Improving Service Delivery in International Arbitration By Philip Bambagiotti

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Improving Service Delivery in International Arbitration

Philip Bambagiotti

 

The Problem

  1. International arbitration is a remarkable phenomenon, almost unprecedented in history (at least since there has been history).  The idea that individuals, corporations, and nations (and even individuals against nations) can resolve their disputes, even massive disputes, in a systematic and peaceful way, and in a way that can be enforced, by nothing other than inter-jurisdictional consensus, and without the threat of violence, economic power, or war, is quite incredible.
  2. The whole notion of investor/state , investment treaty arbitration is inconceivable from an historical perspective.
  3. And despite the recent surge in populism in politics, the onward march of international arbitration continues unabated.  Each year, each month, and sometimes each day, countries around the world are adopting the structural elements of the international arbitration community – such as the New York Convention and the UNCITRAL model law.  
  4. We are seeing, for example, the further embrace by the Peoples Republic of China of the elements of international arbitration as a feature of its belt & road initiative and a way of expanding its reach without the use of gunboats and tanks.
  5. However, as in every good Shakespearian plot line, at this time of its greatest ascent, a worm of trouble has appeared.  To quote the bard, ‘something is rotten in the state of Denmark’.  As a matter of fact, international arbitration is in serious trouble.  And in order to prevent a disaster from turning into a catastrophe will take focus, work, and courage.
  6. International arbitration began its modern ascent to prominence at the cost of national courts, whose approach to commercial dispute resolution was too costly, took too long, too parochial, too fiddly, and was, ultimately, completely unsuited to the pragmatic requirements of commercial activity.  
  7. Arbitration provided a solution to this – using experienced and eminent industry figures, offering procedural efficiency, speed, and a consequent reduction in cost.  It promised to be ‘cheap’, ‘quick’, and ‘effective’ in allowing parties to resolve their disputes in a suitable way, and get back to business.
  8. The modern problem is that international arbitration, as it has developed and evolved into its own industry, has been seduced into many of the characteristics that it was used to resolve.  The complaints that arbitration is too costly and takes too long were once murmurs but are now cries of criticism.
  9. These complaints should cause those of us that believe in arbitration, and want to see it flourish and survive a great deal of concern.
  10. An example of the threat to international arbitration is seen in the proliferation of international courts – established to offer a forum for the resolution of international disputes – such as the Singapore International Commercial Court, the Dubai International Financial Centre Courts, and the recent announcement of a PRC international commercial court.  
  11. The courts are fighting to claw back some of their role.
  12. Resolving these complaints is not just a philosophical issue.  With the proliferation of participants to the international arbitration community, tackling these issues of cost and time serve the interest of the clients and make good commercial sense.  The future will lie with arbitration practitioners that are innovative, courageous, and solutions and efficiency focused.
  13. Today, we will consider some of the ways that can be used to tackle these problems of time and cost – not only to deliver a good result by means that are cheaper and faster, but the cheaper and faster process will make the good result better.
  14. We could talk for hours over the ways to wrestle with time and cost.  Rather than completely changing the world, what we need first are procedures that that are relatively simple, and that are relatively painless to implement.
  15. I will look at 4 such measures: framing the arbitration powers and procedures, arbitrator selection, the use of technology, and managing expert evidence.

