Author: Guillermo Coronado Aguilar

Previously we saw the steps that you will take under a commercial arbitration. Having a roadmap can give you a perspective of what lies ahead so you can plan accordingly, and preparation in Arbitration is a key component, planning ahead will do wonders.

Well, let’s get back to business. So you received the request for arbitration, and with that what you have to do first, is not to panic, and avoid an attitude of not answering, I have seen lawyers not acquainted with arbitration, that one of the first strategies given to clients is to do nothing and not answer the request for arbitration.

Believe me, it will harm the case of your client, avoid such path.

So, in order to give a proper answer, you first need to locate if the type of arbitration is institutional or ad hoc, if it is institutional go directly to the rules agreed by the parties so you can establish a time-frame for the answer. T minus 30 days is a possible time for your answer. But sometimes clients take longer to decide what to do with the request for arbitration and to find a lawyer who is keen to the dispute and to the arbitration process.

The days that you may have are not that many, so plan accordingly in your answer, with that the best advice is not to overwork an answer, as said before, you will have time for that. So if you feel that you are against the ropes, review the arbitral rules and ask for an extension, it is possible to do it and most of the times it is granted.

The attitudes that you can take on your answer are the following: neglect the actual claims directed at your client, whether you agree or not that there is an actual dispute, to accept or neglect the existence of an arbitration agreement, and to agree or not with the appointment of a sole arbitrator or to appoint your arbitrator at that stage or on a later stage, and finally to counter claim.

The structure to be implemented for your answer to the request of arbitration is the same as to the request of arbitration, you can find it here.

As you discovered with the answer and the request for arbitration, there will be the need for you to appoint an arbitrator, if it is a sole arbitrator you will need to agree with your counter party on this issue, and if you don’t agree, then it will be up to the judge by the request of one of the parties under an ad hoc arbitration, and if it is institutional arbitration this will be done by the Institution who administers the arbitration.

However, if it is a three member tribunal, then you are free to appoint your arbitrator, with this, you will need to make a conscious choice, you will perform what is called in the industry as a beauty pageant or beauty contest, meaning that you will have interviews with possible arbitrators in order to be appointed to the dispute at hand.

As we saw previously, there is an actual roadmap to be taken for commencing arbitrations, in this case what opens the door for arbitration is having an arbitration clause, without it there is no much you can do to have access to arbitration.

After there is an arbitration clause agreed, and if a dispute arises between the parties signatories to the arbitration agreement (either as in the form of a clause or as a separate contract), then the first step is to write your request of arbitration.

What you should put into such arbitration request?

Fear not, this can actually be drawn from the institutional arbitration rules or if it is ad hoc you can also get a general idea from the said arbitral institutional rules, as for example the ICC (International Chamber of Commerce) sets in their rules for arbitration the elements that should be included in such a request:

1. Name, description and address of each of the Parties  
2. The contractual relationship between the parties as well as the nature and circumstances giving rise to the dispute
3. The arbitration clause, the governing law substantive and as well procedural, the seat of arbitration and language.
4. The possible designation of an arbitrator, or to be set in conjunction with respondent.
5. Claimant’s damages
6. Statement of relief
7. Payment of the advance of arbitrator’s fees by Claimant

When drafting your request for arbitration, try to be brief, since you will have the opportunity to go at great lengths after a schedule is organize under the Procedural Order 1, which sets in motion the arbitration, which means, after the constitution of the Arbitral Tribunal.

In this phase you need to pay close attention to two elements, one, that there is an actual agreement to resolve the dispute under arbitration, in other words that an arbitration agreement exists, and second, that there is an actual contractual relationship which was affected by your counterpart’s behavior.

But, as said before, you don’t need to write a long request of arbitration, since you will have your opportunity later on.

Be brief and to the point.

Let’s say that one good day at your office, while having a good cup of coffee, which is like your second cup since you leave the house already jacked with coffee beans running through your system, racing like F1 cars all over your bloodstream like in Montecarlo raceway, all of a sudden someone knocks on your door, screaming they have released the “moot problem” or, we what a new case!

