Effective Arbitration: Essentials for the Clause Effective - - PowerPoint PPT Presentation

John A.M. Judge

Thirty Nine Essex Street Chambers London Arbitration Place Toronto

Effective Arbitration:

Essentials for the Clause Effective Procedure and Excellence in Deliberations

• 1. Why Arbitration Rather Than Court?

> Generally: – Party autonomy: the parties are free to agree on procedure – Flexibility and speed: ability to adapt procedures to the dispute

– Generally less expensive

– Freedom to choose the decision-maker – Real Case management by the decision-maker – Greater confidentiality and privacy – Implied obligation to avoid procedural delay and proceed in good faith – Finality – domestically, limited appeal rights if not excluded

INITIAL CONSIDERATIONS

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• 1. Why Arbitration Rather Than Court? (Cont’d)

> International Commercial Contracts and Disputes: – All of the above, plus – Neutral forum: no “home court” advantage – Avoid unattractive aspects of a foreign system, even a developed common law legal system (e.g., juries and punitive damages in U.S.) – No right of appeal; limited procedural grounds to set aside – Obligation to carry out award without delay in some rules (ICC, LCIA) – Ease of enforcement under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (exceptions: Taiwan, Belize, some key African countries etc.)

INITIAL CONSIDERATIONS

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• 1. Why Arbitration Rather Than Court? (Cont’d)

> Cautions: – Multiple parties possible, usually only if signatories to contract – Types of claims limited to what contract provides – Limited right of appeal and review – Speed is not assured – Cost not necessarily less – Importance of arbitrator selection – For interim relief, may still need the courts

INITIAL CONSIDERATIONS

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• 2. What Arbitration Is Not

> Mediation, which is not an adjudication: in mediation there is no resolution unless parties agree – Multi-tiered negotiation clauses as pre-conditions to arbitration > Expert determination: – What is it? – (e.g., accountant for price adjustment) – No procedural safeguards; no hearing – No “judicial” decision, but a determination

INITIAL CONSIDERATIONS

• 3. Key Elements in Arbitration Clause

> Agreement to arbitrate > Scope of disputes or arbitrability > Institutional or ad hoc arbitration > Venue/Seat of the arbitration: procedural law (express choice) vs. choice of law for contract > Language of the arbitration > Choice of Arbitrator: 1 or 3 > Cautions: Time limits?; multi-step clause? > Domestic only – rights of appeal, if any

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 4. Scope: What is Arbitrable?

> Any type of dispute may be decided by arbitration (save consumer contracts in Ontario and Quebec) > Avoid ambiguity > Better to use broad language that covers any dispute arising under

• r relating to the agreement (or to the legal relationship between

the parties) rather than narrow, limiting language > The validity or enforceability of an agreement is arbitrable > Tort, equitable and statutory claims (including oppression remedies) are arbitrable

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 4. Scope: Limitations

> Limitations in some jurisdictions – e.g., a competition law claim or

• ther statutory claim may not be arbitrable

> Arbitration clause (or arbitral institution’s rules) may limit the jurisdiction of the arbitrator, i.e., no punitive or consequential damages > Right to arbitrate may be statutorily limited in consumer cases and class actions unless the consumer agrees to arbitration after the specific dispute arises > Common Exclusion- Validity of I.P. rights > Express provision for award of costs and interest > Parties – signatories and non-signatories

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

• 5. Institutional Arbitration vs. Ad Hoc

> Institutional Arbitration – Arbitration supervised and administered by an arbitral institution under the rules of that institution > Main Institutions Internationally: – ICC (Paris) – AAA\ICDR (NY) – LCIA (London) – CIETAC (China) – Regional Institutions – Stockholm, Singapore, Hong Kong, KL > Main Institution Domestically: – ADR Institute of Canada, Inc.

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 6. Key Features of Institutional Arbitration

> Institution acts as appointing authority (i.e., appoints the arbitrator(s) if parties cannot agree) > Reduces pre-arbitration litigation and delays over appointments and challenges to arbitrators (e.g., based on conflicts & challenges) > Monitors progress of arbitration to ensure efficiency > Additional contact for parties > Quality control for award, but can cause delay > Provides service at a price (varies from institution to institution) > More expensive, but avoids court costs

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 6. Key Features of Institutional Arbitration (Cont’d)

