I. Approaches to Dispute Resolution
-Never know if they will work or not.
-Maybe parties will reach a settlement or not.
-There is no guarantee.
-There is a winner and a loser in the outcome.
-Unless an arbitrator makes a mistake (i.e. failing to follow proper arbitral procedures), there is a result that one can enforce.
-In arbitration, there are no appeals and there is a quicker result than in courts where there are more stages set for appeals.
What to Consider when Choosing a Dispute Resolution Mechanism:
1. What disputes are most likely to arise?
a. Who is the claimant going to be?
b. Who will be holding the $ or goods?
c. Who will be holding the records/evidence?
2. Will there be leverage (槓桿原理) by one party at the time of the dispute?
3. Where are the parties’ assets?
4. Is there security/guarantees?
5. In what language will the parties be working?
6. What will be the governing law of the contract?
7. Does a party have a connection to a third country and know of its legal system?
A. Mediation/Conciliation – parties request a third party to help reach a settlement for
a dispute that arises out of a contractual or legal relationship. Parties choose the model of mediation to follow:
1. Facilitative Mediation (Ad hoc) – Role of mediator is to establish communication between parties and help each side understand the other’s perspective and interest in the dispute
2. Evaluative Mediation (Institutional) – Mediator gives a non-binding evaluation of the dispute that the parties can choose to accept or reject.
§ Non-binding (parties do not have to continue meeting)
§ Parties are in control of the dispute
§ Decisions cannot be imposed on the parties; the outcome is by their will
§ Mediator is NOT a decision-maker.
§ WIPO Arbitration and Mediation Center suggests an appropriate mediator for the situation.
§ Mediation is confidential to encourage openness that cannot be used in later litigation or arbitration.
§ Interest-based procedure: takes into account business and future relationship interests.
§ Parties address each other in the dispute
§ Informal process
§ A conciliator can only turn into and continue as an arbitrator if a
settlement is reached.
§ High rates of success
§ Can be used at any stage in a dispute – after negotiations, during
litigation or arbitration.
a.. Mediation [and arbitration] is NOT appropriate for:
§ deliberate bad faith matters (i.e. piracy)
§ when a party thinks it has a clear cut case
§ a party wants a neutral opinion on a question of difference to establish precedence
b. Mediation IS appropriate for:
§ minimizing costs
§ a quicker settlement of the dispute
§ more control over the outcome and settlement process by parties
§ wanting confidentiality of the info during the dispute and outcome (especially where a continuing contract relationship is involved)
§ preventing disputes, not just resolving them
§ parties who want low risk commitment
c. Stages of a World Intellectual Property Organization (WIPO) Mediation
i. Parties send a request to the Center to mediate, with details of the
dispute and parties involved.
ii. The Center appoints possible mediator’s with biographical details,
discusses possible meeting locations, fees, collects a deposit from the
parties, and provides services needed, such as interpreters.
o Parties decide what role the mediator will play – to give a neutral evaluation or to facilitate their negotiations
o Do the parties want a mediator knowledgeable in the subject area of the dispute, or one who is a successful mediator, or both?
o Parties can choose the mediator based on nationality or connections/prior experience with the dispute/other party.
iii. Initial contacts between the mediator and the parties
iv. First meeting between mediator and parties
o Establish ground rules of the mediation process (confidentiality, if mediator can meet separately with the parties)
o Discuss documents parties must provide and if experts are needed.
v. Parties may have private consultations with one another.
vi. Subsequent meetings – if the mediator has a facilitative role:
o Gather info on the dispute and identify all issues
o Explore the interests of all parties
o Develop options that would satisfy both parties
o Evaluate options with respect to the parties’ interests
o Conclude and record the settlement in an agreement – If each party agrees that an option for settlement exits that will better serve its interest than any other alternative, such as litigation or arbitration, a settlement should be achieved.
§ Outcome is determined by applicable law, an objective standard
§ Rights-based procedure
§ It is harder to get an agreement to arbitrate once a dispute already started.
