International Arbitration - Loukas Mistelis

INTERNATIONAL ARBITRATION –
CORPORATE ATTITUDES AND PRACTICES

12 PERCEPTIONS TESTED: MYTHS, DATA AND ANALYSIS
RESEARCH REPORT∗
Professor Loukas Mistelis**
I. Introduction – The Context of the Survey ...................................................527

1. Purpose of this Survey ...................................................................530
2. Background – Previous Surveys ....................................................531
3. Scope and Limitations of this Survey ............................................534
II. The Survey: Perceptions Tested – Myths, Data and Analysis....................536
1. Use of International Arbitration ...................................................536
1.1. Perception .............................................................................536
1.2. Data and Analysis.................................................................537
1.3. Conclusions ..........................................................................541
2. Advantages and Disadvantages Associated with the Use of
International Arbitration ..............................................................541
2.1. Perception .............................................................................541
2.3. Conclusions ..........................................................................547
3. Dispute Resolution Policy Considerations ..................................550
3.1. Perception .............................................................................550
3.3. Conclusions ..........................................................................555
4. Arbitration Clauses ......................................................................555
4.1. Perception .............................................................................555
4.3. Conclusions ..........................................................................559
∗
The survey was conducted in 2005 by Ms. Emilia Onyema, LLB, LLM, MCIArb,
employed at the time as PwC Research Fellow at the School of International Arbitration,
Centre for Commercial Law Studies, Queen Mary, University of London.
**
LLB (Hons, Athens), MLE (magna cum laude), Dr Iuris (summa cum laude)
(Hanover), MCIArb, Advocate, Clive Schmitthoff Professor of Transnational Commercial
Law and Arbitration; Director, School of International Arbitration, Centre for Commercial
Law Studies, Queen Mary University of London. I am grateful to Professor Julian D. M.
Lew, QC and to Gerry Lagerberg, James Parker, Melanie Vaughn and Amanda Philips, of
PriceWaterhouseCoopers LLP, for their comments and criticism on earlier drafts of this
report. I am also thankful to PriceWaterhouseCoopers for funding this research: without
which this research would not have been possible. Errors of fact, judgment, and taste are,
of course, mine.
525
526 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 15
5. Ad hoc v. institutional arbitration................................................559

5.1. Perception .............................................................................559
5.3. Conclusions ..........................................................................563
6. Venues for the Seat and Conduct of International
Arbitration ...................................................................................564
6.1. Perception .............................................................................564
6.3. Conclusions ..........................................................................570
7. Potential for Appeal on the Merits...............................................570
7.1. Perception .............................................................................570
7.3. Conclusions ..........................................................................571
8. Appointment of Arbitrators .........................................................571
8.1. Perception .............................................................................571
8.3. Conclusions ..........................................................................576
9. Appointment of law firms............................................................576
9.1. Perception .............................................................................576
9.3. Conclusion ............................................................................578
10. Cost..............................................................................................578
10.1. Perception ...........................................................................578
10.2. Data and Analysis...............................................................579
10.3. Conclusions ........................................................................582
11. Sophistication of Users................................................................583
11.1. Perception ...........................................................................583
11.3. Conclusions ........................................................................584
12. The future of international arbitration .........................................584
12.1. Perception ...........................................................................584
12.3. Conclusions ........................................................................585
III. Future of International Arbitration and the Role of Empirical
Surveys...............................................................................................585
1. What we have left out and why......................................................585
2. Methodology ..................................................................................586
3. Issues for further research ..............................................................589
2004] INTERNATIONAL ARBITRATION: CORPORATE ATTITUDES AND PRACTICES 527
I. INTRODUCTION – THE CONTEXT OF THE SURVEY
Disputes are an inevitable occurrence in many international commercial

transactions and a consequence of increased globalization and further market
liberalization. Different commercial and legal expectations, cultural approaches,
political ramifications and geographic situations are all sources for disagreement
and dispute between contracting parties. Genuine differences can concern the
meaning of contract terms, the legal implications for a contract, and the respective
rights and obligations of the parties. Sometimes parties agree to perform a contract
where performance is just not possible. Extraneous factors and human frailties,
whether through mismanagement or over-expectation, will also interfere with
contractual performance. A major area of dispute is the failure to pay money due
under a contract: this may be because of an inability to pay or a wish not to pay
and therefore one party is seeking an excuse or a justification to refuse to pay all
or part of the contract price.
Where these disputes arise and they cannot be resolved by direct negotiation,
they will need to be resolved in accordance with a legal process. This process
should have the confidence of the parties or at least be in a forum that is
acceptable to the parties. In these circumstances, the perception is that parties to
international commercial contracts frequently look to arbitration as a private,
independent and neutral system. There is, however, very little empirical evidence
to substantiate this and other perceptions associated with international arbitration.
In the last 25 years most countries in the world have adopted new or
modernized their legislation in respect of international commercial arbitration. As
a result of law reforms and, of course, as a result of increase of international trade
relations, the number of international arbitrations has increased significantly: in
the last five years most major international arbitration institutions combined
would administer more than 5,000 – 6,000 cases. Here are some recent statistics of
selected eleven major institutions:
Table 1: Arbitration Cases in Selected Arbitration

Institutions from 1992 to 20041
Institution 1992 1994 1996 1998 2000 2001 2002 2003 2004 2005
AAA-ICDR2 204 187 226 387 510 649 672 646 614 580
CIETAC3 267 829 778 645 543 731 684 709 850 979
1
Statistical data were provided by the Institutions of the website or upon request.
2
American Arbitration Association International Center for Dispute Resolution:
www.adr.org.
3
China International Economic and Trade Arbitration Commission:
www.cietac.org.
Institution 1992 1994 1996 1998 2000 2001 2002 2003 2004 2005
DIS4 20 30 31 42 62 58 77 81 87
HKIAC5 185 150 197 240 298 307 320 287 250 281
ICC6 337 384 433 466 541 566 593 580 561 521
JCAA7 5 4 8 14 10 17 9 14 21 11
LCIA8 21 39 37 70 81 71 88 104 87 118
SIAC9 7 22 25 67 55 56 46 41 51 58
SCCAI10 44 74 100 122 135 130 120 169 123 100
Vienna11 47 64 45 46 55 33 33 45 50
ICSID12 2 2 8 13 26 26
TOTAL 1137 1783 1880 2101 2292 2626 2655 2702 2720
Numbers often speak better than words: arbitration appears nowadays to be a

well-established mechanism for the settlement of commercial disputes. The data
above, which amount to over 2700 cases annually in the last 3-4 years, relate to
eleven well-known international arbitration institutions. The International
Federation of Commercial Arbitration Institutions (“IFCAI”), however, has more
than 60 fee paying members, a small portion of the more than 200 operating
arbitration institutions.13
The numbers in Table 1 do not take account of the very many ad hoc
international arbitrations which anecdotal evidence suggests is increasing
enormously all around the world. There are also the thousands of specialist
arbitrations in the commodities (e.g. GAFTA,14 FOSFA,15 LME16), insurance (e.g.
ARIAS17) and maritime (e.g. LMAA,18 JSE/TOMAC19) sectors.
4
Deutsche Institution für Schiedsgerichtsbarkeit: www.dis-arb.de.
5
Hong Kong International Arbitration Centre: www.hkiac.org.
6
ICC Court of International Arbitration: www.iccwbo.org/index_court.asp.
7
Japanese Commercial Arbitration Association: www.jcaa.or.jp.
8
London Court of International Arbitration: www.lcia-arbitration.com.
9
Singapore International Arbitration Centre: www.siac.org.sg.
10
Stockholm Chamber of Commerce Arbitration Institute: www.sccinstitute.
com/uk/Home. The numbers include both domestic and international cases.
11
Vienna International Arbitration Centre: www.wk.or.at/arbitration.
12
International Centre for the Settlement of Investment Disputes: www.worldbank.
org/icsid.
13
Compare the large IFCAI membership (of more than 60 fee paying members) and
the list of more than 200 arbitration institutions at www.kluwerarbitration.com.
14
Grain and Feed Trade Association: http://www.gafta.com.
15
Federation of Oils, Seeds and Fats Associations: http://www.fosfa.org.
16
London Metal Exchange: http://www.lme.co.uk.
17
Insurance and Reinsurance Arbitration Society: http://www.arias.org.uk.
18
London Maritime Arbitrators Association: http://www.lmaa.org.uk.
In June 2003 an unscientific survey by the American Lawyer “ruffled

feathers” when it publicized 40 disputes with stakes above $200 million.20 In 2005
the same publication presented the top 50 contract arbitrations and the top 50
(investment) treaty arbitrations, including 41 entries with stakes of $1 billion or
more. The publication assembled information on 130 disputes, divided into two
groups: 71 contract arbitrations with stakes of at least $300 million, and 59 treaty
arbitrations with stakes of at least $100 million.21 One can take from these results
that arbitration is not only popular, it is also big business.
International and national legislation has certainly played a significant role in
the increased awareness and acceptance of arbitration. First, the adoption of the
New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards 1958 by over 137 countries22 and the Washington Convention on the
Settlement of Investment Disputes between States and Foreign Investors 1965 by
more than 143 countries,23 including, in particular, the developing countries
provides a significant public international law regulation for international
arbitration.
Almost 50 countries24 have adopted the 1985 UNCITRAL25 Model Law on
international commercial arbitration in the last twenty years, but interestingly
enough some of the “arbitration superpowers” have designed their own laws.
Amongst them:26
19
Japan Shipping Exchange: http://www.jseinc.org/en/tomac/guide.
20
See, Michael D. Goldhaber, Focus Europe, Private Practices, AM. LAWYER
(Summer 2003), available at http://www.americanlawyer.com/focuseurope/private
practices.html.
21
See Michael D. Goldhaber, Focus Europe, Private Arbitration Scorecard, AM.
LAWYER (Summer 2005), available at http://www.americanlawyer.com/focuseurope/
scorecard0605.html.
22
See http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.
html.
23
See http://www.worldbank.org/icsid.
24
Australia, Azerbaijan, Bahrain, Bangladesh, Belarus, Bulgaria, Canada, Chile, in
China: Hong Kong Special Administrative Region, Macau Special Administrative Region;
Croatia, Cyprus, Egypt, Germany, Greece, Guatemala, Hungary, India, Iran (Islamic
Republic of), Ireland, Japan, Jordan, Kenya, Lithuania, Madagascar, Malta, Mexico, New
Zealand, Nigeria, Norway, Oman, Paraguay, Peru, Philippines, Republic of Korea,
Russian Federation, Singapore, Spain, Sri Lanka, Thailand, Tunisia, Ukraine, within the
United Kingdom: Scotland; in Bermuda, overseas territory of the United Kingdom of
Great Britain and Northern Ireland; within the United States of America: California,
Connecticut, Illinois, Oregon and Texas; Zambia, and Zimbabwe.
25
United Nations Commission on International Trade Law: www.uncitral.org.
26
All texts are available at www.kluwerarbitration.com; ICCA HANDBOOK (Jan
Paulsson ed.); and INTERNATIONAL COMMERCIAL ARBITRATION (Eric Bergsten ed.).
- China – Chinese Law of 1994. as amended