> Institutional rules are adopted - avoids the need to draft and re-invent detailed procedural rules > The institution should administer the arbitration when its rules are used > Additional features of institutional administration – Emergency arbitrator rules – Enhances arbitrator accountability – Handles funding and oversees arbitration fees – Some procedure may cause delay, but can improve quality > Awards may be more readily recognized and enforced internationally than awards made in ad hoc arbitration > Clear preference by knowledgeable in house counsel for international contracts

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 7. Key Features of Ad Hoc Arbitration

> In Canada, popular for domestic arbitration, largely due to absence

• f a credible, accepted Canadian Institution

> Ad hoc arbitration is not administered or supervised by an arbitral institution > Ontario’s Arbitration Act and International Commercial Arbitration Act provide for ad hoc arbitration under the supervision of the Ontario courts > UNCITRAL Arbitration Rules may be more readily adapted to the needs of the dispute than institutional rules

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 7. Key Features of Ad Hoc Arbitration (Cont’d)

> Factors when considering ad hoc arbitration: – Can save institutional fees (unless disputes go to court) – Extra delay and cost if need to ask court to compel arbitration or appoint an arbitrator – Appointing procedure – if parties cannot agree, the default is court – Use of an appointing authority, short of institutional arbitration – Consider desirable extent of discovery and production of documents – Consider likelihood of review and potential scope of appeal for domestic arbitration at seat. Consider where the award will be enforced – For international transactions, consider law where arbitration would be held and where award would be enforced – Ad hoc can be useful for sophisticated parties who can co-operate

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

• 8. Rules, Institutions and Clauses for Different

Transactions > Domestic Transactions and Ontario Arbitration: – Ad hoc arbitration under the Arbitration Act – ADR Institute of Canada or ADR Chambers – New ICDR “Canadian” rules > Interprovincial Transactions: – ADR Institute of Canada – B.C. International Commercial Arbitration Centre – Consider new ICDR Canadian Rules

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 8. Rules, Institutions and Clauses for Different

Transactions (Cont’d)

> International Transactions: – Canada-United States: – ICDR, possibly ADR Institute (avoid AAA rules) – Canada-China: – not CIETAC; Hong Kong, Singapore, Stockholm, recently LCIA, KLRCA – Enforcement issues – Canada-India – – LCIA (Mauritius) but other significant issues – Enforcement issues – Structure with non-Indian corporation – Canada-Europe – developed common law or civil law country: ICC is favoured; then LCIA and ICDR

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 8. Rules, Institutions and Clauses for Different

Transactions (Cont’d)

> International Transactions (cont’d): – Canada-Elsewhere in Asia: – ICC, Singapore, Hong Kong, KLRCA – Canada-Africa: – ICC; LCIA (London or Mauritius) for Commonwealth countries – Canada-South or Latin America: – ICC preferred, then ICDR – Canada-foreign state entities: – ICC, LCIA, ICDR; now also ICSID since Canada has implemented ICSID Convention

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 9. Arbitrators: 1 or 3?

– One to minimize cost and delay – For large cases, three is preferable

– -facilitates combination of different skills and expertise – legal, linguistic, technical, cultural

– In international arbitrations, three is common

– each party appoints one arbitrator – the chair may be appointed by party nominees, the parties themselves

• r an institution or appointing authority

– Benefit of three – a more rigorous consideration and analysis

– A built in “court of appeal”; easier to reduce to one if appropriate

– ICC – absent agreement, default is one, but ICC can appoint three where

appropriate (Art. 12(2))

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 10. Arbitrator: Appointment Process and

Qualifications > Qualifications and Expertise – Cautions: problem of stringent contractual qualification > Method of Appointment: – If no procedure provided, then frustrating delays and court litigation – In ad hoc arbitration, use appointing authority or include easy workable method of appointing the arbitrator – Avoid the court-appointment process - time-consuming, costly and inefficient.

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER

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• 11. Dysfunctional Clauses

> Ambiguous conditions precedent: – failure to specify what happens if parties do not agree or to set time limit to satisfy a condition – Multi-tier negotiation clauses:

– parties to act reasonably or in good faith to resolve dispute before arbitration: Consider impact of SCC in Bhasin v Hrynew duty of honesty – avoid a jurisdictional condition precedent with clear termination of negotiations

> Non-existent arbitral institution or non-existent rules (“Canadian Arbitration Association”)

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 11. Dysfunctional Clauses (Cont’d)

> Inadequate appointment mechanism: problem of recourse to the courts if no agreement > Overly specific qualifications for the arbitrator that prove difficult to fulfill > Time limits that are unworkable or unreasonable – be careful what you wish for if no agreement to vary > Improper Parties and Signatories: including a non-party in the arbitration clause or failing to include as a signatory a necessary party for the resolution of a dispute (e.g., a parent or subsidiary corporation)

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 11. Dysfunctional Clauses (Cont’d)

> Failure to specify a place or a language for an international arbitration > A clause with a provision that is contrary to the law of the place of arbitration (e.g., non-arbitral disputes; qualifications for arbitrators) > A clause that adopts the rules of an institution without appointing the institution to administer the arbitration

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 11. Dysfunctional Clauses (Cont’d): Examples

“The parties shall use their good faith efforts to settle any dispute arising out of or in connection with the execution and performance

• f this Contract amicably.

