December 22, 2011 Articles

Questions to Ask Before Starting International Arbitration

Although thinking ahead is important in all forms of dispute resolution, it takes on added importance in international arbitration

by B. Ted Howes

No one can deny the increasing importance of international arbitration in today's connected business world. Because arbitration awards are much easier to enforce abroad than domestic court judgments are, and due to the perceived neutrality of international arbitration compared to home-court lawsuits, arbitration has significant advantages over litigation in resolving international commercial disputes. For most sophisticated corporations, arbitration has become the default dispute-resolution mechanism for international transactions. As a result, international arbitration has grown in tandem with the explosive growth of international trade.

Despite the rapid growth and the acceptance of international arbitration, some U.S. litigators and in-house counsel are not prepared for the special demands of this unique dispute-resolution mechanism. What many U.S. practitioners fail to appreciate is that international arbitration is ahybrid form of dispute resolution that combines characteristics of both the common-law and civil-law legal systems. International arbitration is also, by definition, complicated by transnational legal issues and competing legal jurisdictions and cultures. As a result, those attorneys who are not accustomed to the unique procedures, rules, and customs of international arbitration may encounter unpleasant surprises if they rush into a case without adequate forethought.

To effectively plan for and manage an international arbitration, attorneys are advised to ask six strategic questions at the beginning of the arbitral process—which, for a plaintiff/claimant, means before the commencement of the arbitration, if possible, and, for a defendant/respondent, means on receipt of the claimant's arbitration threat. Answering these questions (or, for in-house counsel, demanding answers to these questions from outside counsel) should not be a rote exercise; doing it right takes time and mental energy. That said, a thorough and realistic evaluation of these six inquiries will likely save legal fees in the long run and significantly increase the chances of victory in the arbitration.

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