Whether or not you find out that there is an actual dispute between two or more parties involved in a legal relationship and there is an arbitration clause, you are representing “Horace Fastrack.” Just kidding, not if you are involved in the Vienna Moot, but bear with me.

What to do when you are in front of an arbitration clause and a Request of Arbitration? Well, read carefully the arbitration clause, determine the elements of the arbitration clause, and whether or not you are before a possible valid and invalid clause, also locate the seat of the arbitration proceedings, since it will be where the judges will collaborate with the Arbitral Tribunal, and also whether there is an indication of “ad hoc” or “institutional arbitration”.

Things to look for before start writing your first request for arbitration:

• The substantive law applicable to the contractual relation between the parties.
• The procedural law applicable to the actual process of arbitration will be applicable as a backup rule whether in “ad hoc” or “institutional” settings. This law can be different from the substantive law.
• In case of institutional arbitration the rules of arbitration from such institution.

After you have done your checklist on the possible applicable laws, you need to have a roadmap of what could occur down the road:

1. Request of arbitration
   • Directed to the arbitral institution in case of “institutional arbitration”
     • The institution will deliver the request on your behalf, but you have to pay an advance on the administrative fees before doing that.
   • Directed to the counter-party in case of “ad-hoc”.
2. Answer the request to arbitration
   • You may answer but also establish possible counterclaims
     • Be wary because this will increase the amount in dispute, increasing the costs of the arbitration.
3. If there are counterclaims, expect the answer to such counterclaims
4. Then, there is the process of the constitution of the Arbitral Tribunal
   • If there is one member both parties will agree on the appointment of the arbitrator, if there is lack of agreement, the Institution will appoint the arbitrator –in case of “institutional arbitration”–, in case of “ad hoc” will be the judge of the seat.
   • If there is a three member Arbitral Tribunal, each party will appoint their respective arbitrator, and the arbitrators appointed by each party will appoint the president of the Arbitral Tribunal
5. Then, there will be a PO1 (Procedural Order Number 1)
   • In there, you will agree on a schedule, how to name the evidence, and the actual disputes between the parties.
   • Also, there will be an advance on costs.
6. Memorials
   • Claimant
   • Respondent
7. Hearing phase
   • Pre-hearing conference, to make some arrangements
   • Actual hearing
8. Post-hearing briefs
9. Award
   • Tribunal discussions
   • Rendering of the Award

Hopefully this roadmap is helpful to jumpstart yourself in arbitration, and when you are at a Moot Problem, especially in the Willem C. Vis, you will be involved in steps six and seven, the previous elements you will see them within the brief given to the teams.

And if you are someone just starting your first arbitration case, this might be just as helpful.

Cheers.

One of the questions that now and then pops up is to understand whether or not we are happy with what we are doing. Sometimes this is also with our activity as lawyers involved in arbitration.

Arbitration as any other type of an activity that requires high amounts of energy, physical, mental and emotional can drain you out, or burn you out, you have to know yourself and know your limits.

Which means first to know when to say no, and when to say yes.

This is is really easy said than done, you are afraid that if you don’t talk in a given venue, that if you don’t write in a given review, or that if you just say no to an appointment as an arbitrator or as a lawyer, you will be doomed.

Is it possible to wake up and say to yourself:

What a wonderful week ahead representing my clients!

Drafting a memoranda!

Preparing for the hearings!

Yes it could be possible, but how to get there?

The first element and the idea I want to share with you is that be proud of the great work you will be doing, with that idea in your head, it could be possible to think that whatever happens down the road you did a work that first of all you are proud of.

Being proud of your work means, that you worked smart, with passion, with drive and with energy, with the elements that were handed to you, and with that you did all what was possible in your capacities.

So, if you are proud of your work and what you are doing, then the feeling and the mindset is positive, much of the people involved in arbitration are high achievers, prone to perfection, with that we want to control everything, even the outcome.

