Challenges and Considerations in Evaluating International Arbitration Venues Claudia T. Salomon Partner and Co-Chair, International Arbitration Practice Group DLA Piper LLP 1
[An Excerpt] Understanding Arbitration Law in a Foreign Venue International arbitration is designed to create a neutral forum so that neither party has to litigate in the courts of the other party s home country or expose itself to an unfamiliar legal system. For example, if a US company is entering into a deal with a Chinese company, the parties could stipulate that the contract would be governed by English law, with arbitration venued in Singapore. The US company would not need to know Chinese law, because the substance of any dispute would be tried under English law, which is the law of the seat of arbitration, and Chinese substantive law would not come into play in enforcement. However, if there are other issues concerning whether the Chinese party that entered into the contract had capacity to do so, that issue could be governed by Chinese law. In fact, one of the most interesting aspects of international arbitration is the interplay of the many different types of law that must be considered in a case. My firm is currently representing a US company that sold its Peruvian subsidiary to Colombian and Korean parties; the contract is governed by New York law, and the place of arbitration is New York. While it remains to be seen at this particular stage whether we will need to know anything about Colombian and Korean law, we will need to know about certain aspects of Peruvian law, even though none of the parties are Peruvian, because the case is about indemnification for liability that has been established in court proceedings in Peru. Practical, Procedural, and Cultural Considerations Every culture has unique issues that may affect the arbitration process. For example, it is important to think about how witnesses from particular countries may come across to the arbitrators. In certain parts of India, for instance, witnesses will shake their head to the side, which may mean either yes or no. It becomes important to make sure that what the witness actually means is communicated. Likewise, respect for hierarchy is very important in certain countries, and there may be taboos against challenging someone who is senior in age or position, which could appear to be violated by aggressive cross-examination. Also, in certain cultures, discussing settlement, including setting up a system for mediation, could be perceived as a sign of weakness. It is important to keep in mind that there are different expectations regarding the production of documents when engaging in arbitration in other countries. A company in another country may not have kept certain documents, or may not produce them on request. Additionally, concepts of privilege vary from country to country; when a company is located in one country and their lawyer is in another country, the arbitrator needs to make an equitable decision with regard to production requests. It is also important for lawyers to ensure that they do not wind up in a situation in which they would somehow have to do something that they cannot ethically do under the bar rules in which they operate. Cross-examination in international arbitration is fundamentally different from the process in litigation, in that the evidence in the case is already submitted. Consequently, the main concern is whether cross-examination is going to be effective, or whether it would be better to arguing the points based on the documents submitted. I have seen opposing counsel make this mistake multiple times i.e., asking questions when they do not need to. In many instances, the documents submitted already have the necessary information to support your case; if a witness then explains away the document under cross-examination, you have lost ground instead of gaining it. This is a key example of why it is crucial to be aware of the differences between international arbitration and litigation.
Perseverance is necessary when trying to uncover the facts in relation to an international business dispute. Keep in mind that there are greater limitations in international arbitration, because your ability to get evidence from third parties is dependent on what the laws permit you to do in the country where the arbitration is venued. In certain circumstances, you can use US laws to obtain evidence from third parties, but whether you have subpoena power and can require someone to be present at an arbitration hearing will depend on the law in the jurisdiction where arbitration takes place. Although it is more common in international arbitrations for each side to hire their own experts, arbitrators from civil law jurisdictions may expect to call their own independent experts as witnesses. Unlike in US litigation there is an expectation that party-appointed experts not come across as being advocates for the party that appointed them. Language Issues in International Arbitration Deciding the language of the arbitration proceedings is also very important. It is usually a mistake to agree that arbitration will be conducted in more than one language; it is also a mistake to choose a language where it may be hard to find people with translation capabilities. For example, I lived in Prague for three years, and while I developed some aptitude in the local language, when I was contacted by an arbitral institution to see if I could chair an arbitration that was going to be conducted in Czech, I had to refuse. The key difficulty in this situation is that the language of the arbitration was designated in the arbitration clause as Czech, but under the rules of the arbitration institution governing the arbitration the chairman could not be of the same nationality as either of the two parties, both of whom were Czech. The arbitral institution was therefore in