- England – Arbitration Act of 1996
- France – New Code of Civil Procedure 1981
- Switzerland – Swiss Private International Law Act 1987
- Sweden – Swedish 1998 Arbitration Act
- USA [the dated 1925 Federal Arbitration Act]
It is widely accepted that the UNCITRAL Model Law27 establishes and represents
international standards. As a Model Law it sets objectives and allows enacting
States to accommodate specific needs.
What is “international arbitration”? A good working definition is:
International arbitration is a specially established mechanism for the final and

binding determination of disputes, concerning a contractual or other relationship
with an international element, by independent arbitrators, in accordance with
procedures, structures and substantive legal or non-legal standards chosen
directly or indirectly by the parties.28
What is clear is that there are four fundamental features of arbitration:
•
•
An alternative to national court;
•
A private mechanism for dispute resolution;
•
Selected and controlled by the parties;
Final and binding determination of parties’ rights and obligations
While there are many publications and other print and electronic resources about
the law and practice of international arbitration, many questions remain
unanswered: how much do we know about arbitration practice and most
importantly what users of arbitration think about the process, why they select it,
what are their expectations?
A. Purpose of this Survey
Statements to the effect that arbitration is on the rise, most contracts include
arbitration clauses, and there is one ad hoc arbitration for each institutional
arbitration, are heard regularly the arbitration community. However, there is
hardly any tangible data. Against this background, the School of International
27
See http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_
arbitration.html.
28
JULIAN D. M. LEW, LOUKAS A. MISTELIS, & STEFAN M KRÖLL, COMPARATIVE
INTERNATIONAL COMMERCIAL ARBITRATION, para. 1-1 (2003).
Arbitration at the Centre for Commercial Law Studies, Queen Mary University of
London conducted a research funded by PricewaterhouseCoopers LLP London
into the attitudes and choices of various international corporations towards the
resolution of international commercial disputes.
The specific objectives of the research are:
• To obtain empirical evidence of the attitudes of major corporate entities
•
towards international arbitration and resolving cross border disputes.
To set out current perceptions of corporate attitudes towards international
arbitration as a means of resolving cross border disputes, and to use the
empirical data to either confirm or challenge these perceptions.
Consequently, the research also sought to verify or falsify29 various myths,

theories, assumptions or presumptions typical in international commercial
arbitration literature. To achieve this daunting and ground-breaking task, general
counsel or head of legal department of various corporations in various industrial
sectors and jurisdictions with cross-border economic activities were targeted. In
addition to the general survey, 40 in-house lawyers from major corporations,
including multinationals and government controlled entities, were interviewed to
shed light on the practices and policies of their corporations in respect of dispute
resolution. Most, if not all, corporations involved in this research are international
players in their various sectors with experience in international arbitration. Several
interviewees had been personally involved in some high profile, well-known
arbitrations and precedent-setting judgments arising from such arbitration
proceedings.
B. Background – Previous Surveys
Before we present the findings of the survey it is essential to put the research
in context by looking at other surveys conducted prior to this one and
distinguishing them from this survey.
29
In the sense of the leading epistemological text: Karl Popper, Logic of Scientific
Discovery (Routledge 1992). The book was originally published in German as “Logik der
Forschung” in 1935 and was first translated in English in 1956. Popper argues that
scientific theories can never be proven, merely tested and corroborated. Scientific inquiry
is distinguished from all other types of investigation by its testability, or, as Popper put, by
the falsifiability of its theories. Unfalsifiable theories are unscientific precisely because
they cannot be tested. In this survey we do not attempt to falsify theories but invariably it
will become apparent whether ideas have empirical bases.
There are two types of arbitration surveys: those conducted by or on behalf of

arbitration institutions and those conducted by independent experts. There are
several in the first category including the very useful ICSID stakeholder (client)
survey.30
From the various international arbitration institutions, the ICC publishes the
most data about its cases. Several basic data of ICC arbitration cases from the
2005 Statistics include the following:31
•
•
521 Requests for Arbitration were filed with the ICC;
The new Requests concerned 1,422 parties from 117 different countries
•
and independent territories;
in 13,1% of cases at least one of the parties was a state, parastatal or
•
public entity;
the place32 of arbitration was located in 50 different countries throughout
•
the world;
arbitrators of 68 different nationalities were appointed or confirmed under
•
the ICC Rules;
the amount in dispute exceeded one million U.S. dollars in 54,3% of new
•
cases;
325 awards were rendered.
Several notable data included in 2004:33
• Of the cases filed with the ICC in 2004, 31% were multiparty disputes.
The average number of parties in a multiparty case was 5.24 (in part
•
because ten cases had more than ten parties and one had 81 respondents).
Parties specified the place of arbitration in their contract in 74% of the
cases and agreed on the place of arbitration after the dispute arose in
another 12% of the cases. In the remaining 14% of the cases the ICC
Court determined the place of arbitration.
30
See http://www.worldbank.org/icsid/highlights/icsid-client-survey-100904.pdf.
31
See http://www.iccwbo.org/court/english/right_topics/stat_2005.asp. The full
statistical report will be published in 17(1) ICC BULL. (2006).
32
In this survey, we use the term “place (or seat) of arbitration” as meaning the
juridical seat of arbitration, i.e. the place with which the arbitration proceedings is linked.
In other words, it is the place whose local courts may support the arbitration and/or review
the process. In the survey we also use the more general term “venue” to denote the place
of arbitration and the place of hearing. The general term intends to ascertain what the users
of arbitration associated with the locale of arbitration.
33
2004 Statistical Report, in 16(1) ICC BULL. (2005).
• Parties nominated the co-arbitrators/party-appointed arbitrators in 94.1%

of the cases involving three-arbitrator tribunals, and the parties or party-
•
appointed arbitrators nominated the chair in 53.9% of those cases.
During 2004, 37 arbitrators were challenged after appointment; the ICC
•
Court rejected 35 of the challenges.
Of the contracts giving rise to ICC arbitrations in 2004, 79.1% specified a
governing national law, 19.6% specified no governing law, and 1.3%
specified some non-national rules of decision.
Other institutions also provide useful data.34

Several independent surveys have been conducted.35 Three warrant specific
attention:
• Dealing in Virtue, by Dezalay and Garth.36 This survey was published in

1996 and examined (in their own words) “how an elite group of
transnational lawyers constructed an autonomous legal field.” Based on
numerous interviews the authors analysed how arbitration become an
instrument of globalization. In addition they explore how an informal
system, as arbitration is or rather was, became formalized and more
litigation-like. The interviews are conducted in arbitration centers in the
•
developed world.
David Lipsky and Ronald Seeber, Appropriate Resolution of Corporate
Disputes: A Report on the Growing Use of ADR by U.S. Corporations.37
This 1998 survey is useful but has a territorial limitation as it only looks at
the practice of U.S. corporations. In addition, the authors adopt a U.S.
definition of ADR which is not necessarily internationally accepted.
34
See, e.g., for LCIA: http://www.lcia-arbitration.com/ (under News); Stockholm
Chamber of Commerce Arbitration Institute: http://www.sccinstitute.com/uk/About/
Statistics/ (containing statistics without comments or analysis).
35
See generally, TOWARDS A SCIENCE OF INTERNATIONAL ARBITRATION:
COLLECTED EMPIRICAL RESEARCH (Christopher Drahozal & Richard Naimark eds., 2005).
The book focuses on the application of quantitative empirical research to the study of
international arbitration. The text presents, together with commentary, existing empirical
studies on the subject, in addition to several studies published for the first time.
36
YVES DEZALAY & BRYANT G. GARTH, DEALING IN VIRTUE – INTERNATIONAL
COMMERCIAL ARBITRATION AND THE CONSTRUCTION OF A TRANSNATIONAL LEGAL
ORDER (1996).
37
See http://www.ilr.cornell.edu/icr/downloads/guides/guide88/growingUseofADR.
pdf (last visited on 10 February 2006).
• Dispute-Wise Business Management, an AAA sponsored research.38 This

survey was completed and published in 2003 and examined how corporate
counsel view and experience non-judicial settlement of disputes. The
focus of this research was the United States and provides not only a useful
update to the Lipksy and Seeber research but also sets standards as to
what would constitute a good dispute resolution business management,
going into corporate practices.
What can this survey add to the existing corpus of empirical research in
international arbitration?
C. Scope and Limitations of this Survey
The research for this report was conducted from May 3, 2005 to October 31,
2005 in two phases:
• The first phase commenced on May 3, 2005 with an online questionnaire

completed by 103 respondents. Respondents targeted were heads of legal
departments, general counsel (or deputy) or counsel in charge of
arbitration/litigation in the legal or corporate departments of corporations
•
involved in cross-border transactions.
The second phase commenced on June 2, 2005 and concluded on October
31, 2005. We conducted face to face and telephone interviews with 40
general counsel, heads of legal and counsel (on the authority of the
general counsel). Particular attention was paid to the need to interview
persons from different parts of the world and different professional
backgrounds. To achieve uniformity, the interviews conducted were based
on a set of guideline questions. Interview times varied from 15 to 30
minutes (for phone interviews) to two hours for face-to-face interviews.
Half of the interviews were face-to-face and the other half were on the
phone.
The responses from the online questionnaire and interviews were collated,
statistically analysed and interpreted. Arguably this is the largest international
sample ever interviewed on arbitration matters as it appears that all previous
surveys were national rather than international.39
38
See http://www.adr.org/dw.
39
Dezalay and Garth interviewed lawyers in private practice rather than in house
lawyers or corporate decision makers.
Respondent corporations, though involved in cross-border transactions and in

the majority of cases with offices in more than one country, are primarily based in
and/or operate from:
•
•
Africa (including Egypt, Nigeria, South Africa)
•
Americas (including Mexico, U.S.A.)
•
Asia (including Japan, Pakistan)
Europe (including Belgium, Finland, France, Germany, Greece, Hungary,
•
Italy, U.K.)
Middle East and Gulf Region (Saudi Arabia)
The largest sample was from Europe and Asia but we cannot provide more
precise numbers as the online questionnaires were anonymous. However, there are
specific statistics about the interviewed corporations and reported in the
Methodology section, infra III.2.
This survey addresses perceptions in respect of:
1. Use of international arbitration and how this compares with other methods
of dispute resolution;
2. Advantaged and disadvantages associated with the use of international
arbitration;
3. Dispute resolution policy considerations;
4. Arbitration clauses;
5. Ad hoc v. institutional arbitration;
6. Venues for the seat and conduct of arbitration proceedings;
7. Potential for appeal on the merits of an award;
8. Appointment of arbitrators;
9. Appointment of law firms;
10. Costs;
11. Sophistication of users of arbitration; and
12. Future of international arbitration.
Questions not addressed in this survey are those of the specifics of the
arbitration procedure. They could be addressed in a future survey. This survey
explores, in particular, the attitudes of corporations, not the views of the outside
counsel representing them. Ultimately it is corporations which are the users of the
dispute resolution service provided by arbitrators and arbitration counsel. The
corporate views are essential for the improvement of arbitral services provided.
While it appears that one in ten corporations actively uses or is prepared to

use international arbitration,40 it is impossible to reach corporations with little or
no experience in the process. Also in some countries with protected or regional
trading, it is impossible to access corporate counsel or to have them agree on an
interview. All interviews were conducted in English and the majority of the
interviewees were speaking English as a foreign language; most of them could be
characterized as effectively bilingual. Overall our conclusion is, that the more
familiar a counsel is with arbitration, the more prepared he or she is to share his
views and discuss how the process can improve.
II. THE SURVEY: PERCEPTIONS TESTED –

MYTHS, DATA AND ANALYSIS
We are using a specific pattern for the presentation of the findings. First, we
set out what the perception is; second, we present the findings organized in two
parts: quantitative analysis (online questionnaires) and qualitative analysis
(interviews); finally, the findings are formulated and, where appropriate,
suggestions are made.
A. Use of International Arbitration
1. Perception
The perception presented to the test of the survey is twofold:
• Corporations rely on international arbitration as a mean of resolving
•
cross-border disputes
• Risks associated with litigating under foreign law and before foreign
Litigation is avoided as a means of resolving cross border disputes due to:
• Threat of lack of independent judiciary

courts
• Possibility of corruption
• Lack of familiarity with proceedings and innate intimidation and
• Lack of knowledge of language

discomfort about being in foreign court
• Time consuming
• More expensive
40
We have approached about 1400 corporations, but only 143 of them participated
in the survey; most of the remaining indicated that arbitration does not affect their day-to-
day operation.
In other words most people believe that corporations opt for arbitration for their
international disputes because most companies are wary of litigation in foreign
courts.
2. Data and Analysis

The widely held general perception of the use of arbitration in international
commercial disputes has been supported by the findings of this survey. In general,
77% of corporations participating in the survey and involved in cross-border
transactions have experience in transnational litigation, international arbitration
and international mediation and other alternative dispute resolution mechanisms
(“ADR”). It appears that at least one in ten international corporations has been
involved and is interested in arbitration one way or another, i.e. either to pursue a
claim or to have an award enforced or in attempting to avoid litigation before
foreign courts.
Experience with Dispute Settlement
19% 16%
4%
11%
32% 2%
9%
7%
Litigation and ADR Litigation

