Wolf von Kumberg
wolf.vonkumberg@arbdb.com
16 March 2015.
NGC International
ADR Guidelines and Model
International Disputes Clause
Drafting the Clause: Choosing the Process
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Consider whether multi-step approach should be employed (as in the Model Clause)
– Ascending levels of management: negotiation between senior executives of the parties (if
possible, specify by title)
– Mediation prior to arbitration or litigation (if possible, specify institutional mediation rules,
e.g. ICDR www.adr.org/icdr AAA www.adr.org , ICC www.iccwbo.org, CEDR
www.cedr.org)
– Specify time period for each successive step
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Choosing the Process: Arbitration
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Arbitration Versus Litigation – Issues to Consider
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Does arbitration provide a safer alternative than foreign judicial system? Is foreign court
system expeditious, trustworthy, reliable and fair?
Does NG’s bargaining power allow it to insist on U.S. courts as the forum for dispute
resolution if that is our preference?
Does arbitration provide demonstrable cost and time savings over litigation in foreign courts?
Does litigation provide surer means to enforce the outcome (judgment versus award)?
How does each forum handle discovery issues?
Would a dispute process benefit from expertise in the decision-maker?
Is the subject matter of the transaction one that would benefit from a private, as opposed to
public, dispute resolution process?
Are there any local law requirements or constraints?
Arbitration: Ad Hoc or Institutiona
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Preference is to use Institutional arbitration. The Institution will help administer the
proceeding, and its Rules will govern the conduct of the arbitration
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Drafting the Clause: Choosing the Rules
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The chosen Institutional body will have its own set of governing rules. These
rules may be modified from time to time, so one must consult the most current set
of rules before making a final decision. Also, there may be reasons to modify the
current set of rules. Factors to consider when choosing rules include:
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Extent to which the rules may be modified
Who chooses arbitrators/how many
Any nationality/professional criteria
Previous history with a particular party. Where a customer has previously agreed to a
particular acceptable institution, attempt to use it again.
Administrative/arbitrator costs. This can vary between fixed fee based on value of the
dispute or hourly rates.
Joinder of parties/issue consolidation
Limits on discovery
Issuance of award
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Timeliness
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Reasoned decision
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Drafting the Clause: Choosing the Location (Seat)
• Seat of arbitration determines the arbitration’s procedural law, which
can impact manner and conduct of arbitration, including
– Degree to which national courts may intervene or assist, e.g., issuing
interim measures such as injunctions or preservation orders or requiring
posting of security bonds
– Ease of enforcement
– 1958 New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (146 signatory countries) identifies any
reservations made by the State in which the seat is located. See
www.newyorkconvention.org/ for such information.
• Preferred Seats (depending on location of contract performance)
– New York: for contracts in the Americas
– London, Geneva, Paris (in that order): for contracts in Europe or the
Middle East
– Singapore or Sydney, Australia: for contracts in Asia
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Drafting the Clause: Choosing the Arbitrator
• Appointment of Arbitrators
– Qualifications of arbitrators should be
expressly included if important, including
• Legal qualifications
• Other professional qualifications (accountant,
engineer, etc.)
• Government contracting expertise
• Language skills
• Potential conflicts
• Availability
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Drafting the Clause: Choosing the Scope
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Scope of Arbitration
– Arbitration should cover all disputes “arising from” or “related to” contract and not just
contract-based claims
– Consider whether access to local courts should be preserved for temporary injunctive
relief
• Interim injunctive relief typically available under institutional rules
– Jurisdiction should not be limited because subject matter implicates public policy or
national statutory rights
– Arbitrator should not have jurisdiction to decide matters under general concepts of
natural justice (known as “amiable composition”)
– Consolidated proceedings
• Multiple disputes: Consider whether you want to agree to consolidate in single
arbitration proceeding all disputes relating to the contract
• Multiple parties: Make sure clause is consistent in prime and subcontracts;
determine how arbitrators to be chosen if there are multiple parties
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Drafting the Clause: Various Provisions
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Language
– Arbitration proceedings should be conducted in English
– Specify that all documents produced in the arbitration are to be in English or translated into English at the
expense of the producing party
Governing Law
– Clause should encompass performance and interpretation of the contract and any other (including noncontractual) claims arising from or related to the contract
– If NG contracting entity is U.S. based, default is for U.S. based law (with strong preference for New York
given its international reputation). Foreign law may not be used absent prior approval of the Law
Department
– If NG contracting entity is outside U.S., default is for English law.
Sovereign Immunity
– If the contract involves a State, State Agency, or Corporate Entity in which a State has an interest, obtain
an express waiver of the right to assert sovereign immunity as to both jurisdiction and execution. Also,
obtain a warranty that all approvals needed to make the waiver enforceable have been obtained
Privacy
– Arbitration proceedings are not a matter of public record, but need to ensure that other party maintains
confidentiality
– Confidentiality is particularly important if the proceeding will involve sensitive information
– ITAR issues need to be addressed
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Drafting the Clause: Choosing Discovery Rules
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Institutional Rules tend not to deal with discovery or if they do are not uniformly
applied, thus making them somewhat unpredictable
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But ICDR Guidelines require parties to exchange supporting documents in advance of
hearing and give arbitrator right to approve targeted document requests
Parties usually able to modify discovery procedures by agreement in the
arbitration clause
– For example, parties may agree to adopt the IBA “Rules on Taking of Evidence in
International Commercial Arbitration,” which provides for more restrictive discovery than
might be ordered in litigation, particularly if Anglo Saxon focused
– Model Clause incorporates IBA Rules on discovery
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Drafting the Clause: Choosing the Remedies
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Continuing Performance Obligation
– Parties to continue performing notwithstanding any dispute
– NOTE: consider deleting this provision where NG is the supplier
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Limitations on Damages
– Consider whether to exclude categories other than compensatory damages, e.g.,
indirect, consequential, incidental, multiple or punitive damages. (Tie this in to the
Contract limitation provision.)
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Reasoned Award
– Consider whether a reasoned award (decision) is desired. In most cases, this should
be included
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Drafting the Clause: Ensuring Finality and Enforceability
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Finality and Enforceability
– While most institutional rules provide for finality of the award, some jurisdictions provide
for review by local courts. To eliminate this potential, expressly exclude the right to
appeal
– Finality (little or no ability to overturn award through judicial intervention) largely
protected, particularly in countries that have adopted the New York Convention.
– Simplified international enforcement through New York Convention
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Check the New York Convention regarding any reservations made by the State in which the
other parties to the contract are located. See www.newyorkconvention.org/.
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Summary: The Top Ten Things to Remember
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Arbitrations are creatures of contract, i.e., parties choose how they will be structured.
Some arbitral institutions are better than others (AAA-ICDR, ICC, LCIA,DIS).
Some arbitral seats are better than others (London, Geneva, Paris, New York, Singapore).
English is the language of choice.
When negotiating with a sovereign, get an express waiver of immunity (along with warranty that
waiver is enforceable).
Confidentiality is key.
Limit discovery.
Limit damages.
Ensure finality and enforceability.
When drafting, start with the NG Model International Disputes Clause.
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