A business person's guide to negotiating an international arbitration agreement

Multinational Business Review, Spring 1998 by Reinsch, Roger W, DeVito, Raffaele

Special Clauses to Reduce Litigation.

Since reducing the cost of litigation is one of the purposes for entering into an arbitration agreement, the parties should include some clauses that will help reduce the cost of arbitration. The parties might consider some general clause stating that each party will work expeditiously and diligently toward a final resolution of any dispute. This is basically a good faith clause, and would be difficult to enforce if one of the parties refuses to abide by it, but it could be a statement of philosophy to encourage prompt action. More importantly, and more to the point, would be a clause limiting reasoned awards by the arbitrator(s). Reasoned awards are those that require a detailed finding of the facts and a detailed logical explanation of each and every legal issue, versus a simple statement of why something was decided. Reasoned awards take additional time, especially if there is more than one arbitrator. Reasoned awards provide little or no benefit to the parties, since most arbitration awards are appealable based on defined limitations covered previously. In fact, anyone who is asked to fully explain something will almost always be able to come up with the appropriate explanation. To cut the cost of arbitration, the best decision will be to state that reasoned awards will not be necessary.

Methods and Form of Evidence Presentation.

U.S. parties are accustomed to extensive pretrial discovery. That is not the norm in other parts of the world. The rules of most arbitration organizations give the right to the arbitrator(s) to decide the extent of the evidence allowed. The tribunal generally may be able to request that the parties present documents, exhibits, witnesses, including expert witness, and other relevant evidence. The arbitrators, generally, will not have the power to issue subpoenas, therefore, the parties should put a clause in the arbitration agreement that will give such power to the arbitrator(s).

However, there are some arbitration organizations such as the Zurich Chamber of Commerce whose rules are more restrictive as to some of the evidence. The Zurich rules allow a party's spouse, grandparents, parent, children, grandchildren, brothers and sisters, uncles, aunts, and cousins, and the spouses of these relatives to refuse to testify. A party may also refuse to testify against himself or herself.

In Corporate Counsel's Guide on International Arbitration there is the following statement about the parties' right to agree to procedural rules:

"It must be remembered that the parties are free to contract about the procedures to be used by the arbitrators, and to specify the rights they will have regarding the presentation of evidence and the testimony of witnesses. While this, may alleviate much of the uncertainty, the arbitrators will still retain unfettered discretion to determine

the relevance, materiality and weight of any evidence" (1.044).

If arbitration takes place under the Swiss rules, it would appear that a party can agree to waive their rights to refuse to testify in the arbitration agreement. The rights of the relatives to refuse to testify could not be waived in an arbitration agreement since it is not a right of the parties to the contract to waive a right that belongs to another person.