Int'l Arbitration Litigation and Arbitration
ADR ADR and Arbitration
ADR, Arbitration and Litgation None of the above
In fact, of the 91 online respondents who answered the question on the

different types of dispute resolution processes corporations use in resolving their
international commercial disputes, it is evident that most of them use various
methods (and combination of methods) of dispute resolution for their cross-border
disputes. The fact is that 61% uses arbitration as a stand alone mechanism or in
conjunction with other mechanisms, such as mediation and negotiation, while only
4% has experienced international litigation only.
We have also asked which methods of dispute resolution parties prefer. The
following table highlights their preferences.
Preferred Dispute Resolution Method
transnational
litigation
international 11%
arbitration and ADR
44% international
arbitration
29%
international
mediation and other
ADR
16%
Of these 91 respondents,
• 40 preferring a combination of international arbitration and ADR (multi-
•
tiered dispute resolution systems, including arbitration)
•
26 prefer international arbitration
•
15 international mediation and other ADR forms
10 consider transnational litigation their preferred dispute resolution
mechanism
This corroborates the perception set out above, since only 11% opts for
international litigation, while the remaining 89% of the respondents opts for ADR
and/or arbitration; and a strong 73% (i.e. 29% arbitration only and 44% a
combination of arbitration ADR) certainly prefers international arbitration to any
other method. We should also bear in mind that under ADR, parties understand a
wide spectrum of mechanism ranging from direct negotiations once a dispute has
arisen to the retention of a third-party neutral for the resolution of the dispute. As
a matter of fact, U.S. parties will consider arbitration a form of ADR. The 11% of
respondents preferring transnational litigation consists mainly of a peculiar mix:
corporations from developing countries and corporations from developed
countries which operate exclusively in developed countries. The remaining 89%
operates across the regions, in the developing countries, least developed countries
and the developed world.41
41
There is no internationally accepted definition of least developed, developing and
developed countries. Some guidance is provided by WTO which includes criteria for
classification as developing country: http://www.wto.org/english/tratop_e/devel_e/
The results of the two questions read together provide further insights. While
only 77% of the respondents have experience in arbitration and/or ADR, 89%
would opt for (or at least consider primarily) arbitration and/or ADR. This raises
the question: why only 11% would consider international litigation for the
resolution of international disputes? So, what is wrong with litigation?
National courts are a viable and reliable forum for dispute resolution,
provided the judicial system is developed and judges well-trained and perceived to
be independent and fair. Cross-border litigation as a means of resolving
international commercial disputes is an option available and included in most
cross-border contracts as a safety net. “International” implies that a particular
business transaction involves a foreign element, for instance, the parties have their
place of business in different jurisdictions, or the performance of the contract is in
another jurisdiction, or the parties have by agreement conferred jurisdiction on a
court in another country.
The common reasons regularly alleged as the disadvantages of cross-border
litigation arise from the general fear associated with litigating before a foreign
court. This includes lack of familiarity with the foreign court’s system or
procedure, pursuing the litigation away from home and the difficulties of
enforcement of a foreign judgment. Other reasons referred to relate to cultural
approaches to court proceedings, excessive formality, and the use of domestic
language which may be unknown to one or both disputing parties.
The research shows that in-house lawyers to these corporations themselves do
not perceive these reasons to be of such a fundamental nature as to rule out
altogether the use of transnational litigation. Maybe this is due to the fact that in
house lawyers will not normally conduct litigation themselves and the success of
the pursuit of the case in courts would be a matter of corporate risk management.
In some instances, cross-border litigation is preferred to international arbitration
as in some instances international litigation can be speedy and inexpensive.
However, “horror stories” in respect of litigation included the use of juries in the
U.S. for civil claims, the issue of extensive discovery, class actions, excessive cost
involved in court litigation and the fact that litigation in some jurisdictions in the
U.S. may cost as much as U.S. $4,000,000 per year! It is also argued that in some
jurisdictions it would be impossible to prevail in proceedings over a local party
which is a major employer and household name.
Some general counsel interviewed expressed a level of comfort about
litigating in another jurisdiction (via local lawyers) in situations where they
perceive they will receive fair treatment before an independent and impartial
judiciary. This issue is of such great importance that some corporations maintain a
written policy to opt for litigation in some countries as a first dispute resolution
d1who_e.htm and a list of 50 least developed countries: http://www.wto.org/english/

thewto_e/whatis_e/tif_e/org7_e.htm.
choice while arbitration is the first dispute resolution choice in other countries.
Although only 11% of respondents appear to prefer litigation, the remaining 89%
is not automatically averse to court proceedings; they simply consider non-judicial
methods of settlement of disputes to be more suitable to international disputes,
ensuring a more adequate level playing field for disputing parties.
The general counsel of a manufacturing company based in Italy said his
corporation maintains a list of countries falling into these two categories and
forming the basis of their negotiation of dispute resolution clauses in any cross-
border contracts. He stated,
The group maintains a written guideline on jurisdictional preferences. [We] either

litigate or arbitrate in the following countries: Western Europe, United States,
Japan, Australia and New Zealand. In all other countries [we] arbitrate principally
because of concerns over the independence of the judiciary.
This example shows that corporations are generally not averse to transnational
litigation especially where the judiciary of the relevant court is perceived to be
independent (usually from the government), impartial and knowledgeable in the
subject matter of the dispute. There is a positive preference for transnational
litigation under certain circumstances. Where the contracting corporations are
sophisticated and from jurisdictions with experienced judiciary in the law of the
subject matter of the dispute (this is especially true for very specialist disputes
requiring some degree of expertise on the part of the judiciary, e.g. financial or
construction matters) they may agree to opt for litigation in either of the relevant
states or a third neutral state. In this regard in-house counsel in a mining
corporation interviewed said the corporation has a preference for either the
English or South African courts.
In other cases, corporations are willing to litigate in whatever jurisdiction they
have substantial commercial interests. An example is one of the large
multinational oil & gas exploration corporations operating in various jurisdictions
all over the world. The general counsel interviewed said the corporation was
willing to litigate in most jurisdictions where it operates. In making such decision,
it takes into consideration the value and effect of the transaction on their business
in the particular country. Where it is a straightforward supply of services contract,
for example, the corporation may opt for litigation in the operating country. As an
example, they have concluded agreements in which they opted for litigation
before the courts of Qatar.
Almost all in-house lawyers interviewed point out the difficult and time
consuming efforts of enforcement of foreign judgments as the major disadvantage
of international litigation especially where there is no relevant treaty (for
enforcement of judgments) in force or applicable between the relevant States.
Other comments made include the fact that in some jurisdictions, litigation is
efficient and inexpensive, while efficient and expensive in others, and still in
others, inefficient and expensive! Thus international litigation remains a viable
and, under certain circumstances, reasonably acceptable option.
3. Conclusions
The main outcome of this survey in respect of the first perception, is that
arbitration is a popular and generally the preferred dispute resolution mechanism.
Nevertheless, while international litigation maintains a significant role in
international dispute resolution:
• Arbitration is more consistently relied upon than litigation as a means of
•
resolving cross-border disputes;
However, it is not used in isolation; its use with other forms of ADR is
•
the most common option;
Escalating dispute resolution clauses in a crystallized form are
•
increasingly popular;
Litigation is still selected by some corporations in some circumstances.
The reasons for opting of arbitration and the role of escalating or multi-tiered
dispute resolutions clauses will be discussed below.
B. Advantages and Disadvantages Associated with the Use of International

Arbitration
1. Perception
International arbitration is associated with a number of perceived advantages.
These include mainly:
•
•
avoidance of the other parties home court system
taking advantage of the international legal framework governing the
enforceability of arbitration awards42
•
•
confidentiality
•
suitability for international disputes
cost and speed
A study by Richard Naimark and Stephanie Keer asked participants in AAA

international arbitrations to rank a list of attributes in order of importance in that
42
Christian Bühring-Uhle, ARBITRATION AND MEDIATION IN INTERNATIONAL
BUSINESS 135-36 (1996).
particular proceeding.43 They found that “an overwhelming majority of the parties
ranked a fair and just result as the most important attribute, even above the receipt
of a monetary award, speed of outcome, cost or arbitrator expertise.” Interestingly,
the confidentiality of the arbitration proceeding, which Bühring-Uhle found to be
an “important” advantage of arbitration, ranked quite low in the Naimark and
Keer study. The explanation may be that before a dispute arises parties prefer a
private method of dispute resolution, but that after a dispute arises they may see
less need for privacy in that particular case. The results of the Naimark and Kerr
study were revisited in the 2003 Dispute Wise survey and the following table
emerged for purposes of comparison:
Table 2: Reasons for Using Arbitration44

Reasons for Using Arbitration 2003 1998
Is required by contract 91% 92%
Saves time 68% 69%
Saves money 65% 69%
Has limited discovery 65% 59%
Allows parties to resolve disputes themselves 61% N/A
Provides of more satisfactory process 60% 61%
Preserves confidentiality 54% 43%
… … …
Is an international dispute 25% 32%
Provides more suitable resolution compared to 20% 28%
litigation
Became standard practice in industry 18% 34%
There are, of course, several perceived disadvantages. These include increased

costs, length of arbitration proceedings, that third parties may not be joined and
that parallel proceedings cannot be consolidated.

All these perceptions were taken to test. Various reasons were given why
corporations opt for arbitration as their preferred process for resolving their
international commercial disputes. Each respondent could list its top three
preferences. Based upon these results, we assigned three points to the top score,
43
Richard W. Naimark & Stephanie E. Keer, International Private Commercial
Arbitration: Expectations and Perceptions of Attorneys and Business People, 30 INT’L
BUS. LAWYER 203 (2002).
44
Dispute-Wise, supra note 38, at 8.
two to the second reason and one to the third reason. The following were the top
five advantages:
Table 3: Top Reasons for Using Arbitration

Advantage Score No of respondents Ranked top reason
Flexible procedure 119 points 71 respondents 11 respondents45

Enforceable awards 105 points 48 respondents 24 respondents46
Privacy 105 points 54 respondents 17 respondents47
Selection of arbitrators 92 points 47 respondents 16 respondents48
Other (incl. Speed) 47 points 18 respondents 14 respondents
Most in-house lawyers interviewed admitted that the traditional grounds for opting
for arbitration (arbitration being faster and more cost effective than litigation) are
no longer true in most cases. However, the success of the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards compensates for
these failures in cost and time. 82 out of 91 online respondents ranked the
importance of various issues in influencing their decision to arbitrate. 24 ranked
enforceability of international arbitral awards as the most important advantage of
arbitration and why they opt and continue to opt for arbitration in their cross-
border contracts.
Interestingly enough, in the scoring system, flexible procedure is the most
important reason as 71 respondents consider it one of the top three reasons.
However, only 11 respondents consider it the top reason. Flexible procedure
means that the procedure is emancipated from the constraints of national court
proceedings and that the parties can determine the procedure on their own or with
the assistance of the tribunal.
Another issue that influences parties in opting for international arbitration is
the privacy / confidentiality the process affords parties. Privacy was ranked by 17
respondents as the most important factor. International arbitration is a private
process contrary to the public nature of litigation in national courts. Privacy does
not necessarily connote confidentiality, though parties use the terms
interchangeably. In-house lawyers believe that arbitration is the process to adopt
when corporations do not want the dispute publicised for various strategic reasons
including where the image of the corporation may be brought to disrepute.
Selection of one’s own arbitrator was ranked the most important advantage of
arbitration by 16 respondents.
45
35 respondents ranked second and 16 third most important reason.
46
47
48
Other factors perceived as making arbitration advantageous include, neutrality

of venue, fairness, suitability for international disputes, avoiding unfavorable legal
systems, and industry practice.
Scoring - Top Reasons for Using Arbitration
140
119
120 105 105
100 92
80
60 47
40
20
0
Flexible procedure Enforceable award Privacy Selection of Other
Arbitrators
The chart below highlights how the respondents weigh the various
advantages. 29% considers the enforceability of awards most important reason,
21% considers privacy, 20% considers the ability to select arbitrators most
important, while flexible procedure is considered most important by 13%.
Most Important Reason for Using Arbitration
Other Flexible procedure

