Party Perceptions
in International Arbitration
Where are the disconnects?
Michael McIlwrath
Associate General Counsel – Litigation
GE Oil & Gas
Brunel
24 May 2013
Disconnect number 1
party orientations towards the
conflict and each other
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April 13, 2015
Dispute over equipment failure
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April 13, 2015
Two causation theories:
1. Claimant’s expert: manufacturing and installation
defects
2. Respondent’s expert: excessive water in gas causing
high vibrations in equipment left unchecked by
customer
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April 13, 2015
“Claim valuation blindness”
Source: M. Mcilwrath, Selective Perception and Bad Faith Allegations in Commercial
Settlement Discussions, Alternatives (CPR Institute), October 2004
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April 13, 2015
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)
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April 13, 2015
Disconnect 2 – party
perceptions of the arbitral
process:
the culture of litigators vs
business managers
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April 13, 2015
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)
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April 13, 2015
Questions to international litigators
and business people:
1. For a dispute of medium
complexity and value of $5-10
million, how long should an
arbitration take, ideally ?
2. What if it were an expedited or
fast track arbitration?
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April 13, 2015
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
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April 13, 2015
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.”
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April 13, 2015
timing: views of GE litigators (audio)
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April 13, 2015
timing: the voice of business
(audio)
Three business leaders in Doha,
Qatar:
1. 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.”
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April 13, 2015
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.”
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April 13, 2015
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
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April 13, 2015
Can we address the
disconnects?
1. 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?”)
2. Arbitrators: pre-appointment interviews and
early case management conferences to set
expectations. (“How long should this arbitration
take?”)
3. Institutions: mediation as part of arbitral
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April 13, 2015
end
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April 13, 2015