Framing the Arbitration Powers & Procedures

  1. One of the strengths and weaknesses of the arbitration process is its dependence upon the contract.  The metes and bounds of the arbitration is governed, rather than guided, by the terms of the arbitration agreement.  
  2. And to that extent, in most cases, the terms of the dispute resolution is established by decisions made, and understanding held, by the parties at the outset of the relationship (rather than at the pointy end, when dispute has arisen).
  3. In fact, however, particularly in the case of construction disputes, the dispute involves a range of interests, and parties, that lie beyond the contract containing the arbitration agreement.  This includes consequent disputes with sub-contractors, suppliers, consultants, financiers, and the like – not to mention the fall out of joint venture partners that arises from a project that is going wrong.
  4. The arbitration agreement will tie the parties to the contract to the arbitration process for dispute resolution, but the true nature of the dispute may, and very often, will, lie beyond that relationship.  
  5. A dispute that is substantial enough to lead to arbitration, will, in the case of a construction project, usually be mirrored by a number of other disputes between one of the parties to the principal arbitration and the other bit-players.  
  6. The outcome of the principal arbitration will affect the circumstances of those parallel disputes, and in many instances, those disputes will affect the outcome of the principal arbitration.
  7. The inability (practically) to join third parties, or to resolve multiple disputes at the one time, can have great affects upon time, and cost, and add immeasurably to the frustration of the parties.
  8. We have not yet reached the point at which there is a sophisticated and generally acknowledged means to expand arbitration proceedings to include third parties.  
  9. It is possible, of course, to design a bespoke contractual framework to do this, but kind of feature is very unusual, and is probably too far ahead of its time.
  10. However, there are some practical things that can be done to reflect this problem.  For example, careful monitoring of the sub-contracts and consultancy agreements to ensure that the dispute resolution mechanisms that they contain are harmonised with the time-frames and procedures that are set out in the principal contract.  Perhaps with an opt in facility?
  11. One of the features of combined arbitration and litigation proceedings in Australia is the use of the reference system.  This is an issue where a dispute includes an arbitration agreement, with arbitrable elements, and non-arbitrable elements, that necessarily lie outside the jurisdiction of an arbitrator.  
  12. Rather than have multiple and contradictory proceedings, the NSW Supreme Court, has a procedure whereby it refers the non-arbitrable part of the dispute to the arbitrator to determine them as referee.  The matter is usually heard together, with the arbitrator producing an award and a report (addressing the different issues that are invested in the arbitrator).  The report goes to the Court for adoption and the same time as the award is enforced.  This allows the third party problem or the non-arbitrable dispute problem to be efficiently resolved.
  13. Another example is the use of tiered dispute resolution techniques, or the use of a range of dispute resolution techniques.  
  14. An example is the careful use of expert determination for appropriate types of dispute (usually purely technical issues, or disputes that are quantitative or are measurable), so the client is not pushed into an overly sophisticated dispute resolution mechanism for disputes that do not warrant that degree of sophistication.
  15. Also, it is critical that the nature of the dispute resolution procedures mirror the true nature and sophistication of the parties.  The contract is the parties’ contract, the dispute is the parties’ dispute.  
  16. Imposing an overly paper and notice driven dispute resolution mechanism to a party that is struggling to keep up with the paper will not help.
  17. Another feature is the provision of the procedural resources, such as the tailoring of standard rules and the like, which encourage certainty and therefore confidence at the early stages of a dispute – allowing the parties to focus on likely cost etc, and therefore the value of the dispute to them.
  18. So the first element of the control of the time and cost of arbitration is to take an intelligent and proactive approach to dispute management at the time of contracting.  
  19. This includes carefully considering the nature, strengths, and weakness of the parties; looking forward to the types of dispute that could occur, taking a wide-view of dispute resolution by reference to the suite of contracts that are likely to interact in every project, and ultimately not just adopting the dispute resolution provisions found in standard form contracts without evaluating their suitability.

