Proskauer Rose International Practice Guide Proskauer Rose LLP |
      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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  1. Overview

    Arbitration can be institutional or ad hoc. Institutional arbitration is conducted under the auspices of an arbitral institution, and will result from the parties’ agreement to apply the rules of a particular institution such as the International Chamber of Commerce or the American Arbitration Association. Arbitration will be ad hoc where the parties have not agreed on any particular set of rules or where they have agreed on arbitration rules that are not linked to any particular institution, such as the UNCITRAL rules.

  2. Institutional Arbitration
    1. The precise role of an arbitral institution in the arbitral process will differ from one institution to the other. In no case will the institution itself hear or decide the dispute. Rather, an arbitral institution organizes the administrative aspects of the arbitration and assists in connection with certain procedural issues.
    2. Although the parties have to pay administrative fees to the institution, institutional arbitration is generally preferable to ad hoc arbitration in particular because the institution can intervene and assist the parties when the process is threatened by a variety of circumstances, such as where one party refuses to name an arbitrator, where an arbitrator is challenged or where the tribunal is not sufficiently diligent.
    3. The major institutions are also well respected and awards rendered under their auspices tend to be readily enforced by courts in the absence of voluntary compliance.
    4. There are today many international arbitral institutions. While a selection of the most prominent institutions is presented below, there are many other regional institutions, including: the Inter-American Commercial Arbitration Commission (IACAC), the Singapore International Arbitration Centre (SIAC), the German Institution of Arbitration (DIS), the Hong Kong International Arbitration Centre (HKIAC), and the China International Economic Trade Arbitration Commission (CIETAC) .
    5. International Chamber of Commerce (“ICC”) International Court of Arbitration
      1. The ICC is widely considered to be the world’s leading international arbitration institution, and the most “international” of the major institutions. It is located in Paris, France and administers arbitrations that take place all over the world. Every year, well over 500 new cases involving parties from over 100 countries are filed with the ICC.
      2. Where an arbitration agreement provides for arbitration pursuant to the ICC Rules of Arbitration, the proceedings will be held under the auspices of the ICC. The two organs of the ICC that handle or supervise certain aspects of the arbitral proceedings are the International Court of Arbitration itself and its Secretariat.
      3. The Court of Arbitration is constituted by representatives of each member country. The Secretariat consists of several teams of counsel of a variety of nationalities who specialize in different regions of the world. While the proceedings and the decision-making are left to the arbitral tribunal, the Court and/or the Secretariat set and receive payment of advances on costs at the commencement of the proceedings and fix the arbitrators’ compensation at the end of the proceedings, select and appoint arbitrators where the parties have not selected any, confirm arbitrators selected by the parties, decide upon challenges to arbitrators, review the first procedural document issued by the tribunal which sets forth the issues in dispute and procedural matters (the “Terms of Reference”), and scrutinizes awards before they are handed to the parties.
      4. The most salient specificities of arbitration under the ICC Rules are:
        1. - the requirement that “Terms of Reference” be prepared. This document forces the parties and the tribunal to define and summarize the parties’ positions and the issues the tribunal will need to decide, and set the schedule for the various steps of the procedure. The ICC reviews the Terms of Reference.
        2. - The ICC is unique in that the Court “scrutinizes” the arbitral tribunal’s draft of the award, and has the authority to require modifications as to the form of the award and to draw the tribunal’s attention to points of substance. This scrutiny is a valuable safeguard, especially in light of the fact that arbitral awards are not subject to appeal.
        3. - Both the administrative costs and the arbitrators’ fees are determined by the amount in dispute in accordance with a scale setting forth ranges of costs and fees per amount in dispute. The Court of Arbitration determines the precise amount at the end of the proceedings and takes into consideration factors such as the complexity of the matter, the diligence of the arbitrators and the time spent by them, and the rapidity of the proceedings.
      5. Under the ICC’s “Rules for a Pre-Arbitral Referee Procedure,” parties can also obtain a very expedited, non-binding resolution of a dispute. As this procedure is available only where the parties have specifically agreed on it, and parties rarely do so in their arbitration agreements, these rules have not been used very often.
    6. American Arbitration Association (“AAA”)
      1. The AAA’s International Center for Dispute Resolution (ICDR) is headquartered in New York City and administers international arbitrations held pursuant to the “International Arbitration Rules” of the AAA. It receives over 500 new international arbitrations per year.
      2. The AAA has also issued “AAA Commercial Arbitration Rules” which are designed for domestic US arbitrations. Where parties to an international dispute have agreed to AAA arbitration without designating a particular set of rules, the ICDR will apply the International Arbitration Rules.