Learning to let go, and be proud of your work is a start. Be proud of your effort and that you did all you can do for your client.

Remember, arbitration is just a tool for dispute settlement, which means is a means to an end, don’t change the end for the means, care for yourself!

International Commercial Arbitration can be understood as the process between two or more parties upon which decide to resolve their actual or future disputes before an Arbitral Tribunal in order to have a final and binding decision, having an international element in some of its elements.

This could be that two or more parties are from different countries, that even if the parties are from the same country, the execution of the contract or the main obligations of the contract are in another country, or maybe that even if the parties are from the same country they determined to have their arbitration resolved under a different jurisdiction in a different country.

In order to move forward we need to ask ourselves why Arbitration is a trusted tool for International Commercial disputes, and the answer comes from all the treaties, changes in legislation and recognition by the national courts of the international awards (which are the final decisions render by the Arbitral Tribunals), that make possible that parties in different jurisdictions resolve their commercial disputes through arbitration and that in the case of non-compliance to the arbitral award, the parties can resort to the national Courts in order to have such award recognized, either because there is a treaty that authorizes the winning party to do this, or because the national legislation is so called “pro-arbitration” venue.

The first stop is UNCITRAL (United Nations Commission on International Trade Law), why this?, well because is the commission that administers two of the most important instruments for International Commercial Arbitration, one being the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and second the Model Law on International Commercial Arbitration.

Take your time in surfing what is all about UNCITRAL, the work done in order to achieve a level of harmonization in international commercial transactions, as it is the case here with International Commercial Arbitration, International Commercial Mediation, International Sale of Goods (CISG), which is celebrating 40 years, Procurement and Infrastructure, MSME Enterprises, Electronic Commerce, Insolvency, Security Interests, Online Dispute Resolution, International Payments, and International Transport of Goods.

Such instruments, the New York Convention and the Model Law on International Commercial Arbitration, helped in two different ways, one that in the case of an award rendered by an Arbitral Tribunal, the process of recognition of such decision by the national courts be streamlined, and second, that the national legislations adopted following the Model Law, either entirely or part of it, which sets forth within the national legislations to have as well a faster process for the recognition and execution of arbitral awards.

As the say goes, the more the merrier, however, sometimes this is not so recommendable, since, when you are drafting your arbitration clause, you may increase the cost of your arbitration without noticing it.

The arbitral tribunals typically are composed by one or three arbitrators, but it can go as high as you want in uneven numbers, but the more people assigned to solve your dispute as an arbitrator the costlier your dispute will be, so try not to go bananas with the numbers, but be careful to choose uneven numbers, so you have always a majority or someone with the casting vote.

If you have three arbitrators, the cost will increase, if you have just one arbitrator the cost will be lower, but the decision of having one or three arbitrators, must not be on a pure economic basis, it must be directed at how complex the issue is, to more complexity you need more arbitrators, to a lesser complexity you need a smaller panel.

If you want to know more about the costs of a possible arbitration, almost all the institutional arbitrations have an arbitration calculator, so you can have a rough idea of the cost of the arbitration, which is to cover the expenses by the institution and the expenses and fees by the arbitrators, such will not cover what the law-firms will charge for their representation fees.

As to the language of your arbitration, I know that this can sound a little bit of an oxymoron if you have an arbitration clause within a contract agreed in English and determine that the language of the arbitration to be in Spanish.

Well this is possible, it is because it may happen that the agreement was made in one language, due to the needs of one of the parties, but the actual execution of the contract as a whole was made almost in its entirety in another language, and it is quite normal for this to happen, I was involved in a case that the agreement was in English and actually the arbitration clause was agreed to be the language in English, however, the only time that English was used was during the negotiations and the actual drafting of the contract.