Arbitrator Selection

  1. When arbitration really started to launch itself internationally, there were a number of innovative and forward looking individuals that realised its potential and moved in, establishing the modern arbitration community.  This reflected the vitality and life of the system.
  2. The problem is, of course, that yesterday’s revolution and innovation becomes today’s convention.  And too often, the innovators of the past become resistant, and in some case, become sticking points, to further innovation.  That is when a laboratory becomes a museum, and ultimately a mausoleum.
  3. There is a criticism that, too often, the pool of likely arbitrators that are considered for larger projects is getting shallower.  Those that are recognised as eminent in the field, are often in such demand that getting an arbitration together takes months.  In some cases, the establishment of the tribunal can take longer than the arbitration itself should have taken.
  4. And of course, with the eminence of the arbitrators, will go sometimes eye watering cost.
  5. There are initiatives and repeated calls to broaden the pool of available arbitrators.  The pledge has focussed upon the consideration of, and appointment of, more female arbitrators (many of whom are overlooked when the conventional choices, perhaps the usual suspects, of proposed arbitrators is being considered).
  6. This is obviously an important issue, and one that deserves all our support.  However, in my view, it does not go far enough.  
  7. The limits of opportunity and involvement is not exclusively applied to women.  The limits extend over a range of different categories for labelling people, including race, nationality, and religion.
  8. This is a fact of life, but not one that we are compelled to accept.  More importantly, the nature of international arbitration should suggest that the arbitrators being considered should reflect the natures and characteristics of the parties to international commerce.  To suppose that women take a backseat in commerce is to ignore the reality that international arbitration is geared to meet.  The same can be said of all the categories or criteria upon which the recognition of practitioners can be gauged.
  9. Apart from the ideological considerations, taking a restrictive and conventional approach to arbitrator selection will reflect a restrictive and conventional approach to arbitration itself.
  10. It is hard to promote efficiency and innovation in a forum that is geared towards conventional wisdom.  An example of this is the difficulties in take up of new approaches to document management, with a marked preference for paper, and difficulties to innovative approach to the receipt of evidence – electronically and examination by videolink, and the resistance to (because of unfamiliarity with) concurrent expert evidence.
  11. It is easy to keep doing what one is familiar with, and what one has done a hundred times before.  It is hard to try or champion something new, and to work to make it work.
  12. If the arbitrator sets the tone of the arbitration – which is natural given the arbitration itself is directed towards assisting the arbitrator in making a decision, a more conservative arbitrator may well not support (either overtly or covertly) attempts to introduce innovation.
  13. Tactically, the introduction of innovation can provide advantage to the party prepared to embrace and champion it to the cost of another party that wants to approach the arbitration with a business as usual approach.
  14. So, one of the ways to reduce time and cost, and to press for a more efficient result, is the intelligent and careful selection of arbitrator, arbitral institution or secretariat, and even the selection of counsel.  
  15. To overcome the difficulties in obtaining intelligence about arbitrators, may involve research of papers and presentations, as well as carefully frames questions of potential arbitrators.

