Choosing the Proper Forum and Jurisdiction, and the Importance of Treaties and Enforcement of Arbitration Awards A U.S. Perspective … 5 Significant Developments in International ADR
| Jurisdiction | Derecho Internacional |
(April 2003)
Choosing the Proper Forum and Jurisdiction, and the Importance of Treaties and Enforcement of Arbitration Awards A U.S. Perspective … 5 Significant Developments in International ADR
Baker & McKenzie
130 E. Randolph Drive, Chicago, Illinois, USA 60601
312-861-8866
312-861-2899 (fax)
thomas.a.doyle@bakernet.com
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INTRODUCTORY COMMENTS AND SCOPE OF PAPER
This paper focuses upon important considerations in choosing an arbitral forum, as well as the importance of treaties (particularly with respect to enforcement of arbitration awards) from a U.S. perspective. Although the conciliation process is beyond the scope of this paper, conciliation has become an important aspect of international dispute resolution. UNCITRAL's new Model Law on International Commercial Conciliation recently has been adopted, and conciliation laws and mandatory conciliation programs (as in some U.S. courts) are becoming more widespread. Accordingly, a brief commentary regarding conciliation as a form of international commercial dispute resolution seems essential to a discussion of forum choices in international dispute resolution and is included here by way of introductory comment.
In many international disputes, mediation or conciliation is an advisable precursor to the formal dispute resolution process. Most arbitral institutions now offer organized mediation or conciliation services to facilitate resolution of disputes prior to initiation of formal adversarial proceedings. Moreover, a plethora of private mediation services exist in the U.S. and other nations, with mediators culled from the ranks of private legal practitioners, retired judges, and legal scholars from a variety of backgrounds. Although private mediation services certainly are not inexpensive, such services still are likely to be less expensive than full-blown adversarial proceedings.
Many U.S. courts now require some form of pre-trial mediation, and formal conciliation proceedings are utilized in a variety of dispute settings globally. In light of the increasing use of mediation or conciliation procedures, parties are well advised to address the mediation or conciliation pppppossibility at the contracting stage. Contractual
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provisions mandating mediation or conciliation may not always be advisable (as, for example, a party may not consider a mediation "preview" of its case to be beneficial in all disputes), the procedures to be followed in the event of voluntary mediation or conciliation should be considered up front.
A variety of different forums for mediation or conciliation exist inside and outside of the U.S. Some of these institutions, such as the International Chamber of Commerce ("ICC") in Paris, have their own ADR Rules governing conciliation proceedings. UNCITRAL (as discussed in more detail, infra) also has adopted the Model Law on International Commercial Conciliation, as well as procedural rules governing international conciliation. Many institutional rules applied in conciliation proceedings limit or exclude the admissibility into evidence in a subsequent adversarial proceeding of matters discussed or suggested during conciliation. The confidentiality and admissibility of conciliation proceedings is a significant factor to be considered preliminarily in determining the forum or procedure for potential conciliation or mediation. Confidentiality and subsequent admissibility considerations can become particularly thorny issues where parties agree to self-administer informal, principal-to-principal dispute resolution efforts without resort to a third-party neutral or governing rules.
Decisions rendered by a conciliator or mediator typically are not binding, although parties can agree to final and binding resolution. If mediation or conciliation results in the execution of a binding settlement agreement or agreement of compromise, U.S. courts are likely to enforce such an agreement under applicable contract law principles if the court possesses personal jurisdiction over the parties. The UNCITRAL Model Law likewise provides that settlement agreements concluded by the parties are
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binding and enforceable. As parties involved in commercial disputes turn more frequently to conciliation as a method of international dispute resolution, they must consider many of the same factors concerning forum, procedures, and enforcement as they do in drafting arbitration agreements. Failure to give due consideration to conciliation options may lead to additional disputes or adverse consequences.
