Lexpert Magazine

LEXPERT MAGAZINE | JUNE 2017 65 | IN-HOUSE ADVISOR: INTERNATIONAL ARBITRATION | the next one. You should tailor the clause to the situation. You should think about what types of disputes might arise under your contract." Sven Deimann, Legal Counsel for Bombardier Transport in Berlin, says his company's participation in international commercial arbitration has usually been under the auspices of the International Chamber of Commerce (ICC). He has also been involved under the Zurich Chamber of Commerce (International Arbitration Rules) and the German Institution of Ar- bitration (DIS). In one of the company's large arbitra- tions several years ago, the arbitral agree- ment stipulated Geneva as the seat, but most of the hearings were held in Paris to make use of the ICC's conference facilities. "As for the substantive law used in the ar- bitrations," he says, "this has usually been a function of where the underlying trans- action for the sale of rail technology took place." Very oen, because of the public tendering process, Bombardier doesn't get to choose the seat of an arbitral tribunal or the substantive law that will apply. "If the contracts are for standard sales of equipment outside of a tendering process governed by public procurement laws," Deimann says, "then we would typically try to insert standard [arbitration] clauses. In other contexts, especially if the contract is the outcome of a competitive tendering process governed by public procurement law, it is more common for the tendering entity or authority to insist on their stan- dard dispute-resolution clauses." As for the speed and cost of proceedings, says Deimann, "Over the last ten years, we have really experienced both extremes: lengthy, virtually endless proceedings — in one instance it took close to nine years from the request for arbitration to settle- ment of the award as to costs — and bal- looning costs for counsel, but also for the arbitrators and fees for the institution. [But we have also experienced] extremely expe- ditious proceedings that came at reason- able arbitrator and institutional fees." Lyle Braaten, Legal Counsel for Lumina Gold Corp., has been through three inter- national commercial arbitrations in eight years, each under the auspices of the Stock- holm Chamber of Commerce (SCC). Two of the arbitrations were heard in Reykjavík and the third in Madrid at the request of the chair of the arbitration panel. e disputes centred on the Icelandic subsidiaries of North American compa- nies: one, a Canadian company with a majority interest in an Icelandic electricity producer; the other, a US company with a majority interest in an Icelandic alumi- num smelter. e first arbitration took two years; the next two, a year and a half each. Each of the contracts had a custom- ized arbitration clause that stipulated they would be governed by Icelandic law. ese clauses were prepared by Icelandic lawyers. Both arbitration clauses mandated the SCC, because the Icelandic lawyers who draed the clauses were most familiar with that institution. "One of the main advantages is that we were able to select arbitrators who had the necessary expertise rather than rely on judges," Braaten says. "e chances of getting a judge in Iceland who dealt with commercial issues, let alone electricity and smelting, were small." He was disappointed, however, that ar- bitration was actually more expensive than he estimates litigation would have been. "It's supposed to offer speed, but when you're picking quality arbitrators you're subject to their schedules. ey're busy, and you can't expect extraordinary speed." In arbitration, the parties appoint the arbitrators first and then you consider their schedule. "I think it should be the other way around," says Braaten. "'What's your availability to hear this dispute and then we'll appoint you.'" Braaten is pleased, though, that the grounds for appeal of arbitral rulings are limited. "You may wait longer than you'd like for a decision, but once you get a deci- sion, you're pretty well assured that there's going to be no appeal. In a traditional liti- gation you can wait a year and a half to two years for your hearing, a year for your de- cision, and the parties can appeal it, which will take another two years. If you add it up, arbitration does provide relative speed. I am happy with relative speed." DRAFTING AN ARBITRATION CLAUSE Drafting an arbitration agreement that holds up across borders comes with its own challenges When drafting an arbitration clause for a cross-border commercial contract, in-house counsel should, according to Vasilis Pappas of Bennett Jones, ensure that they include at least these six elements: It has to say that it's mandatory and binding. If it's permissive, it's not enforceable. It should designate the arbitration rules to be used: for example, those of the ICC, ICDR or LCIA. It should stipulate the legal "seat" of the arbitration: the place where the arbitration will take place. This is not necessarily the location of the institution. The "seat" is important because it determines which court has judicial oversight of the arbitration process. It should designate the number of arbitrators that will hear the dispute, usually either one or three. Typically, each party appoints one arbitrator, and these two arbitrators appoint a third arbitrator as chair of the panel. If they are unable to agree on a third arbitrator, the arbitration institution chooses a "neutral" arbitrator from a roster of available experts. It should designate the language of the arbitration. This is important even if the disputants are two English-speaking companies, because at some future time, one of the companies may be acquired by a foreign company with a different language. It should be drafted as broadly as possible. Rather than saying that "any disputes under this contract shall be resolved by arbitration," it should say "any disputes arising under, related to or in connection with this contract, shall be resolved by arbitration." The intent of such broader language is to subject not only contractual disputes but extra-contractual issues to arbitration. IN HOUSE INSIGHT

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