Technology

  1. These days, almost every discussion about developments in law and in arbitration involve discussion about new and marvellous technology features – including, most recently, the future proliferation of artificial intelligence (AI).  Indeed, there are some of our colleagues that should be concerned about being replaced by a machine that does what they do.
  2. Dispute resolution involves resolving disputes, which in almost every case, involves the subjective and sometimes emotional input of the people involved with different parties to the conduct of the other.  The nature of the process almost necessarily involves a variation to disputes that have gone before (otherwise there would not have been a dispute).  
  3. I am not particularly concerned about robots in wigs replacing all of us, Blade Runner style.
  4. Having said this, technology, in fact, provides useful tools for dispute resolution and is an inevitable fact of the dispute resolution environment.  I remember a time when some of the more senior practitioners could not see the value of email, or of looking things up on the internet.  
  5. Today, the suggestion that communications be put on paper that is physically despatched, or that research involves going to the library to sweat through the digests is hopelessly antique, and, which is horrifying, quaint.
  6. The problem arises from confusing the useful parts and features of technology with the sales pitch.  Too often, we look at new technology tools as a silver bullet – a means of avoiding work, rather than enhancing it.  
  7. I wonder how often lawyers that, using an online product that selects 200 cases on a topic for them, actually read those cases – or even most of them – or even some of them – or even any of them at all.
  8. Technology can be seductive, but can lead to bad habits and degeneration of legal skill and legal services.  It is important to embrace them, but to make sure that technology is used to make the lawyers work better, rather than just more voluminous.
  9. Technology can enhance the process of arbitration quite dramatically.  Rather than allowing it to simple generate more documents, and more paper, it can be used intelligently, to generate less.  
  10. An example is the formation of a coded and indexed electronic trial book at an early stage – so that as the statements are taken, they are cross-referenced to documents that are exhibited in the trial book, instead of being reproduced dozens of times.  It also allows variations of the common documents to be more clearly identified and dealt with.
  11. Large volumes of documents can be conveniently reproduced, and arranged (with less loss of reproductions, degeneration in reproduction, and cost saving with storage and availability).  
  12. Counsel, despite first impressions, will more enthusiastically embrace a document production in a thumb drive or on the cloud than 20 folders of documents arriving in chambers that will have to be read, but need not hang around once they are dealt with.
  13. Because, with arbitration, the arbitrator will almost always have limited resources, there is a great advantage to including hyperlinks to authorities that are cited, so the arbitrator can go to the source of the citation – rather than expecting them to trudge through law libraries, or to go through multiple folders of court cases of quite varied reproduction quality.
  14. About 10 years ago, optical character recognition (OCR) was said to be the way of the future.  It was expensive, sophisticated, and sexy.  And was particularly useful for bringing older written documents into the electronic embrace.
  15. Again, convenience often seduced to laziness.  With documents that have been processed by OCR, it is necessary to have someone actually read them.  It was always hard to get volunteers for this.  
  16. The need for this exercise, and the danger of not doing it, is easily recognised by anyone who has had to wrestle with predictive text of a smart phone.
  17. Having said this, I am not to be thought of as a curmudgeon or a luddite.  
  18. The fact that I am here is a direct product of the advance and use of technology.  International arbitration makes dispute resolution international, and opens up the opportunities for international practice.  The fact that counsel or experts from another time-zone and another part of the world can realistically be involved in arbitration disputes around the world would have been unimaginable 10 or 20 years ago.  It is part and parcel of modern dispute resolution.
  19. There are, then enormous advantages to be had by using electronic document management and control.  There are other advantages.  The use of video recording of views/inspections and comprehensive photographic archives of the dispute mean that multiple attendances can be reduced, as well as having experts (and 2nd opinions of other experts) obtained from persons located around the world (and without the other party necessarily knowing with whom you are conferring).
  20. Dispute resolution management is currently embracing the ‘Building Information Management’ or BIM analyses.  BIM opens a range different perspectives for analysis, and the vast resource of BIM documentation opens a range of new opportunities for discovery.
  21. Advances in AI are already making significant strides in this area, and are due to make greater strides.
  22. Technology has the potential to vastly empower arbitration lawyers in the means of comprehending and processing huge, and previously impossible, amounts of documentation and information.  It provides the means to do more, and allows them then to see the forest, rather than the swamp of dead trees.
  23. However, technology is not a silver or magic bullet that solves all problems.  And as with other bullets, will only be useful if it is carefully aimed.  Technology should be embraced, and can enhance deliverable results that are beyond what is available with even vast amounts of well meaning labour contribution.