§ Arbitrators play the role of judges and hear testimony; similar procedures to a trial
§ NO unilateral (單方的) communication– communications w/ the arbitrator are to be known by both sides.
§ New York Convention (United Nations Convention on the Enforcement of International Arbitral Awards) – Art. II carries out arbitral awards w/o looking into if they have mistakes. Chances of enforcing an arbitral award from one country in another under this Convention is greater than having a court enforce the arbitral award
1. Institutional – arbitration proceedings are set by an organization/agency
o Easy to incorporate institution rules into an international contract
o Rules have been tested, drafted by pros, and updated
o ICC rules has a broad arbitration clause, refuting the claim that the dispute is non-arbitral
o ICC rules are available in 7 languages
o Institutions choose a highly qualified arbitrator; most important
o ICC sets reasonable, balanced fees (services, translators) and schedules payments; will not have to negotiate by yourself
o An administrative referee ensures arbitrators act independently
o Disclosure and challenge proceedings can remove/replace an arbitrator
o Arbitral institutions are respected by the judiciary, which helps enforce an arbitral award in a national court.
o If a party defaults or is absent to an arbitral proceeding w/o excuse, the arbitrator may proceed and enforce default awards
2. Ad hoc – parties set their own arbitration proceeding rules (parties should take “off the
shelf” rules and customize them, i.e. fix deadlines). Lowest risk is to copy exact rules and deadlines, second lowest is to change some rules, high risk is to create own rules, highest risk is to arbitrate w/o any rules
o Flexible, shaped by the facts of the dispute
o Reference to UNCITRAL rules in the parties’ contract are a substitute for the rules
, except in finding if an arbitration agreement exists. Breach of an agreement to arbitrate entitled the other party to damages actually sustained, but could not be the basis for an original cause of action. Suit could be maintained for breach of an arbitration agreement, but damages were nominal. Marine Transit Corp v. Dreyfus changed the precedent of English law by putting breach of Ks and arb agreements on the same footing.]
3. Certain disputes are non-arbitrable i.e., antitrust law, consumer protection, security
law, and matters of public policy, but the NY Conv allows some exceptions.
4. Arbitration agreements are separable from the underlying K in which they appear.
Thus under the separability doctrine, challenges to the validity, formation, or legality
of the underlying K do NOT affect the validity of the arbitration agreement.
III. Evolution of Arbitration within the Legal System
A. A Glimpse Back in History – A French Case[L’Alliance v. Prunier (1843) – Parties contracted that all disputes regarding fire damage would be adjudicated in Paris by 3 arbitrators. This is a clause regarding future disputes, called clause compromisoire. The Civil Procedure Code only discussed compromise, an agreement to arbitrate existing disputes, so the Court took that rule and applied it to compromisoire. In Civil law, a law can be used by analogy. The Code required the arbitrators and the object of the controversy be named, or else the agreement is void. Contracting to arbitrate matters in Paris is unfair and burdensome to parties who may have no connections or business in Paris; such an agreement would deprive one of the guarantees a court could provide.]
1. I.C.A. – Construction of French Jurisprudence
Some provisions of a Code are mandatory and others are dispositive, or default, rules. i.e. A default rule is if the parties do not agree on a place to deliver goods, the rule is it goes to the buyer’s place of business.
a. Default rules do not concern public policy; there must be a rule for
a factor that most Ks do not determine.
b. Mandatory rule is to act in good faith and concerns public policy. If
K allows one to act in bad faith, this is against public policy. One can get around (逃避) mandatory rules by choosing to have the K looked at under foreign rules.
i. Super-mandatory rules do not allow one to get around them.
i.e. Where a penalty K rule is enforceable in IL, one may be able to get around it if the penalty law is not enforceable in France. Is the policy behind the rule so strong that we are not going to let people get out of it? Policies are diff for international trade Ks and businesses.
[Migout v. Arguad developed a choice of law mechanism: where a French party contracted to arbitrate under a law that held arbitration clauses valid, the French Code that would have invalidated the agreement would not apply.]