As to the execution of the contract, was everything made under Spanish language, this is because the holdings get into the agreements, but because they tend to have some branches in one place, the whole execution and the day to day operation of the contract was in another language, determining the actual language upon which the parties will execute the contract will help you in saving quite a lot of money in interpreters and translations, so try to choose wisely.

Ultimately if you didn’t choose the language or it happens that in the contracts they were two versions in different languages determining both languages to be the official languages, then will be up to the arbitral tribunal to decide the issue, it will occur that you might have a mix of languages during your arbitration proceedings, so make sure to have people apt to litigate in such languages.

After making sure that the parties had agreed to resolve their legal disputes through arbitration, and that you make sure that the parties agreed the seat of arbitration, upon which the Courts will have jurisdiction regarding the validity of the arbitration clause and the award or awards.

Then you have to choose whether to have an institution administering the arbitration or ad hoc and be administered by the parties in conjunction with the arbitral tribunal.

My point of view is that in order to avoid headaches choose an arbitral institution for the administration of your arbitration. The selection of the institution will cause your clients expenses in the future, so you have to make sure which arbitral institution is more apt to the needs of your clients.

If you are new to arbitration and you are litigating a case and you find that the parties choose an arbitral institution, be aware to determine the cost of the possible dispute, since the expenses of the institution and the arbitral tribunal must be determined, make clear to your clients, that such costs are not part of your fees, or you will end up being on the wrong side of the table.

But, the question is which arbitral institution is best? And how many are there? Well, there are quite plenty, so the selection becomes cumbersome, make sure to select an institution that has been around quite some time, and also that is backed up by people expert in arbitration. That is the staff is knowledgeable to arbitration. 

Also, the selection becomes important with the language of your dispute, since the institution needs to be able to handle the many issues between the parties and with the arbitral tribunal that occur during an arbitration, which means the institution needs to speak the language of the parties. Otherwise the administration of the case will be prong to misunderstandings. 

The selection of the institution also has an impact on the costs of the arbitration, depending on which institution you select it is the amount of money you will pay and the currency upon which the services will be charged. It is not the same to pay in British pounds, that in Euros, nor American Dollars, nor Canadian dollars, or Argentinian Pesos, or Mexican Pesos. Thus, the selection of the institution becomes important moneywise oriented.

When I say there are plenty of arbitral institutions out there believe me, they are. A point to take into account is that despite being established in a given geographical place, any arbitral institution is equipped to administer international commercial arbitrations.

And, let say that you don’t know where to start with the drafting of your first arbitral clause, well, the arbitral institutions make this journey a lot easier, since in their web and in their rules of arbitration they give you examples of arbitration clauses that you can use in your contracts.

So, there you go, when drafting an arbitration clause you have two options, one that is Institutional which will be administered by an arbitral institution, or the other ad hoc, which will be administered by the parties, the judge acting in support of the arbitration, and when the designation of an arbitral tribunal is made, well the arbitral tribunal.

If you want to be on the safe side and you want to include an arbitral clause into your contracts the safest bet is to designate an Arbitral Institution and their rules, you will eliminate quite a lot of headaches to your clients in the future.

In a recent post we talked about the necessity to have an agreement to arbitrate, so the parties can have the ability to present a request and a response to arbitration, which can be made before an arbitral institution or on an ad hoc basis.

So after making clear that the parties have agreed to submit all or part of their current or future disputes through arbitration, then another element that must be looked closely is the seat of the arbitration.

By saying the seat of the arbitration, it is the actual place where the arbitration judicially speaking will be located, this does not mean that you need to travel to such a place to present your request for arbitration, or answer, or your claim and response, but it could happen that you need to travel there for the audiences to be held.

It also does not mean that the arbitrators or the arbitral tribunal must be located physically there meanwhile the arbitration takes place. It is a judicial fiction, in the sense that the arbitrators and the arbitral tribunal even if seated in a given country, lets say, Santiago de Chile, it does not mean that necessarily, the arbitrators must be there the whole time, nor having their law firms there.