If no amicable settlement can be reached between the parties, all disputes out of or in connection with this Contract shall be finally settled by arbitration according to the Rules of Conciliation and Arbitration of the ICC by one or more arbitrators appointed according to the said Rules. Venue shall be Zurich, Switzerland. The court of arbitration shall decide upon the dispute according to the provisions of this contract and secondarily according to Law of the Province of Ontario.”

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 11. Dysfunctional Clauses (Cont’d): Examples

“Arbitration, if any, by ICC rules in London”

Mangistaumunaigoz Oil v. United World Trade Inc. [1995] 1 Llyod’s Rep. 617

“All disputes arising in connection with the present agreement shall be submitted in the first instance to

• arbitration. The arbitrator shall be a well known

Chamber of Commerce (like the ICC) designated by mutual agreement between the parties.” “In the event of any unresolved disputes, the matter will be referred to the International Chamber of Commerce.”

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 11. Dysfunctional Clauses (Cont’d): Examples

“Any and all disputes arising under the arrangements contemplated hereunder… will be referred to mutually agreed mechanisms or procedures of international arbitration, such as the rules of the London Arbitration Association.” “In case of dispute (contestation), the parties undertake to submit to arbitration but in case of litigation the Tribunal de la Seine shall have exclusive jurisdiction.” “Disputes hereunder shall be referred to arbitration, to be carried

• ut by arbitrators named by the International Chamber of

Commerce in Geneva in accordance with the arbitration procedure set forth in the Civil Code of Venezuela and in the Civil Code of France, with due regard for the law of the place of arbitration.

(Source: Redfern & Hunter, Law and Practice of International Commercial Arbitration, 4th Edition)

FACTORS TO CONSIDER FOR THE TRANSACTIONAL LAWYER:

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• 12. Preparation to Start your Arbitration: Change the

Litigation Mindset

> Litigation: – Complex court rules to achieve “justice” – Encourages delay (motions, appeals)and increases cost – Conducting arbitration like litigation causes delay and cost > Arbitration: – Anticipate a faster flexible process- “fair and efficient” – Obligation to proceed expeditiously without delay.

– ICC Art. 22; ICDR Art 16.2; LCIA 14.1 and 14.2

– ICAA Model Law and Arbitration Act – implicit obligation

– Most arbitrators resist attempts at delay

– Benefit of party autonomy and flexible procedures

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 12. Preparation to Start your Arbitration (Cont’d)

LCIA Arbitration Rule 14.2: “Unless otherwise agreed by the parties under Article 14.1, the Arbitral Tribunal shall have the widest discretion to discharge its duties allowed under such law(s) or rules of law as the Arbitral Tribunal may determine to be applicable; and at all times the parties shall do everything necessary for the fair, efficient and expeditious conduct of the arbitration.” ICC Arbitration and ADR Rule 22: “The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute.” ICDR Rule Article 16: “The tribunal, exercising its discretion, shall conduct the proceedings with a view to expediting the resolution of the dispute. It may conduct a preparatory conference with the parties for the purpose

• f organizing, scheduling and agreeing to procedures to expedite the subsequent proceedings.”

ADR Institute: Rule 22: “At the pre-arbitration meeting the parties shall establish time periods for taking steps to deal with any matter that will assist the parties to settle their differences or to assist the arbitration to proceed in an efficient and expeditious manner.”