17% 13%
Selection of
Enforceable award
Arbitrators
29%
20%
Privacy
21%
There are also some disadvantages associated with the arbitration process as
this survey found.
Corporations are not entirely satisfied with the process of arbitration in its
present state. Eighty online respondents answered the question on what was the
most important disadvantage of arbitration. Fifty percent of them (40 respondents)

rank expense (cost) as the most important disadvantage of international
arbitration. Time is ranked the most important disadvantage by 14 respondents
while difficulty of third-party joinder is ranked the most important disadvantage
of arbitration by 9 respondents. Seven of the 40 in-house lawyers interviewed
worry about the quality and accessibility to pool of arbitrators currently available.
The top concerns respondents have are:
Table 4: Top Disadvantages of Reasons Arbitration

Disadvantage Score No of Ranked top
respondents reason
Expense49 166 points 70 respondents 40 respondents
50
Time 84 points 38 respondents 14 respondents
Lack of an appeal 58 points 30 respondents 7 respondents
structure51
Intervention of national 57 points 34 respondents 4 respondents
court
No third party 48 points 25 respondents 9 respondents
mechanism
Other 26 points 14 respondents 6 respondents
49
See analysis by Klaus Sachs, Time and Money, Ch. 5 in PERVASIVE PROBLEMS IN
INTERNATIONAL ARBITRATION (Loukas Mistelis & Julian D. M. Lew eds., 2006).
50
Both the ICC and the AAA claim that in the majority of the cases an award is
rendered within 28 months from filing of request for arbitration.
51
Note, however, that this suggestion has been rejected by institutions such as
ICSID. ICSID in 2004 conducted a survey as to what can be improved in the system. In
the summer of 2005 the idea of an appeals mechanism was abandoned as there was no
support amongst the users of arbitration.
Scoring -
Top Disadvantages of Arbitration
180 166
160
140
120
100 84
80 58 57
60 48
40 26
20
0
Expense Time Lack of appeal National court No third party Other
structure intervention mechanism
When the data are presented on the basis of which is the main concern one gets a
different picture. Accordingly, while the top scoring disadvantages retain their top
position with a combined 67%, the lack of an appeal structure drops fourth, with a
9%, while the lack of third-party mechanism emerges as third with 11%.
Main Concern about Arbitration
8%
11%
Expense
5%
49% Time
9%
Lack of appeal structure
National court intervention
No third party mechanism
Other
18%
On the issue of costs, some in-house lawyers interviewed believe that a

cost/benefit analysis makes the costs incurred reasonable. However, a majority
voiced concerns over the ever increasing costs of international arbitration cases as
compared to the first stage of litigation before a national court. This view
corresponded with responses from the online questionnaire.
The interviews conducted reflected the same concerns. For example, the
regulatory counsel of a telecommunications corporation said she does not
recommend the use of arbitration because from her experience
it is very expensive, difficult to find arbitrators with expertise (in the area of
telecom software) without any conflict difficulties, and it is time consuming.
3. Conclusions
The main outcomes of this survey confirm many of the perceptions, that
arbitration is associated with several major advantages but also with some
drawbacks. However, this survey shows a different focus on which features of the
arbitration process are perceived as an advantage and which features are perceived
as a drawback.
In particular, the top reasons to choose international arbitration are:
• Flexible procedures used in international arbitration: indeed the

procedures of arbitration are specific to each case and the parties are free
to determine the procedures they would like to have followed. In this
respect remedies not available in court proceedings may become available
in arbitration. The active participation of the parties in the shaping up of
the procedure inspires confidence in the whole process. The only
limitation is that the procedure has to meet the due process standards of
equal treatment of the parties.52
• Enforceability of awards: there is hardly any doubt that an arbitration
award is more easily enforceable than any foreign judgment. This is due
to the widely ratified New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards which reduces the formalities
linked with the recognition of awards and also limits the grounds on
•
which a court may rely to refuse enforcement.
Privacy: privacy features high as the parties opt for arbitration as a private
mechanism for the settlement of disputes. Several commercial matters,
such as patents or business practices, are sensitive and not in the public
domain. This does not automatically imply that everything in arbitration is
secret or confidential; it merely means that proceedings are private and
may be confidential. Confidentiality is also, however, a well-accepted
characteristic of the arbitration process.53
52
See, e.g., New York Convention, Art. V(1)(b); UNCITRAL Model Law, Art. 18;
English Arbitration Act, Sec. 33.
53
See, e.g., Loukas Mistelis, Conflidentiality and Third Party Participation, 21
ARB. INT’L 205 (2005); Anjanette Raymond, Confidentiality, In a Forum of Last Resort?
Is the Use of Confidential Arbitration a Good Idea for Business and Society?, 16 AM.
• Selection of arbitrators: the right of parties to select arbitrators of their

liking is an important characteristic of international arbitration, as a
method which is close to the parties. The party-appointed arbitrators
should not be a partisan arbitrator; it is an arbitrator who may be better
suited to understand a cultural or legal context.54
• Other advantages referred to be respondents include cost, speed, the
suitability of arbitration for international disputes, the possibility to avoid
specific legal systems and national courts and the neutrality of the arbitral
venue.
The top drawbacks of international arbitration are:
• Expense: it is often alleged that arbitration is expensive and this is the

single main concern of the users of arbitration. Costs will be discussed
below but this is a matter that both lawyers representing parties in
•
international arbitration and arbitration institutions will have to consider.
Time: arbitration proceedings often take longer than the parties
anticipated, in particular, given that proceedings increasing try to simulate
court proceedings, but this is something the parties and the arbitrators can
REV. INT’L ARB. (forthcoming 2005); Cindy Buys, The Tensions between Confidentiality
and Transparency in International Arbitration, 14 AM. REV. INT’L ARB. 121 (2003);
Olivier Oakley-White, Confidentiality Revisited: Is International Arbitration Losing one
of its Major Benefits?, 1 INT’L ARB. L. REV. 29 (2003); Hanns Prütting, Vertraulichkeit in
der Schiedsgerichtsbarkeit und in der Mediation, in LAW OF INTERNATIONAL BUSINESS
ST
AND DISPUTE SETTLEMENT IN THE 21 CENTURY – LIBER AMICORUM KARL-HEINZ
BÖCKSTIEGEL 629 (Briner et al., eds., 2002); Leon Trackman, Confidentiality in
International Commercial Arbitration, 18 ARB. INT’L 1 (2002); Hans Bagner,
Confidentiality – A Fundamental Principle in International Commercial Arbitration?,
18(2) J. INT’L ARB. 243 (2001); Edward Leahy & Carlos Bianchi, The Changing Face of
International Arbitration, 17(4) J. INT’L ARB. 19 (2000); Yves Fortier, The Occasional
Unwarranted Assumption of Confidentiality, 15 ARB. INT’L 131 (1999); Patrick Neill,
Confidentiality in Arbitration, 12 ARB. INT’L 287 (1996); Andrew Rogers & Duncan
Miller, Non-Confidential Arbitration Proceedings, 12 ARB. INT’L 319 (1996); Jan
Paulsson & Nigel Rawding, The Trouble with Confidentiality, 11 ARB. INT’L 303 (1995);
Michael Collins, Privacy and Confidentiality in Arbitration Proceedings, 11 ARB. INT’L
321 (1995); Hans Smit, Confidentiality in Arbitration, 11 ARB. INT’L 337 (1995).
54
The independence and impartiality of party-appointed arbitrators is stipulated not
only in arbitration law but also in the relevant codes of ethics, such of those of the
American Bar Association, International Bar Association and American Arbitration
Association.
control.55 The problem is that parties sometimes employ dilatory tactics

and although it may be possible to recognize them, the rejection of
dilatory requests may have legal consequences, in that the award may be
set aside or enforcement be refused, if a party could prove that it was not
•
given an opportunity to present its case.
No third-party mechanism: it is a real issue that arbitration is bi-polar,
designed for and typically operating between two parties; this is also
justified on the basis of the contractual nature of arbitration. However,
modern business practices often involve more than two parties and the
2004 ICC statistics indicate that almost one in three cases is multi-party.
This raises issue of multi-party, multi-contract disputes,56 the issue of the
impact of arbitration of third parties57 as well as issues of joinder of third
parties and consolidation of proceedings58 as well as issues of parallel
proceedings and res judicata.59 These issues are in the forefront of arbitra-
tion developments and research and no doubt are worthy or further
•
empirical research.
Court intervention: this is possible before, during and after the arbitration
proceedings but there is not much an arbitration tribunal can do to control
or limit such interventions. In many cases, however, modern arbitration
statutes, such as the UNCITRAL Model Law, specifically limit court
•
intervention.
Lack of an appeal mechanism: this is a controversial finding of this survey
which requires further discussion. It is a well-embedded perception that
users of arbitration appreciate the finality of arbitration awards, i.e. is
there is no appeal of the arbitration awards. Some arbitration institutions
provide for an internal appeal mechanism, within the institution (e.g.
GAFTA, ICSID). At the same time there is widespread criticism of legal
systems which allow for an appeal of arbitration awards on a point of law.
Furthermore, there is evidence that there is an increase in the number of
55
See, e.g., English Arbitration Act 1996, Sec. 33, which mandates that the arbitrators
have to adopt procedures for the speedy resolution of disputes.
56
See, on this issue, Bernard Hanotiau et. al, COMPLEX ARBITRATIONS,
MULTIPARTY, MULTICONTRACT, MULTI-ISSUE AND CLASS ACTIONS (2006).
57
See Mistelis & Lew eds., supra note 49, at Chs. 14-8 (2006).
58
See, e.g., LEW ET. AL, supra note 28, at Ch. 16.; Martin Platte, When Should an
Arbitrator Join Cases?, 18 ARB. INT’L 67 (2002).
59
See Norah Gallagher, Parallel Proceedings, Res Judicata and Lis Pendens:
Problems and Possible Solutions, in Mistelis & Lew eds., supra note 49; ILA International
Commercial Arbitration Committee Interim Report on Res Judicata and Arbitration,
Berlin Conference 2004 [hereinafter “ILA Interim Report”], Section V, p. 18. The Report
is available at www.ila-hq.org.
applications to national courts for the challenge of arbitration awards.

This finding may imply one of two things: (a) the parties would prefer
that there be an arbitration appeal system, within the arbitration institution
rather than before courts; or (b) parties are prepared to challenge awards
more often than before, evidence of the increased litigious approach to
international arbitration. This could be a matter for further research.
Interestingly enough in the 40 interviews conducted only 2 interviewees
(i.e. 5%) referred to this issue as a potential problem.
C. Dispute Resolution Policy Considerations
1. Perception
A dispute resolution policy is a particular plan or understanding agreed at the
corporate level on the methods of dispute settlement to be followed and the places
where such policy would be implemented. Such a policy may be in a crystallized
form or not, i.e. it may be drafted as a model clause to be negotiated, it may be
part of general terms and conditions, printed on the back of standard form and
may be a mere corporate set of guidelines on the drafting of international
contracts.
Dispute Wise Business Management looked at the level of dispute
management, the impact conflict management has on the design and development
of in-house legal departments and confirmed that dispute resolution policies are
on the rise.60
In short, the perception is that organizations do have dispute resolution
policies, but not necessarily in a crystallized format.