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I. CHOOSING THE PROPER ARBITRATION FORUM AND JURISDICTION
The agreed site of arbitration is an important factor to be considered when drafting an arbitration agreement. In choosing an arbitration site, parties often emphasize whether a potential forum is likely to be "neutral" or its relative convenience or inconvenience geographically, but more important factors include whether an award rendered in a particular locale will be enforceable and whether the laws and legal climate of the country of the seat of arbitration are favorable to international commercial arbitration. Historically, Latin American countries have been perceived as being rather hostile environments for international arbitration on the one hand, while arbitral awards rendered outside of Latin America likely would not have been enforceable in many Latin American countries. Over the past decade, however, many Latin American nations have adopted or revised arbitration laws that are tolerant of, and even favorable to, international arbitration. Moreover, many Latin American countries now have ratified either the New York Convention, the Inter-American ("Panama") Convention, or both. Investment treaties (as discussed in more detail, infra) also have increased in prevalence in Latin America, resulting in more favorable international arbitration climates.
A. Reciprocity as a Factor
From a U.S. perspective, the situs of an international arbitration is quite significant for purposes of enforcement by a U.S. court of a foreign arbitral award. The U.S., by reservation and legislation, has adopted a reciprocity requirement for enforceability of awards under both the New York and Panama Conventions. Pursuant to the reciprocity requirements, U.S. courts only will enforce an arbitral award under those Conventions if the award was rendered in a country that also has adhered to the relevant
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Convention. Accordingly, even if a party is a citizen of a country that has ratified the Convention, a U.S. court will not enforce an award under the Convention if it was rendered by a tribunal seated in a country that has not adhered to the Convention. The reciprocity reservations adopted by the U.S. (and many other countries, for that matter) thus impact significantly the choice of arbitral forum, and if the parties wish to be able to enforce in the U.S. an arbitral award under either the New York or Panama Conventions, only countries that adhere to those Conventions should be considered as possible arbitration venues. The increased acceptance and ratification in Latin America of the New York and Panama Conventions, by countries such as Argentina, Bolivia, Brazil, Chile, Colombia, El Salvador, Guatemala, Honduras, Mexico, Panama, Peru, Uruguay, and Venezuela, may serve to improve U.S. perceptions of Latin American arbitration venues, which venues previously would not have been considered if U.S. award enforcement was anticipated.
B. Local Factors
The situs state's laws and attitudes regarding international arbitration also are significant factors that should be considered in choosing an arbitration forum. The U.S., by law and custom, is pro-arbitration; U.S. courts broadly construe valid arbitration agreements and apply a highly deferential standard of review of arbitral awards, annulling awards only in very limited circumstances. Sites in the U.S. and Western Europe thus are proposed frequently as arbitration sites in an effort to achieve procedural regularity and likelihood of enforceability.
The U.S. perception of "local" factors with respect to Latin America has been, until relatively recent times, that many Latin American sites are unacceptable arbitration
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venues for a variety of reasons: the Calvo doctrine subjected U.S. nationals to unfavorable local treatment, domestic arbitration laws were hostile or non-existent, onerous local rules and procedures had to be exhausted prior to arbitration, multi-lateral treaties were not accepted or ratified, seemingly valid arbitral awards were stricken for a wide variety of reasons under the applicable laws or policies of the Latin American state, and arbitral awards made in Latin America may not have been enforceable in the U.S. pursuant to either Convention. Developments in many Latin American countries over the past decade or so, however, have altered appreciably the U.S. perception of local Latin American attitudes towards international commercial arbitration. For example, the fairly recent enactment or amendment of arbitration laws in Brazil, Guatemala, Mexico, Panama, Paraguay and Peru that are consistent with or based upon the UNCITRAL Model Law provides an increased sense of confidence that valid (by U.S. standards) arbitration agreements and arbitral awards will be enforced with some degree of expediency and uniformity. Venezuela's enactment of its Commercial Arbitration Law in 1998 seems to demonstrate a shift away from a (previously perceived) hostility towards arbitration to an attitude that appears to be more modern and accepting. Similarly, the Brazilian high court's fairly recent ruling that upheld the constitutionality of Brazil's arbitration law has been perceived as signaling a much more receptive attitude towards international commercial arbitration in that country. Since many of the foregoing enactments...
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