Because of the inherent flexibility of the arbitral process and the speed at which remote proceedings have become the global norm, the choice of arbitration as an alternative dispute mechanism is more relevant today than ever.
In this article, we examine why arbitration should be seriously considered as the primary dispute resolution process by any in-house counsel and/or solicitor for contracts with an international dimension, the benefits of choosing Irish law as the substantive law and Dublin as the seat for that arbitration, and the practical implications of doing so.
Armed with the appropriate knowledge and expertise, practitioners can leverage the key elements of arbitration for the benefit of their organisation or client, ensuring an effective and efficient process and result.
Why arbitration?
Arbitration offers a confidential and globally recognised process for resolving disputes efficiently through its flexibility of procedure, the integrated choice of trusted and independent decision-maker(s) with subject-matter expertise, and the strongest cross-border enforcement regime available.
These considerations are particularly important for organisations doing business in jurisdictions with which they are not overly familiar, safe in the knowledge that the practice of international arbitration is uniform around the world.
Arbitration is obviously not a new concept and, particularly outside of Ireland, has for many years been the preferred choice for a majority of parties involved in cross-border or multinational ventures, most notably in areas such as energy, construction, shipping and commodities.
In recent years, there has been a significant increase in the volume of arbitrations being referred to the leading international arbitral institutions. For example, according to the London Court of International Arbitration’s (LCIA) annual casework report for 2020, there was an increase of 18% in the number of referrals to arbitration as against 2019, resulting in the highest number of cases ever referred.
There is also an increasing trend towards a broader range of disputes being resolved through arbitration in the technology, finance, corporate and even environmental sectors.
Arbitration’s advantages
For those in-house counsel deeply involved in the day-to-day practice of international arbitration on behalf of their organisations, the advantages of the arbitral process over litigation are clear.
Karl Hennessee (Airbus senior vice-president for litigation, investigations and regulatory affairs) says: “Our clear preference for arbitration over litigation (with only a
few exceptions) is driven by the flexibility, speed, cost-savings and certainty that arbitration, when conducted in the spirit of efficient dispute resolution, offers.
“Litigation tends to take longer, cost more, and invite more unproductive procedural manoeuvring that can further damage the relationship between parties who are, at heart, trying to resolve disputes to move forward with a commercial relationship.”
Maria Irene Perruccio (in-house counsel for international disputes at Webuild Group SpA – formerly Salini Impregilo) comments: “We prefer international arbitration because it provides a neutral adjudicatory body. Our counterparty is often a state entity, and state courts in certain geographical areas might be overly protective towards their state’s public entities.
“In addition, we appreciate the enforceability of the award, the flexibility of the proceedings, and the fact that international arbitration is, in general, faster than litigation.”
Arbitration agreements
The most common method for parties to submit to arbitration is by including an arbitration agreement in their contract(s). A well-drafted arbitration agreement will usually identify the scope of subject matter that the parties agree to submit to arbitration, the number and method of appointment of the arbitrator(s), the legal seat of the arbitration, the substantive law of the arbitration, and any procedural rules that shall apply to the arbitration.
Most commonly, parties will agree to submit to the rules of an arbitral institution in order to resolve any potential future inconsistencies or lacunae that may arise in the arbitration agreement itself, and to ensure that any dispute will be administered efficiently on a time-and-cost basis.
There are a number of arbitral institutions around the globe that administer arbitrations for any parties who have agreed to resolve a dispute under the auspices of their corresponding rules.
The rules that these institutions have created range from being broadly applicable to most types of commercial or private disputes, to those that are solely conceived for parties in sectors such as commodity trading, shipping and sport.
Most significantly for parties and practitioners, these rules govern the entire process, from the choice of seat and number of arbitrators, the appointment of the arbitrator(s), through to the form of exchange of pleadings and expert evidence, and the hearing and making of awards.
Recent innovations
The leading arbitral institutions regularly review and update their rules to ensure that they keep pace with the evolution of dispute resolution globally. Recent innovations include the introduction of expedited procedures, emergency arbitrator proceedings and, of course, remote hearings.
The arbitral institutions provide administrative and procedural support through the life cycle of each dispute and, as importantly, provide expertise in ensuring that disputes are resolved effectively and efficiently. Fees and costs for the services provided depend on the institutions and services required.
The leading international arbitral institutions are the International Chamber of Commerce (ICC), the LCIA, and the International Centre for Dispute Resolution, the international division of the American Arbitration Association (AAA-ICDR).
From an in-house counsel perspective, the most important characteristics to look for when choosing an international arbitration institution are outlined by Karl Hennessee: “Speedy, credible and decisive address of not just the mundane, but the somewhat exotic issues that arise in arbitration.
This is driven by human expertise, clear rules that evolve with time, and confidence to set a framework that allows proceedings to advance with certainty, without stepping on the toes of an arbitral tribunal. Obviously, being based in a jurisdiction with strong law and a culture of arbitration helps.”
Maria Irene Perruccio adds: “We pay attention to the ability of the institution to keep the costs of the proceedings under control. We also appreciate institutions that can assist the parties in the constitution of the arbitral tribunal and provide a wide range of international and neutral nominees for the arbitrator’s role.”
Legislative structures
Ireland has an international ‘best-in-class’ statutory framework to fully support arbitrations seated in this jurisdiction.
- UNCITRAL Model Law: Ireland benefits from the most widely used and global standard in arbitration legislation, the UNCITRAL Model Law on International Commercial Arbitration (as implemented through the Arbitration Act 2010). More than 85 states have adopted legislation based on the model law to date and, as such, it allows practitioners from around the world to work seamlessly in relation to international arbitrations seated in Ireland.
- New York Convention: The New York Convention of the Recognition and Enforcement of Foreign Arbitral Awards has been a corner-stone of international arbitration for more than 60 years, as it ensures that an arbitral award is equally enforceable in any of the 168 contracting states. The convention makes the process of enforcing an arbitral award in another jurisdiction more effective than seeking to enforce a corresponding court judgment, particularly outside of EU and EFTA jurisdictions.
- Arbitration Act 2010: The act provides for robust and specialised support for ongoing arbitrations seated in the State and for streamlined applications for the setting aside, recognition, or enforcement of foreign arbitral awards through its nomination of the High Court as the relevant court, and by having a designated arbitration judge (Mr Justice Barniville prior to his appointment to the Court of Appeal). This ensures both consistency and sector-specific knowledge in all international arbitration-related matters heard in the State on the part of the judiciary.
Mr Justice Barniville and his predecessors have delivered a series of judgments over the past decades that have consistently shown judicial support for international arbitrations conducted in this jurisdiction. T
his is manifested through an unwillingness to interfere in arbitral processes outside of very limited and well-defined exceptions, and includes a readiness to support impending and ongoing arbitrations.
Further, the courts have been willing to take active measures, such as the granting of mandatory stays on litigation proceedings in light of prima facie evidence of the existence of an arbitration agreement between parties.
Above all, the pro-arbitration attitude of the judiciary has been seen through its adherence to the narrow interpretation of the grounds of challenge to the recognition/enforcement of foreign arbitral awards, shared with traditionally arbitration-friendly jurisdictions like England and Wales, France and Switzerland.
Look it up
The second part of this article (in the next issue of the Gazette) will further explore why Dublin is the perfect legal seat for arbitration.
Read and print a PDF of this article here.