The question whether corporations maintain a dispute resolution policy was
answered by 94 online respondents:
•
•
Over one-third (35 corporations) maintain such a policy;
•
Over one-third (33 corporations) do not maintain such policy; while
Just under one-third (26 corporations) do, but not in any crystallized form.
60
See supra note 38.
Dispute Resolution Policy
Have a policy in
a non
crystallised
format Have a policy
28% 37%
Do not have a
policy
35%
It follows that two-thirds of the respondents (61 out of 94) maintain a corporate
policy for the resolution of disputes; this maybe in a standard term or model
clause or a set of guidelines. The latter was referred to by some in-house lawyers
interviewed as “practice” or “guideline” but not a policy in the strict meaning of
the word. This is comparable to two-thirds that also include arbitration agreements
in international contracts. One can draw the conclusion that dispute resolution
policies indicate that arbitration clauses should be included in contracts.
Sixty respondents to the online questionnaire gave the following objectives
for maintaining such dispute resolution policy, guideline or practice.
• 44 said minimizing dispute escalation was the most important or primary
•
objective of maintaining a dispute resolution policy.
•
11 ranked savings in cost as the most important objective.
9 ranked providing consistent practice within the organization as the most
important objective.
Reasons for a Corporate Dispute Resolution Policy
corporate practice
14%
save costs
17%
minimise dispute
escalation
69%
Prior to our research it was empirically unsubstantiated61 whether corporations

maintain a dispute resolution policy or not. Our research hypothesized that
corporations with a dispute resolution policy in place would be better equipped to
manage disputes when they arise. Sixty-nine percent of the respondents believe
that agreeing at the corporate level and formulating a dispute resolution policy
minimizes dispute escalation and could lead to fewer disputes. In addition disputes
could settle more quickly. However, the survey cannot quantify the benefits of
having a dispute resolutions policy, save for the fact that 86% of the respondents
perceive advantages with a positive economic impact.
Some in-house lawyers interviewed explained that though their corporations
maintain a dispute resolution policy, such policies are not cast in stone and can
always be modified by negotiation. Such policies serve as a guideline to in-house
lawyers when negotiating contracts on behalf of such corporations. Generally, the
policies would include a palette of options, or when attempting to put on paper a
specific business deal.
The perceived competitive advantage derives from the awareness of issues,
assessing various options available and trying to avoid “things going wrong.” In
other words, dispute resolution policies generally ensure that negotiations are
informed and negotiators known the extent to which they can compromise.
It follows from the survey that corporation believe that many contractual
arrangements may be appropriate to explore the possibility of a negotiated
settlement, or at least a cooling-off period of time, before the parties can resort to
court or arbitration. Accordingly, to maximize the opportunity to resolve matters
amicably without a full blown arbitration, a step-by-step (multi-tiered or
escalated) dispute resolution system should be established. The parties provide for
61
Except for the comprehensive and more complex findings of Dispute Wise
Business Management, supra note 38. Dispute Wise particularly looked at and analyzed
corporate policies and financial benefits.
different mechanisms to assist with the resolution of the issues which divide them,
and to prevent the escalation of the dispute too quickly. Accordingly, in many
cases rather than end up directly before an arbitration tribunal, it may be
appropriate to require the parties to meet and undertake a certain minimum level
of negotiation with a view to settlement. This provides the opportunity to
negotiate freely and pragmatically without the immediate threat of arbitration
proceedings. When providing for negotiations in this way, it is generally advisable
to allow a specified window of time before arbitration can be commenced. The
next step would involve an attempt to settle with the assistance of a third neutral
party.
In particular, it is understood that formulated dispute resolution policies
provide a framework of tactics for drafting advantageous dispute resolution
clauses into contracts and for dealing with disputes once they arise. In other
words, dispute resolution policies:
•
•
Assist with the drafting of contracts
•
Assist with contract negotiations
•
Avoid options that the company does not wish to pursue
•
Assist with risk management and general planning of legal work
•
Assist the legal department to have better relations to management
Increase awareness of how law can help a corporation pursue its
•
objectives
Project a positive rather than negative attitude towards dispute resolution.
The survey also indicates an increased awareness by in-house lawyers

(corporations) of the different types of dispute resolution mechanisms available to
parties in the particular subject matter of the contract. The “typical” in-house
lawyer we have interviewed was an internationally oriented lawyer
(predominately male) with experience in more than one jurisdictions acquired
either via advanced study of law (LLM, DEA etc) or practice experience during
studies (i.e., internships) or afterwards (e.g. secondments, law firm experience or
experience acquired on the job).
Although corporations consciously think and consider various types of dispute
resolution mechanisms available to them, they fail to negotiate these (or the
contracts are negotiated by different persons than those formulating the dispute
resolution policy) and agree on the type or types perceived to be most suited to
their (mutual) commercial interests. It is intrinsic to the nature of negotiations that
they normally include the business deal between the parties and the dispute
resolution clause. Dispute resolution clauses are often referred to in the industry as
midnight clauses; they are poor relations of the major business deal clauses, until
there is a dispute, that is. Only at the stage of a dispute does it become clear that
dispute resolution clauses can provide an advantage and they should have been
negotiated to safeguard the interests of the corporation.
Even when dispute resolution clauses are negotiated, they are not considered
to be critical clauses, at least as far as managers are concerned. The fact that
dispute resolution clauses can be negotiated accounts for the obvious lack of
rigidity in any corporation’s preferences in this regard. In-house lawyers
interviewed all confirmed to us their desire that no dispute arise but, conscious of
what happens in reality, make provisions for such eventualities, provided that they
participate in negotiations and are given an opportunity to draft the clauses. They
also expressed their wish to be involved in the drafting of all contracts; this does
not seem to be the current practice. They have also indicated that at the time of
negotiations managers wish to close the deal fast rather than allow lawyers to
discuss all “unnecessary legal issues.”
Accordingly, corporate dispute resolution policies are associated with specific
benefits. In particular minimizing disputes scored 154 points, while saving costs
scored 115 points. Drafting and conducting proceedings scored much lower than
the top two.
On Minimizing Dispute
In-house lawyers believe that the presence of a dispute resolution policy
minimizes dispute escalation. It does not prevent disputes from eventuating but
minimizes their escalation when they eventuate. Forty-four of the 60 respondents
consider minimizing dispute escalation the most important objective of
maintaining a dispute resolution policy. Eight think that this factor is the second
most important, while 6 regard it the third most important factor. In these terms a
dispute resolution policy is not just a sword, but it is also more likely a shield, or
for lack of better word, a safety net.
On Costs and Risk Management

To find out if there is indeed a correlation between maintaining a dispute
resolution policy and costs savings, we found that such savings may not be
quantifiable in absolute value terms. Almost all respondents said when a dispute
arises the first step taken is to try resolving whatever the problem is amicably.
This is both an unwritten and written course of action. On cost savings as an
objective of maintaining a dispute resolution policy, 11 of 60 respondents consider
it the most important, 36 understand it as the second most important while 10
consider it the third most important objective. What was often disregarded was the
distinction between pure arbitration costs (cost of arbitration institution and
arbitrator fees) and legal costs associated with the dispute settlement (in particular,
attorney fees and other costs of legal representation).
On Drafting
The effect of a dispute resolution policy on drafting contractual clauses
manifests itself in well defined clauses with appropriate time limits and effective
flexibility, drawing from the corporation’s experiences and knowledge of the
jurisprudence of the law of dispute resolution processes. This is reflected in the
rise of preference for escalating dispute resolution clauses, a phenomenon that
cuts across the various industrial sectors surveyed. The deadlines are essential to
avoid deadlocks in the process and assist the process moving rather than have
disputes stagnated.
On Conducting the Proceedings

A well-defined dispute resolution policy ensures a better reporting system for
in-house lawyers within the corporation. It fosters a better working relationship
between in-house lawyers and external counsel and ensures in house lawyers are
updated on the legal regimes and attitudes of various jurisdictions to these
processes, especially those in which they have commercial interests.
To this effect knowledge of the attitudes of the judiciary towards such
processes become very important as to taking a decision on possible venues for
certain types of disputes. A clearly defined dispute resolution policy saves time
and invariably costs by serving as an indicator to the various stages and applicable
limitations. This has the advantage of moving the processes along, assisting the
corporation in anticipating and preparing for the next phase in the dispute pursuant
the policy.
3. Conclusions
While the survey indicated that corporations perceive that they have an
advantage by designing a dispute resolution policy and using it as a basis for
negotiation, we have not been able to detect whether corporations that do have
such policies also have a financial advantage. Only 17% of the respondents stated
that they think that a dispute resolution policy amounts to significant cost savings.
By contrast 69% of the respondents argue that a dispute resolution policy assists
them to make sure that the dispute does not escalate; arguably the non-escalation
of the dispute will result in cost saving.
D. Arbitration Clauses
1. Perception
It is a widespread perception that the inclusion of dispute resolutions clauses
is considered important. This applies to both multi-tier or escalated clauses and
the more traditional arbitration clauses. Dispute resolution clauses provide a
framework for the steps to be taken for the settlement of a dispute; they typically
provide for direct negotiations between the parties, the use of a third-neutral party
to facilitate a settlement, reference of the dispute to arbitration and/or the choice

of a court which shall have jurisdiction to hear disputes.
Several studies have looked at the provisions of arbitration clauses. A classic
and well received study by Stephen Bond examined the terms of arbitration
clauses giving rise to ICC arbitrations in 1987 and 1989.62 Among his findings
were that the provision most commonly added to ICC arbitration clauses was a
choice-of-law clause specifying a particular national law to govern the contract.
Drahozal and Naimark presented data on the terms of dispute resolution clauses
from a small sample of international joint venture agreements.63

The first issue we explored is whether corporations insist on the inclusion of
an arbitration clause in their contracts as a matter of practice; 90 respondents
answered; 56 of them insist on such inclusion; 31 do not while 3 were not sure.
The conclusion is that 1/3 do not insist while almost 2/3 insist or otherwise ensure
that they include arbitration agreements in their contracts.
Insistence on the Inclusion of Arbitration Clauses
not sure
3%
do not insist
34%
insist
63%
These data confirm the assumption within the international arbitration

community (and evidenced in its jurisprudence) that most arbitration agreements
are pre-dispute in the form of arbitration clauses in commercial contracts. This
finding was also emphatically confirmed in our interviews. It is notable that even
corporations with a dispute-averse policy and a strong preference for direct
settlement of disputes (i.e. without the involvement of third parties) insert an
arbitration clause in most of their international contracts. Ninety-five percent of
62
Stephen R. Bond, How to Draft an Arbitration Clause (Revisited), 1(2) ICC INT’L
CT. ARB. BULL. 14 (1990). This survey also provides useful insights of drafting practices.
63
TOWARDS A SCIENCE OF INTERNATIONAL ARBITRATION: COLLECTED EMPIRICAL
RESEARCH 59-63 (Christopher Drahozal & Richard Naimark eds., 2005).
the in-house lawyers surveyed and interviewed confirmed that their corporations
include some form of dispute resolution clause in their cross-border contracts,
irrespective of whether this is the result of a formulation of a corporate policy or
not.
The Japanese corporations interviewed pointed out that the inclusion of an
arbitration clause appears to drive settlement. This is evidenced by a settlement
rate of 70%-80% of disputes where the contract contains an arbitration clause
when compared with a settlement rate of 20%-55% where a jurisdictional clause is
inserted into the contract.
Indeed the power of the arbitration process as a negotiation tool which could
lead to settlement is also supported by statistics of arbitration institutions. Forty-
seven percent of the ICC cases and 48% of the AAA cases settle during the period
between filing of the arbitration request and the first hearing.64 Parties to
international transactions are increasingly aware of the fact that the arbitral
process and attempts to frustrate the process are rarely successful.65 There are no
reliable data about the settlement rate of disputes on the threat of litigation to
compare with the settlement rate on the threat of arbitration.
The interviews also provide support for the proposition that a good number of
in-house lawyers (about one-third) still rely on their standard contract terms as
generally applicable to all their contracts and do not necessarily negotiate the
dispute resolution clause in each contract. However, in most corporations standard
clauses from institutional rules for arbitration have replaced a blanket
reproduction of clauses from various drafting tools. It appears that corporations
used standard clauses in distribution agreements and in specific contracts within
their group.
Sixty five respondents answered the question on whether their corporation
adopts standard form clauses or drafts clauses for individual contracts.
•
•
31 adopt standard form arbitration clauses in all their contracts
•
28 tailor each clause to each individual contract
6 were not sure what their corporation’s practice is.
64
Data provided by William Slate of the American Arbitration Association.
65
See, e.g., various cases where the parties have tried to frustrate the arbitration by
failing to appear and participate in the process, requesting anti-arbitration injunctions or
kidnapping an arbitrator.
Use of Arbitration Clauses
Not sure
9%
Standard
clauses
48%
Tailor-made
clauses
43%
It is almost an equal split between tailor-made and standard clauses. Standard