a difficult situation: it needed to find a chair who was not a Czech national but who was experienced enough in arbitration to chair a tribunal, and also fluent in Czech. In recent times, we have been seeing more Spanish language arbitrations, largely because we are seeing more investments in Latin America, as well as more intra-latin America deals, where both parties are Spanishspeaking, and have decided that any arbitration should be conducted in Spanish. In an upcoming arbitration that will be conducted in English, I represent a US party that entered into a contract with a Vietnamese counterpart. All of our third-party witnesses submitted their statements in Vietnamese, to be translated into English. Similarly, every e-mail that we send needs to be translated into Vietnamese. All of the arbitration prep sessions involve translators, and the arbitration process itself will be conducted with translators. An international arbitration can sometimes seems like a mini-un meeting, with the participants all wearing headsets. Ultimately, the most important factor in multi-language arbitration is learning how to cross- examine witnesses, prepare a case, and communicate with other parties through translation. One of the strategies that I have developed is learning how to speak in phrase bites, which can then be translated consecutively if you do not have a simultaneous translator. It is also important to speak English in a way that non-native English speakers can understand i.e., clearly enunciated, non-idiomatic English. One transcriber recently told me that I had spoken more clearly than any person she had transcribed in her career. It is important to speak English in a way that people from around the world can understand, because non-native English speakers often have trouble with certain types of accents. Our language is also full of unique idioms that may make it difficult for an interpreter to translate. For example, a common question in cross-examination is, Isn t it true that? which can be difficult to translate in a way that gets a clear answer: yes, it is not true or no, it is not
true. Another example of the challenges in this area arose in a recent case in Singapore, where our firm represented an Indian party; the opposing party was Japanese, and our tribunal was composed of a Pakistani, an Australian, and a Singaporean. Each party spoke English as their native language, but with different accents and usage. We actually had an interpreter who would just repeat what each person was saying in less heavily accented English. Conclusion Both the form and forum of dispute resolution are of great importance and need to be given careful consideration at the outset of any transnational deal and in the course of drafting the contract. An arbitration clause should not be an afterthought, and should be included only if arbitration has been determined to be the best recourse for potential contractual disputes. The place of arbitration has far-reaching implications at every stage of the process, so when arbitration is the preferred method, the arbitration clause must stipulate a well-considered, arbitration-friendly venue. Key Takeaways Think strategically about the place of arbitration, as this can affect many important aspects of the proceedings. Choose an arbitration venue where you can rely on due process and appropriate speed, and where the local courts will support the arbitration without interfering, and will not be subject to corruption. Ensure that the venue country is a party to the NY Convention, or other multilateral treaty that will facilitate enforcement. Consider where enforcement is likely to be sought, and where the other party has assets. Also consider the practical, political, cultural and linguistic implications of a prospective arbitration venue. Stipulate the venue in the arbitration agreement, and consider adding provisions on the number of arbitrators and language of the proceedings where appropriate. Claudia T. Salomon is co-chair of DLA Piper s International Arbitration practice and focuses her practice on complex international disputes. She is a leading practitioner in significant investor treaty arbitration and international commercial arbitration cases under the AAA/ICDR, ICC, ICSID, LCIA, Stockholm, UNCITRAL and Vienna rules, around the world, under a wide variety of governing laws. Ms. Salomon has litigated in connection with arbitration, including enforcing arbitral awards worldwide and obtaining emergency relief, and she regularly advises on the drafting of arbitration agreements. She has also handled all phases of US federal and state court litigation, including evidentiary hearings, motion practice, emergency relief, appellate practice and ADR proceedings. The Global Arbitration Review has named Ms. Salomon one of the world s top thirty women in international arbitration and one of its 45 under 45 in international arbitration. Chambers USA: America s Leading Lawyers for Business has repeatedly cited her, noting that clients describe her as a fantastic lawyer who is a key driving force behind the firm s growth in international arbitration, and say she is excellent in terms of both obtaining results and her levels of client service. Ms. Salomon is also recognized in The Best Lawyers in America for commercial international arbitration. She is included in the International Who s Who of Commercial Arbitration, the International Who s Who of
Business Lawyers, and the Guide to the World s Leading Women in Business Law. In 2005, Ms. Salomon won a Burton Award for Legal Writing Excellence for her article analyzing the major international arbitration rules. Ms. Salomon serves on the ICC Commission on Arbitration. She also served on the ICC Taskforce on Reducing Time and Cost in International Commercial Arbitration and as chair of the Young Arbitrator s Forum (the US chapter of the ICC).