What does then means to have a judicial seat of the arbitration, well, it means that for judicial purposes, the seat of the arbitration will indicate the jurisdiction of the national courts which will be acting in support of the arbitration for one side, and for the other, once an arbitral award is rendered, then the national courts where the arbitration is taking place, will have the jurisdiction to decide on matters regarding the validity or not of the arbitration agreement as well as to the annulment or not of the final award.

Which also will impact the decision as to the lawyers that could be acting within the arbitration, as well as the lawyers who will be acting when there is the need of the involvement of the national courts of the seat of the arbitration.

If both parties are from Latin-America and choose as a seat of the arbitration to be Geneva, Switzerland, it will be advisable to have at least a correspondent lawyer in Geneva just to be on the safe side, even if the case does not need the intervention of such lawyers in Geneva.

Choosing the seat then becomes important as well with the attitudes the local courts may have towards arbitration, they can be pro-arbitration, or against arbitration, or in total ignorance of arbitration, as of today, it is more common to have national courts acquainted with arbitration, but a great assessment must be made as to the seat.

There you go, be clear in two aspects when drafting an arbitration clause or agreement, establish unequivocally that the parties wish to have their disputes resolve under arbitration, and second that the seat of the arbitration be in a given jurisdiction.

As the say goes, in order to have a chicken stew you need to have the chicken, well that is the same with Arbitrations, in order to start a claim through Arbitration, you need first to have an agreement to arbitrate, and such agreement to arbitrate has different ingredients that can be combined with each other in order to have a successful arbitration clause or agreement.

To this point, you have rightfully pointed out that the arbitration agreements can have the form of a clause within a contract or the arbitration agreement can take the form of an entire different contract, obviously relating to the main contract upon which you wish to settle possible legal problems.

One of the first elements, whether in the form of a clause or an agreement, you need to have an actual agreement, and such agreement must be clear as to the willingness of the parties to resolve their given disputes through arbitration.

The agreement must convey such “meeting of minds” to arbitrate, which implies as well an obligation and a right, the obligation means that the parties are obliged to bring their possible disputes before arbitration, and on the other side of the spectrum there is the right of the parties to have their dispute resolve before an Arbitral Tribunal.

At least draft something along these lines: “…the parties agree to have their current or future disputes to be resolved under arbitration…”

So, if there is an actual agreement to resolve the disputes under arbitration, then you at least are good to go.

However, you will need at least a second element, which is the “seat” of the Arbitral Tribunal, we will discuss later on the seat.

I come from Mexico, and when you say arbitration, clients truly think that you are an actual referee in a football match or soccer for the misguided. I’ve being asked if I do International Arbitration why I haven’t been in the news as a referee on football matches, my answer is that hopefully one day.

That is why, when with clients I underline the word commercial arbitration, but the example of a referee of a football match resembles really well the reality of commercial arbitrations, two parties in a match will follow the findings of a neutral in the field (like it or not, even if you yell at the referee). However, instead of blowing a whistle, the determination can come in the form of a written arbitral award.

In essence, Commercial Arbitration can be understood as the process between two or more parties that agree to resolver their actual or future disputes under arbitration before an Arbitral Tribunal in order for such tribunal to render a final and binding decision.

This brief definition gives in many respects what to expect from arbitration, and in more concrete terms with commercial arbitration.

Such elements can be the following:

1 Two or more parties, which means, there can be a classic two party case with one claimant and one respondent, but it can be also multi-party.

2 It is a process.

3 You need to have an arbitration clause or an arbitration agreement as a separate contract.

4 Such agreement can be for the resolution of current or future disputes.

5 The decision rendered will be through a final and binding award (although you can agree having an appeal), by a third party neutral to the dispute.

6 The Arbitral Tribunal, which can be composed by a sole member or a three member tribunal, is a third party neutral to the actual dispute.

I know this can be quite basic but the aim is to have a general idea.

Later on we will discuss what to look for when drafting successful dispute resolution clauses, the core elements and optional elements.