clauses may appear uninspired and basic but they are invariably well-tested and
typically bullet-proof. Tailor-made clauses may suit business needs better but they
are often pathological (defective), without necessarily being ineffective or invalid.
While it is undisputed that specific clauses tailor-made to address particular needs
of parties and disputes, they may backfire when the drafters are not familiar with
arbitration and some of the technicalities associated with their clauses.
Defective or pathological arbitration clauses66 give rise to uncertainty and
different views as to the meaning of the particular clause. For example, some
arbitration clauses use permissive language, e.g. merely providing the parties with
an option to choose arbitration. Ambiguity also can arise where it is not
conclusive from the arbitration clause whether the parties actually agreed on
arbitration or some other form of dispute resolution such as expert determination.
Disputes arise also where the contract contains a conflicting dispute resolution
provision, e.g. one exclusive jurisdiction clause and one arbitration clause. A
typical defect is the incorrect reference to the institution under the rules of which
an arbitration should take place. The designation of a non existent appointing
authority has also given rise to problems in practice. Another defect which has
given rise to dispute is badly drafted pre-arbitration stages in multi-tier dispute
resolution clauses. Arbitration agreements may also become defective through
subsequent events, such as the dissolution of the named institution.67
66
The notion goes back to a seminal article by Eisemann, La clause d’arbitrage
pathologique, in COMMERCIAL ARBITRATION ESSAYS IN MEMORIAM EUGENIO MINOLI 129
(1974); see also Clive Schmitthoff, Defective Arbitration Clauses, J. BUS. L. 9 (1975).
67
See for more detail, JULIAN D. M. LEW, ET AL., supra note 28 at paras. 7-71 – 7-
80.
3. Conclusions
It is clear from the online questionnaires and from the interviews conducted
that the perception is confirmed. More specifically:
• The majority of corporations include international arbitration clauses in

their contracts; this appears to be the case in well over two-thirds of
international contracts and correlates with data produced by arbitration
•
institutions.
43% of the respondents use tailor-made clauses while 48% use standard
clauses. Standard clauses may be those recommended by arbitration
•
institutions or standard clauses drafted by the corporation.
It appears that corporations will give ground on the dispute resolution
clause if it appears likely to put the deal in jeopardy. While no reliable
quantitative data have emerged in relation to this question from the online
survey, the point was made by at least 60% of the interviewees. However,
the importance of well-drafted dispute resolution clauses was
acknowledged by all interviewees, albeit without specific indication as to
what clauses would qualify as well-drafted.
E. Ad Hoc v. Institutional Arbitration
1. Perception
With the majority of respondent corporations having a preference for
arbitration as the favourite method of resolving their international commercial
disputes, we sought to confirm whether more international arbitrations are
conducted ad hoc or institutional. Some people suggest for each institutional
arbitration68 case there is one ad hoc.69
There are few reliable data on the number of arbitration requests submitted, or
the number of arbitrations conducted every year. On the one hand many
international arbitration institutions have started to report quite regularly about the
numbers and the profile of their cases; but not all of them do so: out of some 200
institutions only about 20 or 25 would produce useful data on a regular basis. On
68
Institutional arbitration is where parties submit their disputes to an arbitration
procedure, which is conducted under the auspices of or administered or directed by an
existing institution. There are a large number of institutions of different kinds. These
institutions aim to provide an arbitration service specifically, or within the context of their
overall activities and objectives, and due to their infrastructure will in some cases assist
with the running of the arbitration.
69
Ad hoc arbitration is where the arbitration mechanism is established specifically
for the particular agreement or dispute. Where parties are silent and have not selected an
institutional arbitration, the arbitration will be ad hoc.
the other hand, there is hardly any data on ad hoc arbitration proceedings, save for
word of mouth.70 Others suggest that there are more institutional or more ad hoc
cases.
The hypothesis tested here is that overall corporations prefer institutional
arbitration to ad hoc arbitration.
Institutional v Ad Hoc Arbitration
Ad hoc
24%
Institutional
76%
Eighty-seven respondents answered the question on the type of arbitration

their corporation generally adopts. An overwhelming majority of 66 respondents
(i.e. 76%) confirmed that their corporations opt for institutional arbitration
proceedings. Twenty-one opt (i.e. 24%) for ad hoc arbitration. This, however,
does not imply that there are more institutional than ad hoc arbitrations.
Accordingly the trend presented here relates to the choices rather than number of
proceedings.
Having established the preference for institutional arbitration the next step
would be to find the reasons for such choices. The following are the top reasons
given for the preference for institutional arbitration:
70
See, e.g., the biannual report in the Focus Europe section of the AM. LAWYER,
supra notes 14 and 15.
Reasons for Institutional Arbitration
160 138
140
120
100
73
80 58 54
60
40 31
14 12
20
0
Advice from
Review of
Convenience
Other
Reputation
Cost
Familiarity
awards
external
counsel
Thirty-five of the 66 respondents chose reputation as the most important
factor, while to 13 respondents, familiarity (meaning, in part, also recognition of
brand) was the most important factor; cost was the most important factor to 9
respondents. In the interviews, the reasons varied from the comfort of knowing
that there is a supervisory agency in the background to that of being the norm in
some jurisdictions, e.g. Latin America or in the Central and Eastern Europe and
the former Soviet Union.
One in four corporations has a preference for ad hoc while also involved in
institutional arbitration. This 25% is a significant portion not least because most of
these corporations have a gross yearly turnover of more than US $5 billion. There
appears to be a causal link between large corporations and their preference of ad
hoc arbitration. The reasons for this link can be traced in the fact that larger
corporation often have large and sophisticated in-house legal departments and
have accrued experience in managing arbitration proceedings. In addition, all
government controlled corporations interviewed opt for ad hoc arbitration, as ad
hoc arbitration is perceived to be controlled by the parties more effectively.
However, corporations preferring ad hoc arbitration are involved in institutional
proceedings if these were provided by the arbitration clause agreed.
A further important finding is that most corporations start looking at or opt for
regional arbitration institutions. Respondents also indicate that they are interested
in regional institutions and support their further development, either by including
clauses of regional institutions, or supporting their general work, which sometimes
includes public events such as seminars and conferences. It is unclear though,

whether everyone concerned agrees on the definition of “regional.”71
Having established that parties have a preference for institutional arbitration,
we tried to find out the top five institutions, using our scoring system.72 From a list
of ten well known international arbitration institutions, 66 respondents chose the
following as the most “recognisable ones.” Respondents were also given the
option to add other preferred institutions on the list:
Preferred Arbitration Institutions
160 152
140
120
100
74
80
54
60 46
40
16 11
20 6 5
0
C
IA
C
C
C
l"
AA
s
IC
IA
na
is
TA
C
LC
w
A
K
io
IE
S
H
eg
C
"R
Forty-one of the 66 respondents ranked the ICC as the most important

institution with LCIA and regional institutions voted the most important
institution by five respondents each. The regional institutions mentioned by the
online respondents and the interviewees include the Japanese Commercial
Arbitration Association (“JCAA”),73 Cairo Regional Centre for International
Commercial Arbitration (“CRCICA”),74 CANACO,75 ACICA,76 and SIAC.77
71
For most people it includes the regional arbitration centers under the auspices of
the African Asian Legal Cooperation Council (CRCICA- Cairo Regional Centre for
International Commercial Arbitration; RACKL – Regional Arbitration Centre in Kuala
Lumpur; and the two other regional centers in Lagos and Teheran); CANACO – Cámara
Nacional de Comercio in various cities in Mexico; ACICA – Australian Centre for
International Commercial Arbitration.
72
I.e., 3 points for first choice, 2 points for second choice, 1 point for third choice.
73
Three online respondents and 12 interviewees expressed preference for JCAA.
74
Two online respondents referred to CRCICA.
75
Two online respondents expressed preference for CANACO
76
One online respondent referred to ACICA.
77
One online respondent and 10 interviewees expressed preference for the
Singapore International Arbitration Centre.
In-house lawyers interviewed noted that the position of ICSID is different

since they may be compelled to arbitrate under ICSID because of the nature of the
dispute and their opponent. Thus investment disputes with States or State entities
may be required to be resolved by arbitration under ICSID. This is effectively the
reason why ICSID was not one of the various institutions listed for respondents to
consider.
Sixty percent of the in-house lawyers interviewed believe regionalized
institutional arbitration is the future. The in-house lawyer of an oil and gas
multinational corporation, for example, pointed out that he believes that as
regional institutions become more experienced, corporations will opt more for
arbitration in such regional institutions since they will be geographically closer to
the subject matter of the dispute and will charge less for comparable services (to
the ICC). This assertion appears to be confirmed by the rankings from respondents
of the online questionnaire.
In-house lawyers interviewed gave varying but related reasons for their
preference. These reasons include:
•
•
Reputation (caché)
•
Quality of applicable rules
Comfort of knowing the institution administers many cases.
A strongly perceived advantage of institutional arbitration is the caché behind

the name of the institution. Whilst there are doubts as to the overall value of such
caché, there is a widespread perception that ultimately being able to have an
arbitration award issued under the name of a well-known institution is considered
to be helpful. Another advantage of institutional arbitration is the fact that there is
a “comfort” element: there have been many cases under the rules of each
institution, and every year it has a continuing number of new arbitrations. This
provides an obvious comfort as the parties know that the institution has experience
in the way it establishes the tribunal and arranges for the award to be issued and
has in turn acquired good recognition from users.
Through the structure of the institutions, there is often someone to turn to for
assistance. It is also a convenient way to ensure that the arbitrators are aware of
the needs and concerns of the parties where they are not necessarily addressing the
arbitrators directly. An important advantage of institutional arbitration is that it
avoids the discomfort of the parties and the arbitrators discussing, agreeing and
fixing their remuneration.
3. Conclusions
The data collected from the online questionnaires and the interviews
conducted support the original hypothesis. Institutional arbitration is the preferred
option for 76% of the corporations participating in the survey. This does not,
however, mean that most arbitration cases are institutional, as this specific
assertion remains untested.
Although disputing parties clearly prefer institutional arbitration, this
preference is not limited to well-established centres. A plethora of regional
institutions were cited as preferred options. This may be the result of the
tightening up of the law in the countries where the regional institutions are
established, and the regional institutions improving their procedures to be more
attractive to corporations, but it may also be the indicative of parties opting for
convenience
From the choice of the top three institutions, it can be concluded that the
geographical location of corporations also plays an important role. About 55% of
in-house lawyers interviewed said they would prefer their arbitration to be
administered by an institution close to home if they could negotiate that. It is
therefore not a question necessarily of one party imposing a particular institution
on the other, though bargaining powers may play a significant role in such
decisions.
In negotiating which institution to appoint, it is reputation of the institution
and possible costs are the main factors. Although the ICC was particularly
criticized for its cost and bureaucracy most in-house lawyers interviewed still opt
for the ICC because of its reputation. Another point in favor of the ICC as the
preferred choice is the fact that in some jurisdictions (like South American
countries) ICC arbitration is claimed by several interviewed in-house lawyers to
be the unwritten norm. Thus the negotiation starts from that point.
F. Venues for the Seat and Conduct of International Arbitration
1. Perception
Most arbitration practitioners would suggest that the three most popular
venues for international arbitration are England, France and Switzerland.
However, it is not clear what the ranking of arbitration venues is, according to
corporations. In addition a popular perception is that legal considerations are the
primary factor for corporations when choosing the seat of arbitration.
The importance of the seat of arbitration stems from the theory according to
which arbitration operates within the framework of a national legal order and
never in a vacuum. It can also be seen as an expression of territorial approaches in
arbitration, which inevitably conflict with theories that favor full party
autonomy.78
78
For a comprehensive discussion of the various models representing the
territoriality versus autonomy debate see Julian Lew, Achieving the Dream: Autonomous
Arbitration, 20th Annual Lecture of the School of International Arbitration, sponsored by
Supporters of the territorial approach argue that the law of the seat of
arbitration (lex loci arbitri) has an automatic right to govern the proceedings or
that alternatively, failing an agreement by the parties, it will govern the arbitration
by default.79 In any event, it is suggested that the seat of arbitration is relevant:
• For the support of local courts in the course of arbitration, e.g. with the
•
taking of evidence;
For the challenge of awards where basic procedural standards of fairness
•
were not followed;
For gap-filling, when the choice of arbitral procedure by the parties is not
comprehensive and the local law may provide some guidance.
The importance of the seat of arbitration has been criticized by scholars and
practitioners. In particular, it is argued80 that the choice of seat is often:
•
•
a matter of convenience;
determined not by the parties but by the arbitration institution they have
•
selected;
•
governed by the desire for neutrality; and
the role of the arbitral tribunal is transitory and the seat has no necessary
connection with the dispute.
In light of the above arguments it has been debated that the seat of arbitration, to
the extent there are is no need for support by local courts or enforcement
purposes, may be merely fictitious.81 There is agreement that only the “juridical
Freshfields Bruckhaus Deringer, forthcoming in 22(2) (2006); Roy Goode, The Role of the
Lex Loci Arbitri in International Commercial Arbitration, 17 ARB. INT’L 19, 24-29
(2001). See also the recent debate: Tetsuya Nakamura, The Place of Arbitration - Its
Fictitious Nature and Lex Arbitri, 15(10) INT’L ARB. REP. 23-29 (2000); Noah Rubins,
The Arbitral Seat is No Fiction: A Brief Reply to Tetsuya Nakamura's Commentary, “The
Place of Arbitration - Its Fictitious Nature and Lex Arbitri”, 16(1) INT’L ARB. REP. 23-28
(2001); Philippe Pinsolle, Parties to An International Arbitration With the Seat in France
are at Full Liberty to Organise the Procedure as They See Fit: A Reply to the Article By
Noah Rubins, 16(3) INT’L ARB. REP. 30 (2001); Tetsuya Nakamura, The Fictitious Nature
of the Place of Arbitration May not Be Denied, 16(5) INT’L ARB. REP. (2001).
79
William W Park, The Lex Loci Arbitri and International Commercial Arbitration,
32 ICLQ 21 (1983); F. A. Mann, England rejects delocalised contracts and arbitration, 33
ICLQ 193 (1984).
80
See the comprehensive summary in Goode, supra note 62, at 32-33; see also LEW
ET AL. supra note 28, at paras. 4-46 et seq.
81
Nakamura, supra note 78; Rubins, supra note 78.
seat” of arbitration,82 not the physical place of proceedings deserves a role in

