When to Arbitrate Rather Than Litigate
| Author | Carolyn B. Lamm and Eckhard R. Hellbeck |
| Pages | 197-213 |
197
CHAPTER 13
When to Arbitrate Rather
Than Litigate
Carolyn B. Lamm and Eckhard R. Hellbeck1
The rise in c ross-border transactions i n the wake of the globali zation of the econ-
omy2 has led to a rise in both international litigation3 a nd internationa l arbitra-
tion.4 Generally, parties want a quick, reliable, cost-effective, and relatively
1. The authors a re grateful to Ch ristopher F. Smith and Audrey Bhatoo for t heir valu-
able assista nce in preparing t his chapter for the fi rst edition of this bo ok.
2. For the pur poses of this chapter, a “cross- border transaction” i ncludes any contract
made by partie s residing in di fferent countries.
3. See, e.g., Diane Wood, Transnatio nal Litigation in 2004: Is the Gla ss Half Full or Half
Empty? In’ L. N, June 2004, at 6 (noti ng an “increas ing tide of internation al cases”
in “national cou rts around the world ”).
4. For example, i n 200, 793 requests for arbitrat ion were filed with t he International
Court of Arbit ration of the Internationa l Chamber of Commerce, and a rbitral tribu-
nals under it s auspices rendered 479 awards, compa red to just over 500 cases fi led and
approximately 30 0 awards rendered in 20 00. This represents a n increase of more than
50 percent over the past dec ade. 2010 Statistical Repor t, ICC I’ C A. B ., Vol.
22, No. , at 5, 7, 5 (20); Int’l Chamber of Commerce, Stat istics, available at http://www
.iccwbo.org/Products-and-Services/Arbitration-and-ADR/Arbitration/Introduction-to
-ICC-Arbitrat ion/Statistics/. The caseload of the Inter national Centre for Dis pute Resolu-
tion increas ed by 44 percent from 580 fil ings in 2005 to 836 fi lings in 200 9. ICDR I’
A. R ., Issue , at (20), available at http://www.adr.org/cs/idcplg?IdcService=GET
_FILE&d ID=994&dDocName=ADRSTG_ 003924. The caseload of the Inter national
Centre for Sett lement of Investment Disputes (IC SID) more than doubled from 2 cas es
registere d in 2000 to 26 cases reg istered in 200. ICSID, T ICSID C —S -
, Issue 20-2, at 7 ( July 20), available at https://icsid.worldbank.or g/ICSID/FrontSer
vlet?requestType=ICSIDDocRH&actionVal=CaseLoadStatistics.
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198 CHAPTER 13
noninvasive form of international dispute resolution. The prevalence of arbitra-
tion clauses in t ransnational commercial contracts indicates the perceived value
of arbitration vi s-à-vis litigation.
However, several considerations must inform whether the choice of litiga-
tion or arbitration i s most appropriate in a given case. The pur pose of this chapter
is to provide the pract itioner with the most sign ificant factors that he or she must
consider when determ ining whether to arbitrate or l itigate.5
The choice between litigation and arbitration is more complex in a tra ns-
national sett ing than in a domestic sett ing. In the absence of a forum selection or
arbitration clause, a party may be able to fi le a lawsuit wherever it can find juris-
diction on the basis of the laws of the forum. Th is gives rise to the potential
expense, distraction, and burdens of potential multiple or parallel proceedings
concerning t he same dispute—potentia lly with contrar y outcomes and great pro-
cedural complexities.
In addition, a t ransnational setti ng may give rise to issues at the en forcement
stage that one does not encou nter in a domestic setting. In t he absence of a multi-
lateral legal f ramework for the enforcement of foreign judgments, courts are
bound only by comity and therefore have broad discretion in whether or not to
enforce a judgment r endered by a court of another country. In intern ational arbi-
tration, the New York Convention on the Recognition and Enforcement of For-
eign Arbitral Awards of 19586 (New York Convention) requires courts to enforce
foreign arbit ral awards with very li mited exceptions. Nevertheless, as cou rts may
interpret these exceptions differently, there may still be var ying standards of
enforcement under the New York Convention.
For these reasons— and more—select ing a dispute resolution mechanism in
advance of a dispute by providing for arbitration or a forum selection clause in a
contract may be even more impor tant in a transnat ional setting than i n a domes-
tic setting. Before making such a selection, parties to a transnational contract
must carefu lly consider the following i ssues:
• jurisdic tion of the forum court and/or arbitral tr ibunal;
• procedure;
• discovery;
• applicable rules of evide nce: admissibility a nd types of evidence allowed;
5. This ch apter does not provide a comprehensive di scussion of arbitration a nd litiga-
tion. It also ass umes a general knowledg e on the part of the readers of both for ms of dis-
pute resolution. With re spect to internationa l arbitration, it would be beyond the scop e
of this chapt er to discuss the relat ive merits of institut ional and ad hoc arbitrat ion, or to
offer a compari son of the various arbitr al institution s. Furthermore, th is chapter does
not suggest st rategies for draf ting arbitration c lauses. With respect to inte rnational liti-
gation, thi s chapter does not discus s the advantages and dis advantages of bring ing suit in
differ ent jurisdictions , which is the topic of chapter 7 in t his book.
6. Convention on the Re cognition and Enforceme nt of Foreign Arbitral Award s, New
York, June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.S. 38, available at http://
www.uncitra l.org/pdf/english/texts/arbitration/NY-conv/XXII_1_ e.pdf; implemented
in the United St ates in 9 U.S.C. §§ 201–208.
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