Party Perceptions in International Arbitration Where are the disconnects?

Party Perceptions in International ArbitrationWhere are the disconnects? Michael McIlwrath Associate General Counsel – Litigation GE Oil & Gas Brunel 24 May 2013

Disconnect number 1party orientations towards the conflict and each other

Dispute over equipment failure

Two causation theories: 1. Claimant’s expert: manufacturing and installation defects2. Respondent’s expert: excessive water in gas causing high vibrations in equipment left unchecked by customer

“Claim valuation blindness” Source: M. Mcilwrath, Selective Perception and Bad Faith Allegations in Commercial Settlement Discussions, Alternatives (CPR Institute), October 2004

Consequences of disconnect 1 in subsequent arbitration • Perception/accusations of bad faith • Party positions more entrenched/extreme through preparation for proceedings • Duration and distance of international cases reduces reality checks often available in state courts • International arbitral tribunals typically reluctant to give parties early views of their case • Losing party will blame loss on arbitrators (incompetence, bias)

Disconnect 2 – party perceptions of the arbitral process:the culture of litigators vs business managers

Satisfaction with arbitration? “86% of Corporate Counsel reported they are satisfied with international arbitration” PWC/Queen Mary University Survey, International Arbitration: Corporate Attitudes and Practices 2008 “Well, they must not have have been talking to us…” Massimo Mantovani, GC, ENI Group, Milan (IDN podcast)

Questions to international litigators and business people: • For a dispute of medium complexity and value of $5-10 million, how long should an arbitration take, ideally ? • What if it were an expedited or fast track arbitration?

Conceptually, arbitration should meet party expectations of timing“If you are marketing a product as an arbitrator, it is essential that you have different products. Product 1: you buy into it, and I give you an answer in 14 days. But I have two more products, which are called six months and ‘long as a piece of string’. You just sign up for A, B or C.” -- Australian arbitrator/mediator John Wade

timing: views of lawyers (audio) Two arbitration specialists, English and Italian: Arbitration?“Should take 9 months to one year.” Expedited?“Six months” German arbitration lawyer: Arbitration? “International arbitration, if conducted very efficiently, could be within 6 months after the Terms of Reference have been signed, but average is probably 2 years.” Expedited?“A fast track arbitration should last maximum 3 months.” Senior in-house counsel (Siemens, Germany): Arbitration: “Medium arbitration should not take more than 2 years.” Expedited: “And 6 to 9 months for expedited arbitration.”

timing: views of GE litigators (audio)

timing: the voice of business (audio) • Three business leaders in Doha, Qatar: • Arbitration?“It takes a long time… maybe, could take a couple of months”Expedited?“1 week or 2 weeks.” • 2. Arbitration?“2-3 months for medium complexity arbitration, and 1month for expedited arbitration.” • 3. Arbitration?“For medium arbitration… a couple of months and 3 to 4 weeks for expedited arbitration.” • US executive, global business • Arbitration?“Should take only 30 days.” • Expedited?“15 days.”

timing: the voice of business (audio) • Michael Wheeler, Associate Dean, Harvard Business School: • Arbitration? “If you are talking about a construction example, I think you want to do it in days.” • “In ‘days’? From the filing of an arbitration request to an outcome?”“Yes, in days. If you’re trying to put up a skyscraper, I don’t think people want to be sitting around with the whole project stopped because you don’t know where you stand.” • General Manager, international business (>$200M/year): • Question: “What would you say if I told you your arbitration of a dispute involving $3-5MM might take three years to complete?” • Response: “I’d say that’s absolutely crazy. Why would you file for arbitration at that point? It makes no sense to me.”

Consequences of disconnect 2 • Dissatisfaction of business managers with arbitral process, even if lawyers are happy • Negative impact on arbitrators’ reputation, even if proceedings went smoothly

Can we address the disconnects? • Parties: enhanced awareness of likely outcome, duration, cost: Early Case Assessments (ECA). (“Is the deal I can get today better than what I’ll get and spend in two years of arbitration?”) • Arbitrators: pre-appointment interviews and early case management conferences to set expectations. (“How long should this arbitration take?”) • Institutions: mediation as part of arbitral process

end

Party Perceptions in International Arbitration Where are the disconnects?