://icsid.worldbank.org
-
Arbitration Rules (2006)
-
Additional Facility Rules (2006)
LCIA: http://www.lcia.org
-

ICC Rules of Arbitration (2012)
ICDR: https://www.adr.org
-

HKIAC Administered Arbitration Rules (2013)
ICC: http://www.iccwbo.org
-

CIETAC Arbitration Rules (2015)
LCIA Arbitration Rules (2014)
SCC: http://www.sccinstitute.com
This list is for informational purposes only. CPR and the members of the CPR Arbitration Committee do not endorse any
particular resources listed herein.
All of the arbitral institutions referenced in this Annex A provide model arbitration clauses. These clauses are typically
found at the outset of their arbitration rules. Otherwise, they are available on the institution’s website. In addition, the
following institutions all offer mediation rules and model mediation clauses that can be accessed on the institution’s website:
CPR, HKIAC, ICC, ICDR, ICSID (Conciliation Rules), LCIA, SCC, SIMC, UNCITRAL (Conciliation Rules).
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SIAC: http://siac.org.sg
-

SIAC Arbitration Rules (2013)
UNCITRAL: http://www.uncitral.org
-
II.
SCC Arbitration Rules (2010)
UNCITRAL Arbitration Rules (2013)
INTERNATIONAL TREATIES

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (New York
Convention): http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html

Convention on the Settlement of Investment Disputes between States and Nationals of Other
States (1965) (Washington Convention):
https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc_en-archive/ICSID_English.pdf

ICSID, Database of Bilateral Investment Treaties:
https://icsid.worldbank.org/apps/ICSIDWEB/resources/Pages/Bilateral-Investment-TreatiesDatabase.aspx

UNCTAD, Database of International Investment Agreements:
http://investmentpolicyhub.unctad.org/IIA

US State Department, US Bilateral Investment Treaties and Related Agreements:
http://www.state.gov/e/eb/ifd/bit/
III.
GUIDELINES

CPR Guidelines and Protocols: http://www.cpradr.org
-
European Mediation and ADR Guide (2015)
-
Guidelines for Arbitrators Conducting Complex Arbitrations (2012)
-
Guidelines on Early Disposition of Issues in Arbitration (2011)
-
Corporate Early Case Assessment Toolkit (2010)
-
CPR Protocol on the Determination of Damages in Arbitration (2010)
-
Dispute Resolution Boards and Other Standing Neutrals: Achieving “Real Time” Resolution
and Prevention of Disputes (2010)
-
Due Diligence Evaluation Tool for Selecting Arbitrators and Mediators (2010)
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
-
Economical Litigation Agreements (“ELA”) for Commercial Contracts as a Means of
Reducing Civil Litigation Costs (2010)
-
Partnering: Aligning Interests, Collaboration And Achieving Common Goals (2010)
-
Realistic Allocation of Risks: Allocating Each Risk to the Party Best Able to Handle the Risk
(2010)
-
CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial
Arbitration (2009)
-
Drafting Dispute Resolution Clauses (2006) & Supplement (2008)
-
ADR Primer: An Introduction to ADR Terms and Processes
IBA Guidelines:
http://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx [h
yperlink]

-
IBA Guidelines on Conflicts of Interest in International Arbitration (2014)
-
IBA Guidelines on Party Representation in International Arbitration (2013)
-
IBA Rules on the Taking of Evidence in International Arbitration (2010)
-
IBA Guidelines for Drafting International Arbitration Clauses (2010)
CIArb Practice Guidelines and Protocols: http://www.ciarb.org/guidelines-andethics/guidelines/practice-guidelines-protocols-and-rules
-
CIArb Protocol for e-Disclosure in Arbitration (2008)
-
CIArb Protocol for the Use of Party-Appointed Experts in International Arbitration (2007)

ICC Arbitration Commission Report on Techniques for Controlling Time and Costs in
Arbitration (2012): http://www.iccwbo.org/Advocacy-Codes-and-Rules/Documentcentre/2012/ICC-Arbitration-Commission-Report-on-Techniques-for-Controlling-Time-andCosts-in-Arbitration/

UNCITRAL Notes on Organizing Arbitral Proceedings (2012):
http://www.uncitral.org/pdf/english/texts/arbitration/arb-notes/arb-notes-e.pdf
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