Party Perceptions in International Arbitration Where are the disconnects?

Michael McIlwrathAssociate General Counsel – LitigationGE Oil & Gas

Brunel24 May 2013

Party Perceptions in International Arbitration

Where are the disconnects?

2 /April 20, 2023

Disconnect number 1

party orientations towards the conflict and

each other

3 /April 20, 2023

Dispute over equipment failure

4 /April 20, 2023

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

5 /April 20, 2023

“Claim valuation blindness”

Source: M. Mcilwrath, Selective Perception and Bad Faith Allegations in Commercial Settlement Discussions, Alternatives (CPR Institute), October

2004

6 /April 20, 2023

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)

7 /April 20, 2023

Disconnect 2 – party perceptions of the arbitral

process:

the culture of litigators vs business managers

8 /April 20, 2023

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)

9 /April 20, 2023

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?

10 /April 20, 2023

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

11 /April 20, 2023

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.”

12 /April 20, 2023

timing: views of GE litigators (audio)

13 /April 20, 2023

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.”

14 /April 20, 2023

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.”

15 /April 20, 2023

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

16 /April 20, 2023

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 process

17 /April 20, 2023

end