international arbitration.
However, there is no empirical support for the one or the other view.

The surveys reports on findings on parties’ choice of place of arbitration,
identifying the top countries and reasons for their choice. Countries were listed
instead of cities to give respondents wider choice. There was an option for
respondents to add cities or states. The questionnaire referred to arbitration venues
rather than the legally laden terms “place” or “seat” of arbitration. In the
interviews conducted, 90 percent of the respondents read into the term “venue”
the legal meaning associated with “seat” or arbitration, i.e. the connection of the
proceedings with the local courts and, where applicable, with the local arbitration
law.
Top Venues
The following venues were ranked highest as the most preferred. Our scoring
pattern is applicable here as well:83
Preferred Arbitration Venues
160
137
140
120
100
74 Overall Score
80 63 63
57 58 Respondents
60
37 35
40 30 30
20 12
4
0
England Switzerland France Other USA Japan
Eighty-five online respondents ranked their preferred countries as follows:
• England is the most preferred place to 29 respondents, second most

referred place to 22 respondents and third most preferred place to 6
respondents.
82
See, e.g., Union of India v. McDonnell Douglas, [1993] 2 Lloyd's Rep. 48.
83
Three points for top choice, 2 points for second choice, 1 point for third choice.
• Switzerland is the most preferred venue to 9 respondents, second most
•
preferred to 17 respondents and third choice to 10 respondents.
France is the best option to 8 respondents, second best to 12 and third best
•
to 15 respondents.
The United States was considered the most preferred venue by 9
•
respondents, second best to 10 and third best to 11 respondents.
•
Japan was chosen as the most preferred venue by 4 respondents.
Sweden, which did not make it to the top 5, was considered by 2
respondents the most preferred venue, 3 respondents considered it the
second best venue while to 4 respondents, it is the third most preferred
•
venue.
Other venues not listed were chosen by 16 respondents as the most
preferred venue, with 7 each choosing them as second and third most
preferred venues. The venues mentioned (and numbers of respondents
choosing them) are:
o Singapore (6)
o Italy (5)
o Nigeria (5)
o Cairo (4)
o Hong Kong (3)
o Australia (2)
o Greece (2)
o The Netherlands (2)
o Mexico (2)
o Austria (1)
o Belgium (1)
o Taiwan (1)
o Argentina (1) and
o United Arab Emirates (1)
Determining Factors
The top five factors that influence corporations’ choice of venue are:
Reasons for Choice of Venue in International Arbitration
130
140
120 106 104
100
80 61 66 Overall Score
56 51
60 39 Respondents
40 19 13
20 3 1
0
e
er
ns
rs
lity
it y
nc
th
to
m
io
ra
ie
O
ac
at
i
ut
en
ox
er
lf
Ne
Pr
nv
ga
id
Co
s
le
on
n-
lC
No
ga
Le
These are based on answers by 81 respondents and the scoring pattern used
throughout this survey. In particular:
• Legal considerations topped the list with an overall score of 130. Fifty-six
respondents in total expressed their views that legal considerations are
important: 29 respondents (about one third) considered it the most
important factor, 16 considered it the second most important factor while
11 considered it the third most important factor considered when choice
•
of venue is made.
Convenience followed with an overall score of 106. Sixty-one
respondents opted for convenience: 24 respondents considered it the most
important factor, 17 considered it the second most important factor, while
•
20 considered it the third most important factor.
Neutrality of venue scored as the most important factor with a total of
104. Fifty-one respondents in total voted for it: 17 respondents considered
it their top choice, 19 respondents considered it the second most important
factor and 15 respondents voted it the third most important factor by 15
•
respondents.
Proximity of evidence, witnesses and exhibits was voted the most
important factor by 6 respondents, second most important factor by 15
•
respondents and third most important factor by 18 respondents.
Convenience of parties was the least relevant factor. However, one
respondent voted it the most important factor while another voted it the
•
third most important factor.
Other factors were considered most important by 6 respondents, second
most important by 4 respondents and third most important by 3
respondents. These factors are: extent of local knowledge, perceived

advantage, cost and speed.
In absolute terms of main reason for choice of venue in international

arbitration here are the findings:
Main reason for choice of venue in international arbitration
7%
6%
36% Legal Considerations
21% Convenience
Neutrality
Proximity
Other
30%
While legal consideration come first, they are critical to only 36% of the
respondents, while convenience and neutrality together are essential to 51% of the
respondents. Looking at the “other” reasons, in house lawyers interviewed cited
various factors including accessibility, competent courts, modern law, availability
of competent counsel and overall infrastructure. It is intriguing that these “other”
factors could be subsumed in the main headings of the main reasons for choice of
venue in international arbitration.
Relocation of Place of Hearings

Eighty-two online respondents answered the question whether they have had
their hearings in a place different from the place of arbitration. Twenty-two of
respondents have had such an experience but the vast majority of 60 have not.
Various reasons were given for such relocation as follows:
•
•
Eleven respondents changed venue for convenience of the parties.
•
Seven respondents changed venue for convenience of the arbitral tribunal.
Two changed venue because of location of witnesses or arbitral subject
•
matter.
Two changed for other reasons.
3. Conclusions
The survey confirmed that legal considerations are important. However,
convenience came a surprisingly close second, and if combined with neutrality of
venue, it accounts for the main reason for choice of venue in one of two
corporations.
The survey deliberately used the word “venue” rather than the legally laden
terms of seat or place of arbitration. The question is, would the respondents have
regarded these questions as concerning the seat of arbitration, or the location of
any hearings? The interviews revealed that most in-house lawyers would read
“seat” or “place” of arbitration into the word venue.
It is more intriguing that convenience and neutrality are rated so highly as a
consideration. Although corporations are aware of the connotations of the choice
of seat84 they do not assume that the arbitration procedure automatically will be
governed by the law of the place of arbitration, nor that the local courts would
intervene as the supervisory or supporting courts, unless the parties and the
tribunal decide otherwise. It appears that corporations accept the minimum or
basic role of local courts but they do hope that arbitrators can decide most if not
all matters without having to resort to national courts.
It appears that the argument of transnationalists,85 that a venue for arbitration
is chosen for reasons of convenience and/or neutrality, finds empirical validation.
While legal considerations are relevant and important (and would include, for
example, the fact that the country has ratified the New York Convention, the local
law is arbitration friendly), most respondents seem to take them for granted.
Overall it seems that most parties choose a venue for convenience and its
perceived neutrality. Also parties include in legal considerations, not only the law
and its application on the procedures but also the relevant legal infrastructure and
the quality of legal services provided by lawyers and judges. There is no evidence
that the parties expect that the law of the place of arbitration would necessarily
apply, but when they know that it may apply they are prepared to take the risk.
G. Potential for Appeal on the Merits
1. Perception
Traditionally one of the main advantages of international arbitration is its
finality. While this is not a matter of dispute, in recent years there has been an
increase in the number of application for challenge of awards. The perception to
be tested is that corporations have shown interest in the ability to appeal or to have
a review of the merits of the award. Is such an option anathema?
84
See, e.g., Art. V(1)(d) New York Convention.
85
These include Philippe Fouchard, Berthold Goldman, Pierre Lalive, Julian Lew,
Jan Paulsson and Clive Schmitthoff.

Ninety-one percent of respondents surveyed86 and an overwhelming majority
of those interviewed do not support the idea of appeal on the merits. Only 9% of
the online respondents and 10% of the 40 in-house lawyers interviewed do support
some version of an appeal of the award on its merits.
The interviewees reasoned that the policy of having an end to disputes far
outweighs any need for such an appeal mechanism. Getting another bite at the
apple will only serve to make the arbitral process more cumbersome and more
litigation-like, losing almost completely the attributes of arbitration. A contrary
view was expressed by in-house lawyers (only one in 10) who have had very bad
experiences in arbitration.
Is an Appeal to the Merits Useful in International Arbitration?
Useful
9%
Not useful at all

91%
3. Conclusions
The survey has proven that the perception that corporations would like an
appeals system in arbitration is false. Only 9% would and this is because they
have had a bad experience in arbitration. The view that finality of the arbitration
award is an advantage is not challenged by the small percentage which wishes to
have an appeal or review system in place. The survey does not establish what type
of an appeals mechanism this 9% of respondents wishes to have.
H. Appointment of Arbitrators
1. Perception
This is another important topic for empirical research; what is the profile of
international arbitrators and how are they selected? Benjamin Davis surveyed
86
Lack of appeal structure was chosen as the most important disadvantage by seven
respondents.
attorneys to ascertain whether U.S. minorities are found in international

commercial arbitration.87 Douglas Earl McLaren reports the results of a survey of
American in-house lawyers, finding a split in preferences as to the neutrality of
party-appointed arbitrators.88 Arbitrators’ fees were the subject of a survey by
John Gotanda.89
There are so many questions relating to arbitrators for which we have no
empirical data; the three previous surveys mentioned above deal with very
specific issues but do not address the perceptions we test with this survey. What
motivates parties to select an arbitrator over another? What are the attributes of a
good international arbitrator?
The perception tested here is that arbitrators are appointed because of their
reputation in the world of international arbitration. The survey attempts to find out
the profile of an international arbitrator and the reasons for choosing one arbitrator
over another.
How are arbitrators selected?