Expert Evidence

  1. Construction disputes inevitably involve the use, and management, of experts and expert evidence.  There is a particular challenge to the use of expert evidence – deriving primarily from their description as ‘experts’.
  2. Expert evidence is designed to enable, or to make accessible, highly esoteric and technical information and issues.  Where the dispute involves issues that require experience and expertise to comprehend and to solve, it is necessary to set out the analysis of these issues in a way that a decisionmaker can understand them, and follow the analysis to reach its own conclusions.
  3. When the use of expert evidence is reduced to these elements, the purpose of evidentiary rules becomes understandable, and helpful.  The notion of setting out, clearly, the expert’s qualifications and experience, observations, assumptions, reasoning and methodology clear conclusions, and an explanation of how the conclusions are important and apply to the case are the elements of the admissibility of expert evidence – but, more importantly, make the evidence compelling and attractive.  If done properly, the evidence is very difficult to overcome.
  4. Expert evidence can be the most costly part of case preparation, and can be the feature that causes the most delay.  Management of the process is critical.  
  5. Few things are more destructive to a case than to have a draft report delivered that does not address all the points, in which short cuts have been taken (but disguised), and in which the scope for setting matters aright are lost because it is all too late to fix, and with the litigation budget already having been absorbed.
  6. It is necessary to set the instructions carefully, but more importantly, to have early discussions with the expert to determine: what the expert says is the critical technical issues (they often know more about the technical issues than the lawyers), but also to ensure that the expert understands what are the issues and contemplation of the dispute – that sometimes the expert does not appreciate.  Often, it is necessary to cause a focus on the issues, rather than an exploration on how clever the expert is, or how much the other expert is a dullard. 
  7. It is important then to impose a strict discipline on the preparation on expert evidence (without, of course, interfering with the formation of opinions), predominantly with a view to meeting timetables and timeframes.
  8. One of the features of litigation control in New South Wales has been the widespread use of joint or concurrent evidence by experts.  That is, once the experts have exchanged their reports, that they be required to confer with each other, with a view to preparing a joint report setting out – the issues upon which they agree, the issues upon which they disagree, and each should set out the reasons for that disagreement.  
  9. I normally require each of them to set out the basis for their disagreement, why they say their position is the right one, and why they say that the opponent’s position is the wrong one.
  10. If this occurs, what the tribunal will have, come the trial, is a comprehensive statement as to the issues that are in dispute, and the different perspectives to that dispute.  It means that the trial process can focus exclusively upon the dispute issues.  
  11. Incidentally, it reduces the capacity for consideration of expert evidence to be derailed by cross-examination on non-core issues.
  12. So many times I have found some killer point in a cross-examination, that goes nowhere because there is agreement on the point, or concession, or the issue goes nowhere.  So it allows, or assists, a valuable focus on the issues of real dispute.  
  13. It also means that the counter point to an expert’s position is set out (in writing) by the other expert – and hence the tribunal is able to access the dispute at a more attractive, and logical level.
  14. An expert’s reasoning that comes down to ‘it is because I said it’ is quickly shown up, and falls away just as quickly.
  15. Once the joint report is prepared, at the time of the hearing, both experts (and sometimes more than one) are called at the same time, and sit in the witness box together.  The evidence is usually given issue by issue, with each expert outlining the respective position, and then each of the counsel cross-examining on that issue.  
  16. The decisionmaker usually asks questions and is involved in the process.  If it is done well, the experts can ask questions of each other, and interact as to the answers.
  17. The process is remarkable.  Cases that are ordinarily listed for weeks can be resolved in days, with consequent cost/time savings.  The expert evidence is easier to understand, because there is not days/weeks between the presentation and testing of the different parts of the evidence and the dispute comes to a head very quickly.  
  18. Consequently, the results tend to be much better (because it is grouped in the transcript and because the point and counter point are easily contrasted).
  19. This process has been used in the Supreme Court, and the NSW Land & Environment Court (the NSW planning court) for many years, and has revolutionised the way that trials are run.
  20. The use of concurrent evidence can be strange and unfamiliar to the more old-fashioned and conservative practitioner.  It was often viewed with suspicion by some courts in earlier days.  As with all new techniques, it takes some skill and experience to use and to apply it.
  21. The courts in NSW have mandated the use of the concurrent evidence process for many years, with remarkable results.  There is a reason that most of the major or difficult commercial cases are drifting from other states to NSW, and why the NSW commercial courts have such large lists and manage them so smoothly.  
  22. Equally, there are still many in NSW that only have a peripheral understanding of the process, and that, frankly, do not use it properly or as effectively as they might.  That will always be a problem, with every new procedural development.  
  23. There is a skill to operating and managing the concurrent evidence process.  There is a range of techniques of advocacy that can be used for good results.  As with the acquisition of new skills, there is an element of education or training and of experience.  But it is not rocket science, and is not something that is too daunting to try.
  24. It is a tool that can and that should be embraced.  It has the capacity to dramatically augment the capacity and effectiveness of an arbitration team, and to dramatically reduce hearing times.  It can be used as a feature to compete and to distinguish a forward looking team.

