Understanding the Case
At its core, litigation is about preparing for trial. Trial is the place to showcase evidence, witnesses, and experts and make an impact on the judge or jury. Arbitration, particularly international arbitration, happens in reverse. Preparing for arbitration means presenting most of the evidence, witness testimony, and expert reports up front. In arbitration, the parties’ initial statements present the case, including facts and legal arguments, and often attach the statements of witnesses and experts in support. For this reason, understanding your case early in the process is critical.
To understand your case, you must immediately gain command of the facts and key legal issues. You cannot wait for discovery—there may not be any! Determine where the arbitration will be conducted—the country and city—and the language in which the arbitration will be conducted. What country’s law will govern? Who are your key witnesses? What issues will require experts? Arbitration generally relies heavily on expert testimony, especially when it comes to determining damages or interpreting foreign law.
Assembling the Right Team
As in any form of dispute resolution, the right team is critical. Because much of the intensive work will be done early in the case, it is often sensible to have a case “manager” and a case “strategist” right away. While one person can perform both functions, it is often preferable—especially in a large, complicated action—for one person to manage witnesses, experts, fact collection, and document production, while another prepares the case strategy and legal arguments. You may also need to include one or more of the following on your team: technical experts, damages experts, a certified translator, or a foreign law expert or attorney. Remember that any or all of these individuals, if foreign, may need visas or other travel documents to travel to the final hearing, and it is wise to make arrangements as soon as possible.
The client will often appoint a point person to walk the attorneys through the facts. Typically, this person is responsible for helping the team access information and explaining the key factual issues to the legal team. Often, this person (or persons) will ultimately provide testimony in the form of a witness statement regarding the facts of the case. However, this point person may not be the client’s ultimate decision maker. The legal team should be sure to identify that decision maker early in the case. Specifically, the legal team needs to keep the decision maker apprised of both the progress and also the process of the arbitration. Indeed, unless the decision maker has been involved in arbitration before, he or she may need to be extensively counseled about the way arbitration works.
Moreover, the legal team should advise the client about the particular costs of the arbitration institution administering the action. Depending on the wording of the dispute resolution clause or the rules of the administering organization, costs of arbitration may need to be paid up front or according to payment schedules. Arbitrators need to be paid as well. These costs, often based on the amount in dispute, can be significant. These up-front costs are a significant difference from judicial resolution that, if unaddressed, can blindside the client. Thus, the client will need to set a realistic budget including all types of costs: legal team costs, institutional costs, arbitrator costs, expert costs, translator costs, and travel and accommodations of all the aforementioned. And, as in litigation, there is no guaranteed win—it is important to manage the client’s expectations. Having early command of the case will help in setting realistic goals.
Initiating Arbitration
Generally, a complaint filed in court need only set out a short, plain statement of the facts and a demand for the relief sought. See Fed. R. Civ. P. 8(a). Although certain causes of action (like fraud) may carry a heightened pleading standard, and the cases of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), also articulated the specific pleading requirements to survive a motion to dismiss, it is generally accepted that a plaintiff need not prove its case in the initial court complaint.
Arbitration is different. The request for arbitration generally contains the following: (1) identification of the parties; (2) reference to the contract, arbitral clause, and governing law; (3) the appointment process for the arbitrator(s) or the actual naming of a party-appointed arbitrator; (4) the nature and circumstances giving rise to the dispute(s); (5) the claims and arguments of the claimant; and (6) requests for interim and final relief. If the arbitration clause identifies the arbitral institution and which rules of the institution apply (commercial rules, construction rules, etc.), the request for arbitration should also make reference to the rules. Parties support their arguments with witness statements, which may be used at the final hearing as the direct testimony of that witness. Expert reports are also submitted with this initial filing. In short, to the furthest extent possible, the parties’ initial submissions should prove their case or their defenses, as if there will be no further evidence or argument offered. Indeed, it is not impossible that there will not be a further opportunity to expand on these submissions.
Drawing Up the Terms of Reference and Preparing for the Case Management Conference
The terms of reference are the rules of the arbitration. They are drafted collaboratively by the parties’ legal teams and generally crystalize the issues and arguments of the arbitration. The terms of reference provide the arbitrator with the framework that will be used to decide the issues and ensure the enforceability of an award. Again, drawing up the terms of reference highlights why an early understanding of the facts and controlling law in your matter is critical. A prepared attorney can frame issues and arguments in a way that most supports the conclusions she wants the arbitrator to reach.
Similarly, the first case management conference is a critical point in an arbitration. Unlike an early judicial status conference, for which the attorneys may do little preparation, the case management conference in arbitration can be critical. It is the litigants’ first opportunity to begin explaining the case to the arbitrator or arbitrators, who are undoubtedly interested in learning the facts. A prepared lawyer should be ready to offer a brief summary of the key facts, as well as a summary of the relief her client wants. She should know when she would like to hold the final hearing, how many days she wants to reserve for the final hearing, and how much motion practice should be allowed. The attorney should have a position on whether witnesses will present live direct testimony or whether witness statements alone will provide all or most of the direct testimony. The attorney should be prepared to argue for the amount of discovery, document exchanges, or depositions that will benefit her client. Accordingly, the prepared attorney must have considered and decided on those issues before the first case management conference.
As Sun Tzu taught in The Art of War, “Every battle is won or lost before it’s ever fought.” And as they say in the army, “Prior Preparation Prevents Poor Performance.” Arbitration, like all dispute resolution, is a form of battle, and these maxims hold true. Successful attorneys will invest their time, effort, and creativity at the start of an international arbitration, making their case smoother and more productive later on.