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 12. Preparation to Start your Arbitration (Cont’d)

> Careful Review of the Arbitration Agreement – What rules are applicable? – Scope: any limitations in cause of action? – strategic issues in selection of cause and impact – Contract v. Tort (misrepresentation) – Jurisdiction and procedural pre-conditions – Negotiation or mediation clauses – good faith issues > Identify Proper Respondents – Non-signatory issues? Marshall evidence for jurisdictional challenge

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 12. Preparation to Start your Arbitration (Cont’d)

> Marshall Evidence for an Expeditious Procedure

– Ask yourself: What type of hearing? How get there? – Witness Statements - as evidence in chief? – Early document preservation, collection and review – Experts - early identification and retainer

> Interim Measures of Protection and Injunctions

– Consider whether required and how obtained – Emergency arbitrator (with institutions) or court

> Flexibility in Procedure

– – look for ways to streamline the procedure and hearing to save time and cost

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 13. Proper Commencement of Arbitration

> Comply strictly with applicable Rules for Notice – Model Law Art. 21, Arb. Act. 23 - service on Respondent – Institutional Rules – service on registrar of institution is mandatory > Impact of non-compliance with timely proper service – Consider contractual pre-conditions and time limits; and statutory Limitation Period (generally 2 years) – Plan Group v. Bell (Ont. CA) > Broad description of dispute in Notice – avoids jurisdictional issues

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 14. Choosing your Arbitrator: The Most Important

Decision

> Criteria:

– The arbitration clause requirements – an impediment? – Subject matter experience and knowledge – Knowledge of arbitral procedures – to limit procedural grounds

• f attack

– Proactive Case management skills – to ensure a fair and efficient arbitral process – Availability to handle the case – Reputation in community

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 14. Criteria for choosing your Arbitrator

(Charles River Associates Study 2012)

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 14. Choosing your Arbitrator: Impartiality and

Independence > Interviewing an arbitrator: pros and cons

– Presence of party representatives – Guidelines: Chartered Institute of Arbitrators

> Conflicts of interest : IBA guidelines > Duty to remain independent and impartial > Retired judge as arbitrator

– may inspire confidence, but risk of court procedures and issues of case management skills

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 15. First Procedural Meeting: Critical Steps

> Who controls of the process? – the Tribunal, unless the parties agree otherwise – agreed time limits to be honoured; cost implications – Be prepared and be creative – requires early case assessment – Prior consultation with opposing counsel (proposed arbitration plan); consider presence of clients > Confirm: constitution of tribunal; seat; governing law. > Each party gives an overview of their case – facilitates efficient procedures and pro-active case management > Practical Procedural Considerations – Applicable arbitration rules and guidelines (IBA,ICDR)

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 16. First Procedural Meeting: Critical Steps

> Identify preliminary motions for scheduling: jurisdiction; production of documents; or privilege? > Hearing Dates and Length – What is reasonable? Bifurcation an issue? – Language of arbitration and need for translation? – Fix a realistic hearing date for a strict schedule > Pre-hearing Procedures and Scheduling – Use parallel track procedures to avoid delay – ie. Jurisdiction – Pleadings, Written Submissions, Memorials –

– What include? Witness statements? Documents relied on? – Set out case in full at early stage; Early identification of fact witnesses

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 16. First Procedural Meeting: Critical Steps

– Memorials (cont’d) – page limits to focus case

• delivery dates – consecutive or concurrent

> Document Production and Exchange

– First each party produces documents on which they rely – Then requests? How? What rules? IBA? Affidavit of Documents? – Standard: relevant and material to outcome? – When? Schedule dates for completion – Electronic data issues – protocols for native format, text searchable – Document Management Systems – ensure compatibility

– Agree on coherent system for exhibits in arbitration

– Privilege Issues anticipated? – Schedule tentative motion dates if needed ; use of Redfern Schedule

FACTORS TO CONSIDER FOR THE LITIGATOR

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• 16. First Procedural Meeting: Critical Steps

> Depositions or Examinations for discovery, if at all

– scope and time limits; how deal with refusals and motions?

> Expert Evidence

– Limits on number of experts? One per area of expertise – Preliminary Identification of areas of expertise and scope of subject matter, then identity of expert witnesses – Schedule for delivery of expert reports – simultaneous, consecutive – Consider expert meeting and report to tribunal

> Delivery of Hearing Briefs and submissions to Tribunal

– Common book of documents – Any need for additional written pre hearing submissions

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 16. First Procedural Meeting: Critical Steps

> Pre-Hearing Case Management Conference

– fix time to address and resolve last minute pre hearing issues

> Hearing Issues:

– Location and booking adequate arrangements – Time limited hearing and allocation of time – Daily Transcription and use of Live Note – Bifurcation or special schedule for evidence of liability and damage – Oral Evidence

– Evidence in Chief in writing - limited oral chief or not? – Hearing is principally cross – any special rules for cross – ie. Documents used in cross must be produced in advance

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 16. First Procedural Meeting: Critical Steps