      3. The institution is sometimes considered to be less international, and more American in style, than others.
      4. The ICDR administrators play a much more limited role in the administration of a case than the ICC. They do, however, select arbitrators after consultation with the parties in cases where the parties have not been able to agree on a procedure for the appointment of arbitrators and have not directly designated arbitrators. There is no mandatory requirement that any of the arbitrators be of a different nationality than the parties.
      5. While the number of arbitrators is left for the parties to decide, in the absence of any agreement the rules express a preference for a sole arbitrator unless the circumstances make a three-member tribunal preferable.
      6. Arbitration under the AAA International Arbitration Rules does not involve the creation of a document similar to the Terms of Reference, nor does the ICDR review the tribunal’s award before communicating it to the parties.
      7. The ICDR administrator will set the arbitrators’ fees in agreement with the parties and the arbitrators on the basis of the arbitrators’ rate of compensation and the size and complexity of the case. The AAA’s administrative charges are determined by the amount in dispute.
      8. The International Arbitration Rules also provide for an expedited procedure in which a sole arbitrator is appointed within a short time and is empowered to grant provisional measures.
    7. London Court of International Arbitration (“LCIA”)
      1. The LCIA has its headquarters in London. It administers international arbitrations conducted pursuant to the LCIA Arbitration Rules. Well over 100 new cases are filed with the LCIA each year. Many cases under the LCIA Rules are heard in London, but the LCIA has broadened its reach and has distanced itself from its reputation as a primarily English arbitral body.
      2. Beyond the role it plays in the appointment of arbitrators where the parties fail to agree, the LCIA’s involvement in the arbitration proceedings is, compared to that of the ICC, fairly discreet. In particular, the LCIA Arbitration Rules do not provide for Terms of Reference or a review of the award prior to its communication to the parties.
      3. The rules set out the tribunal’s powers (in particular the power to order discovery) in some detail, and favor the appointment of a sole arbitrator unless the parties have agreed otherwise, or unless the circumstances of the case require a three-member tribunal. The LCIA Rules specifically provide that where the parties are of different nationalities, a sole arbitrator or chairman of the arbitral tribunal must not have the same nationality as any of the parties.
      4. Arbitrators’ fees are disconnected from the sums in dispute and are calculated by an hourly rate agreed between the arbitrators and the parties.
      5. Unusually, the LCIA calculates its own fees on the basis of the time spent by its staff in accordance with a published hourly fee.
      6. The LCIA Rules also provide for an expedited procedure, pursuant to which a party can apply to the LCIA Court for the expedited formation of arbitration tribunal on or after the commencement of the arbitration.
    8. Stockholm Chamber of Commerce (“SCC”) Arbitration Rules
      1. The Stockholm Chamber of Commerce, headquartered in Stockholm, Sweden, receives between 50 and 100 new international arbitrations per year. The SCC Arbitration Rules are one of the preferred choices for parties from Eastern Europe, Russia and China. SCC arbitrations are usually located in Stockholm, but parties adopting the SCC Arbitration Rules can choose any other situs.
      2. Unlike most other rules, the SCC Arbitration Rules provide for a three-member arbitral tribunal unless the parties have agreed otherwise or unless the amount in dispute and the type of case mandate the appointment of a sole arbitrator.
      3. Like other institutions, the SCC Institute steps in where a party fails to nominate an arbitrator and, unless the parties agree otherwise, to appoint the Chairman in the three-member panel.
      4. The SCC Institute sets both the arbitrators’ fees and the administrative fees in accordance with a table included in the SCC Arbitration Rules, which is based on the amount in dispute.
      5. The SCC also has a special set of rules for expedited arbitration proceedings.
    9. World Intellectual Property Organization (“WIPO”)
      1. Founded in 1994 in Geneva, Switzerland, the WIPO has arbitration rules and procedures specifically attuned to the issues related to intellectual property disputes, including specialized discovery rules and rules on disclosure and protection of trade secrets. The WIPO has so far received 73 requests for arbitration.
      2. As do most institutional bodies, the WIPO favors sole-arbitrator tribunals where the parties have not agreed upon a number of arbitrators.
      3. The WIPO Rules allow the parties to decide upon the procedure for the appointment of the arbitrator, but they otherwise set forth a mechanism by which the WIPO sends a list of arbitrators to the parties in order to give them the opportunity to exclude candidates and to allow them to rank them by preference before the appointments are made.
      4. The WIPO has developed a set of rules dedicated to expedited proceedings.
      5. The WIPO sets the administrative and arbitrators’ fees after consultation with the parties and the arbitrators in accordance with a schedule of fees.