Summary

  1. International arbitration is a strong and dominant feature of international commerce.  In its strength, however, there are some systemic weaknesses that must be addressed before the system ends up in a ditch.
  2. Quite frankly, international arbitration as it is presently practiced: takes too long and costs too much.
  3. The challenge for practitioners and their clients is both to address these weaknesses to maintain the integrity of the process, but less altruistically, to enhance the service we provide to the client and to sharpen our capacity to compete on dispute resolution deliverables.
  4. In my view, it is both necessary and desirable, for those actively involved in international arbitration to be aware of and to embrace new techniques and new technologies.  Not for the sake of novelty for novelty’s sake, but because dispute resolution has to exist in the real world, which is a world of dynamic change and evolution.
  5. It is important to be aware of, and to selectively and intelligently use these new changes and techniques, without becoming either a curmudgeon (refusing change at all costs) or a may-fly (following every new fad that develops).
  6. There are a wide range of issues, approaches, and techniques that are available, or that are in the process of development.  I have addressed 4 such issues above.
  7. Firstly, a careful consideration of the toolbox that is to be used for dispute resolution well repays the effort.  A tiered dispute resolution provision may well provide a better ability to respond to dispute.  
  8. Bespoke dispute resolution provisions are not necessary.  But a careful tailoring of the standard may be very effective and useful.
  9. Secondly, given that the process of arbitration involves the task of persuading the arbitrator, it is desirable to consider arbitrators that might be open to change or to the use of new means and techniques will be both necessary and desirable.  
  10. The task of identifying arbitrators that are sensitive to, if not sympathetic of, the type of the parties or the types of the dispute may be desirable.
  11. Thirdly, it is necessary to embrace the march of technology.  There are already means that we have and use now that allow the control and management of vast amounts of information – and the means to generate vast amounts of paper.
  12. The aim, however, is to use the technology intelligently.  To manage the process so that technology does not become the master, but enhances the process by which the lawyer delivers legal services is the key.  It requires the degree of confidence in oneself and the process to embrace technology to make strengths stronger and to compensate for weakness.
  13. Intelligently used technology allows a levelling of the playing field between different sized competing teams, and so can lead to the democratisation of the law and, in this case, arbitration.  However, it rarely, if ever, is a sliver or magic bullet.  If you think of technology in this way, the usual result is that the bullet gets lodged in your foot.
  14. Lastly, particularly in construction disputes, the primary driver of cost and time, and the quality of the outcome, turns on the proper management of experts.  It is necessary to manage the process carefully, to identify and overcome delay.  But this is not enough on its own.
  15. One of the features of litigation in NSW is the use of joint conclave reports and concurrent evidence.  This has the advantage of bringing the evidence into sharp focus, and to dramatically reducing hearing time, with consequent improvement in outcome, and saving of time and cost.
  16. These procedures are often spoken about in conferences about arbitration, but is not taken up as much as it should.  There is still a suspicion, concern, or hostility to this – the shock of the new perhaps.  This is a reflex that is better put aside.  
  17. Dispute resolution involves, ultimately, resolving the dispute.  The collegial approach to the concurrent evidence process is one that lends itself to the pragmatic aspects of arbitration, and has great advantages.
  18. The more that participants in the international arbitration ‘industry’ can be open to and to embrace innovation as a means of reducing time and cost in arbitration can only bring benefit to the process, and coincidentally, to the expert as well.

 

PHILIP BAMBAGIOTTI   

 

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This paper is presented for academic discussion and consideration only, and does not contain legal advice and should not be relied upon to that effect.  Any and all of the statements contained herein should be verified before being relied upon.  Copyright and moral rights of authorship are retained to the author.  This paper is not to be reproduced without my consent.