> Secretary needed? Role, selection and compensation > Form of Award - written reasons or not; time limits for delivery > Administrative Issues – Institutions will deal directly with parties on fees – Ad hoc

– Fees of all arbitrators paid jointly by parties; not separate payment by nominating party for its nominee – Fee rates to be agreed, usually hourly rates x time – deposits usually paid by both parties – Express agreement that both parties responsible for all fees, in event one party defaults

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 17. Pre Hearing Procedures and Efficiency

> Proactive Case management critical to ensure that case keeps on schedule – periodic monitoring with parties on progress, especially on document production – Prompt disposal of motions to resolve issues > Ensure witness and expert availability for hearing dates and the time demands for case preparation. > Pre-Hearing Case Management Conference – to resolve any evidentiary issues jeopardizing hearing – To identify key issues to be addressed and alternatives for sequence of witnesses

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 18. The Hearing

> Time limited hearing generally with equal allocation > Longer sitting times than in court – extend where necessary to finish in allotted days > Time limited opening statements > Pre-determined schedule for witness – Witness statements as chief; Limited oral examination in chief – If translation in fact required, use simultaneous translation – saves time and avoids confusion, despite cost > Consider a Q&A panel with experts to field Tribunal questions > Use Live Note and Daily transcripts; also for large document cases, use electronic document management for Tribunal during hearing > Oral closing statement - limit post hearing briefs

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 19. The Deliberations

> When do they start? – Prior to and during hearing –general in nature but ongoing and increasingly focussed > How Decide the Case? – The first post hearing conference – Post hearing briefs – necessary?

• specific issues only; page limited

– Deciding a complex case – use of “decision tree” schedule – Debate within Tribunal – testing of evidence and legal theory

– Improves quality; objective of unanimity

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 19. The Deliberations

> How to Draft The Award – A reasoned award or not? – Formalities – the value of procedural history, background, arguments and issues – Discussion and Analysis

– Explaining who wins and also why the loser lost – Review of legal principles, key evidence and findings of fact – Circulation of drafts; checks and balances; quality control and completeness – Careful drafting of the “Final Award” or “Award on the Merits” – no “settling” of the judgement

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FACTORS TO CONSIDER FOR THE LITIGATOR

• 19. The Deliberations

> How to deal with a dissenting or a biased arbitrator? > The Dissenter – Drives constructive debate and elevates quality of award – Dissent is not part of the final award > The Biased Co-Arbitrator: Loss of Credibility – Investor state vs. commercial arbitration – Responsibility of the chair; response of other co-arbitrator – Impact on discussion and debate

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FACTORS TO CONSIDER FOR THE LITIGATOR

Rights of Appeal to Court From Award > Model Law International Arbitral Award – no right of appeal on

• merits. Parties cannot expand appeal rights.

> Domestic Arbitral Award – limited right of appeal – Arbitration Act s. 45 – if arbitration agreement does not address appeal, appeal on question of law alone, only with leave of court based on importance and significance of question – Act permits Arbitration agreement to expand appeal rights

– Question of law as of right; or Question of fact or mixed fact and law

– SCC in Sattva Capital v Creston Moly (2014 SCC 53)

– interpretation of contract is question of mixed fact and law; not a question

• f law alone

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FACTORS TO CONSIDER FOR THE LITIGATOR

Setting Aside an Award: Due Process Issues > Model Law and International Award – “due process” or procedural grounds to set aside award – ie incapacity; invalid arbitration agreement; improper notice; award beyond the submission to arbitration; tribunal appointment or arbitral procedure inconsistent with agreement. > Domestic Arbitral Award – Broader “due process” grounds to set aside, including award beyond scope of arbitration agreement; party not treated “equally and fairly”; no opportunity to present case; improper notice; procedures did not comply with Act; fraud; bias failure to

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FACTORS TO CONSIDER FOR THE LITIGATOR

Ease of Enforcement of an Award > International Award under Model Law – Relative ease for recognition and enforcement of award under the New York Convention in over 150 signatory countries (section 35 and 36 – grounds to resist relate to “due process”, not merits, or narrow public policy – Court enforcement subject to general limitation period (Yugraneft v Rexx, [2010] 1 SCR 649). > Domestic Award – Section 50 - court shall enforce award made in Ontario or elsewhere in Canada, save for narrow procedural grounds – Two year limitation after receipt of award to enforce in court

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John Judge john.judge@39essex.com jjudge@judgearbitration.com Thirty Nine Essex Street Chambers www.39essex.com Arbitration Place | www.arbitrationplace.com

QUESTIONS & ANSWERS