  3. Ad Hoc Arbitration
    1. An ad hoc arbitration is an arbitration that is not conducted under the supervision of any arbitral institution. That does not mean, however, that they are conducted without reference to any arbitration rules. There are, indeed, several sets of rules parties can refer to in their arbitration agreement. The most prominent are the UNICTRAL Rules, which are briefly outlined below, as are the CPR International Arbitration Rules.
    2. As there is no institution administering the proceedings, serious difficulties can arise in an ad hoc arbitration if one party refuses to designate an arbitrator or if there is an impasse in the selection of the chairman. It is therefore highly recommended that parties designate, in their arbitration agreement, an appointing authority they can turn to in the event of such difficulties and that will appoint the arbitrators. If so designated, the ICC, the AAA and the LCIA can act as appointing authorities in an ad hoc arbitration.
  4. UNCITRAL Arbitration Rules
    1. The United Nations Commission on International Trade Law (“UNCITRAL”) was established by the United Nations General Assembly in 1966 in order to assist in the development of an “improved legal framework for the facilitation of international trade and investment” by “preparing and promoting the use and adoption of legislative and non-legislative instruments in a number of key areas of commercial law.”
    2. In 1976, UNCITRAL proposed the Arbitration Rules, which were approved by the United Nations General Assembly. The rules offer a procedural framework for an arbitration without the accompanying influence of an administrative body.
    3. Pursuant to the Arbitration Rules parties can agree on either one or three arbitrators, but, in the absence of such an agreement, a panel of three arbitrators is to be appointed.
    4. Where the parties cannot agree on a sole arbitrator, or, in the case of a three-member tribunal, where one party does not appoint an arbitrator or where the two party-appointed arbitrators cannot agree on the chairman, the Rules provide for an appointment by an “appointing authority.” Such appointment is performed pursuant to a list procedure which allows the parties both to object to candidates and to express their preferences.
    5. If the parties have not agreed on an appointing authority or if the appointing authority fails to appoint within 60 days, the Rules empower the Secretary-General of the Permanent Court of The Hague to designate an appointing authority.
    6. The Rules specifically authorize the tribunal to issue interim measures of protection, while also specifying that the resort to a judicial authority for such measures does not constitute a waiver of the arbitration agreement.
    7. The Rules provide that the Arbitral Tribunal is to set its own fees, which should be “reasonable in amount, taking into account the amount in dispute, the complexity of the subject-matter, the time spent by the arbitrators and any other relevant circumstances of the case.”
  5. International Institute for Conflict Prevention & Resolution (“CPR”) International Arbitration Rules
    1. In 1992, the CPR Institute for Dispute Resolution published “Rules for Non-Administered Arbitration of International Disputes” (“CPR International Rules”). Parties who do not wish to have an institution administer their arbitration but nonetheless prefer to establish a foreseeable framework for their ad hoc arbitration, can refer to these rules.
    2. The CPR International Rules call for the each party to nominate an arbitrator and for the two party-appointed arbitrators to select the chairman. In the event of an impasse in the appointment process, the CPR or another “neutral authority” designated by the parties is to make the appointment.
    3. The CPR International Rules also provide for the possibility of interim relief by either the arbitral tribunal or a court.
    4. Compensation of arbitrators is to be determined at the time of the appointment “on a reasonable basis.”
  6. Investment Arbitration: The International Centre for Settlement of Investment Disputes (“ICSID”)
    1. ICSID is located in Washington, D.C. and operates under the auspices of the World Bank. Unlike the other institutions discussed above, ICSID oversees arbitrations arising under the 1965 “Convention on the Settlement of Investment Disputes Between States and Nationals of other States” (usually referred to as the “Washington Convention”) from investment disputes between states who are parties to that convention and foreign investors investing on their territory. The Centre applies, in particular, its “Rules of Procedure for Arbitration Proceedings.”
    2. As of 2006, 143 countries had ratified the Washington Convention. An investor can bring an arbitration before ICSID only if the respondent state has also separately agreed to such arbitration. Such an agreement can be contained either in the contract between the investor and the state or, and this is most often the case, in a bilateral investment treaty between the respondent state and the investor’s home state.
    3. ICSID awards cannot be set aside before national courts and have to be treated by each member state as if they were a final judgment of its courts. Awards can, however, be set aside by so-called ICSID ad hoc committees.
    4. The number of ICSID arbitrations has increased exponentially in the last few years. In July 2007, ICSID had concluded a total of 125 cases, and had 111 pending cases.

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