Our research sought to find out why corporations select the particular
arbitrators they appoint. Seventy-nine online respondents answered the question
why corporations appoint arbitrator as follows:
• Forty respondents appoint arbitrators on the advice of their external
•
counsel.
Twenty-six respondents appoint arbitrators on the basis of personal
•
knowledge.
•
Eleven leave the appointment to appointing authorities or institutions.
Two appoint arbitrators on the recommendation of a third party.
87
Benjamin G. Davis, The Color Line in International Commercial Arbitration: An
American Perspective, 14 AM. REV. INT’L ARB. 461, 466 (2003). Among other results, he
found that over 80% of U.S. nationals reported participating in an international arbitration
with a U.S. minority, while over two-thirds of the non-U.S. nationals had not.
88
Douglas Earl McLaren, Party-Appointed vs List-Appointed Arbitrators: A
Comparison, 20(3) J. INT’L ARB. 233 (2003). Although a majority of the respondents
believed that all arbitrators should always be neutral, a significant minority favored the
traditional default rule in American domestic arbitration that party-appointed arbitrators
need not be neutral.
89
John Yukio Gotanda, Setting Arbitrators’ Fees: An International Survey, 33
VAND. J. TRANSNAT’L L. 779 (2000). The results of the survey revealed that most
arbitrators charge fees based on the amount of work done, unless the practice of the
administering institution is otherwise.
How are arbitrators selected in

international arbitration
Third party
suggestion
3%
Appointing
authority Advice of
14% external
Personal counsel
knowledge 50%
33%
It is intriguing that 14% of the respondents leave the selection of arbitrators to

an appointing authority. This may be justified by the fact that, if parties decide to
have a sole arbitrator, it is better if the selection is made by an appointing
authority. One common denominator of all answers provided that that the
appointment process is controlled by the parties to the extent possible. The next
question is why arbitrators are selected by whoever selects them.
Factors Considered in Appointing Arbitrators – Why are arbitrators selected?

This section discusses the various factors taken into consideration in selecting
arbitrators. These factors presume that the arbitrator is neutral, independent and
impartial. So in addition to impartiality, parties consider:
•
•
Reputation
•
Expertise
•
Recommendation of external counsel
•
Knowledge of relevant language
Knowledge of applicable law
Reputation of the potential arbitrator within the international arbitration

community was mentioned by all our interviewees as one of the most important
factors they consider when choosing an arbitrator for appointment. This important
attribute is closely followed by expertise and common sense. The necessary
information to assess the candidate is obtained from informal contacts, personal
knowledge and recommendation of outside counsel. Accordingly, well-known
arbitrators are more likely to be appointed, especially as chairmen or sole

arbitrators.
Top 5 desired assets of an

international arbitrator
100 90
80 80
80 70
60
60
40
20
0
of relevant
Reputation
Expertise
Coomon
Knolwledge
Knowledge
languages
applicable
Sense
of
It was commonly suggested that attending international arbitration

conferences and publishing relevant articles are very important. However, such
events were not labelled as public relations exercises; they are considered to be a
marketplace.
A very important feedback from in-house lawyers is that they would generally
appoint an arbitrator with specialization or expertise in the subject matter of the
dispute. This is commonly referred to as an arbitrator with expertise in the
relevant field (expert arbitrator) as distinct from expert determination (which is a
form of ADR).
Preference for arbitrators with expertise in the law applicable to the
substantive dispute confirms the view that expertise in the law and practice of
arbitration is not enough to get an arbitrator appointment. A specialization in one
or more areas of substantive law and in the relevant industrial sector is favored by
those appointing arbitrators.90 Corporations believe such appointees save them
time and money and that it makes business sense to so appoint. As to which is
more important, specialization or experience, in-house lawyers would opt for an
arbitrator with both even where this may cost them more (in terms of fees and
time).
90
Twenty-one out of 27 interviewees who discussed this issue said expertise of the
arbitrator in the subject matter of the dispute is one of the most important factors they
consider in appointing arbitrators.
Indeed specialization is not only associated with law but is increasingly

connected with
• the industry section (telecommunications, construction, oil and gas,
•
insurance etc)
•
regional and country expertise (e.g. Latin America or Central Asia) and
cross-disciplinary expertise (e.g. technical or financial background) which
may be useful for the quantification of damages, or understanding the
relevant market conditions at a certain time.
The general counsel of a large multinational oil and gas exploration group
suggested institutions maintaining a list of very widely drawn pool of arbitrators
and making such lists widely available, as one option towards remedying this
situation. Another general counsel suggested better and more proficient
marketability of aspiring arbitrators. However none of our respondents was
willing to offer aspiring arbitrators their first job, preferring to leave it to the
institutions to sort out.
Thirteen of the 40 in-house lawyers interviewed generally expressed concerns
over the quality and availability of arbitrators and the need to widen the pool of
available arbitrators. However, they also stated that they opt for the more secure
choices, i.e. arbitrators with experience and certain reputation in the arbitration
community.
It follows from the above data that reputation and subject matter specialization
appear to be the two most important criteria aspiring arbitrators need to acquire to
meet the appointment criteria of corporations. Having acquired these, the aspiring
arbitrator must then embark on effective marketing targeted at the relevant
corporations for maximum exposure and to ensure that their names come up in
relevant informal discussions.
However, the results are inconclusive as to what the parties consider by the
term “reputation.” It is most certainly not visibility, in the sense that people who
attend every single event appear to not be very busy and rather desperate to get
appointments. It may well be word of mouth, especially recommendation by
people in the know, the legacy arbitrators create about the position they take, e.g.
in relation to conduct of proceedings, case management etc.
Certainly desirable is great experience (quantitatively and qualitatively) as an
arbitrator, both in the particular subject and industry area, and more generally.
Abundance of common sense is also desirable as intelligence can be no substitute
for common sense. It appears that parties prefer one of the arbitration
heavyweights on the panel (often as chair) to conduct the process with knowledge,
authority and panache, and two specialists in the law, region or industry to make
up a versatile and informed tribunal.
Sixty-seven percent of the in-house counsel interviewed indicated that they

found arbitrators that they have come across in proceedings to be quite good.
There are, however, 33% which are not entirely happy with the existing pool of
arbitrators, and 10% who claim to have had a bad experience with arbitrators.
Finally, it is interesting that no respondent considered accreditation or specific
(legal or other) qualifications or training as an essential attribute of a good
arbitrator.
3. Conclusions
The survey confirmed the perception that corporations are looking for
arbitrators with a solid reputation in the arbitration community. However, in
addition to good reputation, common sense, and relevant industry and/or regional
(geographical) expertise are also desirable attributes of an international arbitrator.
Despite this, corporations continue to select arbitrators from a narrow, diminishing
pool of established individuals, who could be described as the “club of grey
eminence.”
Corporations overall would like a wider pool of arbitrators to choose from
(with the additional specialization noted above), but the importance for
corporations of selecting only individuals with established reputations as
arbitrators appears to be hindering the expansion of the pool. About one quarter of
the in-house counsel interviewed and who have acquired industry and/or regional
expertise expressed an interest in being appointed as arbitrators.
I. Appointment of Law Firms
1. Perception
The popular perception to be tested here is that corporations seek and retain
specialist international arbitrations firms or firms with a specialist arbitration
practice group. However, this perception has not yet been empirically researched.
Moreover, it is unclear how a law firm is selected and whether once a selection is
made, it would be for a single case or for a number of cases.

Several views were expressed by the 80 online respondents. Forty-six
respondents decide on retaining counsel on a case-by-case basis, depending on
subject matter and region where the dispute may be located. Twenty-nine
respondents retain a specialist international arbitration counsel or firm. Five
respondents use their regular external counsel.
Selection of Counsel in
International Arbitration by
International Corporations
Decide on a
6% case by case
basis
Use specialist
36% arbitration firm
58%
Retain regular
external counsel
The following reasons were given by the interviewees as significant reasons

for determining which external counsel to instruct:
•
•
Specialist in the subject matter of the dispute
•
External firm or counsel in the place of dispute
•
Specialist in the law applicable to the transaction
•
Availability and
Reputation.
Amongst in-house lawyers interviewed, 30 of the 40 corporations always

instruct specialist arbitration firms or firms with a substantial international
arbitration practice. They also had their own views as to which firm would qualify
in their eyes as an arbitration firm. Amongst the criteria experience, reputation and
number of cases were highlighted.
Use of specialist arbitration firms

Use
regular
external
counsel
25%
Use
specialist
arbitration
firm
75%
Long-term standing relations are considered to be beneficial for both law

firms and international corporations. However, often the relation is between the
corporation and a specific lawyer in the law firm rather than the law firm itself.
There was no conclusive evidence as to whether specific larger law firms were
appointed for disputes world-wide or whether local law firms were retained.
All in-house lawyers interviewed confirmed that they are involved in
managing the arbitration proceedings one way or another. At the very least, such
in-house lawyers act as the link between the corporation and outside counsel. This
position may be explained by the fact that corporations are also investing in
training their in-house lawyers in various dispute resolution mechanisms making
the relevant expertise available within the corporation. The second reason is that
in this way corporations keep a close eye on the outside counsel. Only 10% of the
interviewees confirmed that they lack the necessary resources in house.
3. Conclusion
The survey confirms that corporations generally retain a specialist law firm to
represent them in international arbitration proceedings. Most commonly, however,
corporations select counsel for international arbitration work on a case-by-case
basis rather than use the same specialist firm for all their cases. Few corporations
retain their usual external counsel, rather than a specialist one, for international
arbitration work.
J. Cost
1. Perception
There is little data available on the issue of costs awarded in international
commercial arbitration cases but the issue has attracted considerable scholarly
discussion.91
One of the main advantages of international arbitration is that it can be
cheaper than litigation. However, in recent years corporations have started to
complain that arbitration has become increasingly expensive. Are corporations put
off by the costs of arbitration proceedings? What aspects of the costs of are
91
See, e.g., John Gotanda, Awarding Costs and Attorney Fees in International
Commercial Arbitrations, 21 MICH. J. INT’L L. 1 (1999); MICHAEL O'REILLY, COSTS IN
ARBITRATION PROCEEDINGS (1995); Kent Wilson, Saving Costs in International
Arbitration, 6 ARB. INT’L 151 (1990); Gillis Wetter & Charl Priem, Costs and their
Allocation in International Commercial Arbitrations, 2 AM. REV. INT’L ARB. 249 (1991);
Francis Gurry, Fees and Costs, 6(10) WORLD ARB. & MEDIATION REP. 227 (1995);
Michael Buehler, Correction and Interpretation of Awards and Advances on Costs, ICC
BULL. SUPP. 53 (1997); Murray Smith, Costs in International Commercial Arbitration,
56(4) DISP. RESOL. J. 30 (2001) with assessment of laws and rules and practical proposals.
problematic? Is there any relationship between complaints or mere concerns about

the costs of international arbitration and the size of company or industry sector?
Costs related to arbitration can be divided into two main groups: arbitration
costs and legal costs. Arbitration costs include the arbitrators’ fees,92 expenses
connected with the hearings (e.g. hiring venue, translators’ fees), fees and
expenses of any experts appointed by the tribunal and the administrative expenses
of the arbitration institution, if the arbitration is an institutional one. In
institutional arbitration, the institution is responsible for obtaining an advance
from the parties in respect of these fees and expenses.93
What is the truth? Cost is seen as both an advantage and a disadvantage of
international arbitration! The perception put to the test is that corporation believe
that international arbitration is cheaper than international litigation.

There were 80 online responses to the question whether arbitration is
expensive when compared with transnational litigation. The following responses
were given:
•
•
Thirty-one believe arbitration is more expensive to some extent.
•
Twenty-one believe arbitration is more expensive to a great extent.
•
Eighteen believe both processes cost about the same.
Ten believe arbitration is not more expensive.
How Expensive is Int'l Arbitration compared

with trans-national Litigation
13%
More to some extent
38%
23% More to a great extent
About the same
Less expensive
26%
92
See John Gotanda, Setting Arbitrators’ Fees: An International Survey, 33 VAND.
J. TRANSNAT’L L. 779 (2000) with further references.
93
See, e.g., ICC RULES, Art. 31.
Overall, a clear majority perceives arbitration to be more expensive that

litigation, but a substantial 38% considers that is more expensive to some extent
and 26% believes that it is more or less the same as transnational litigation. One
quarter is clear that it is significantly more expensive.
This is not a surprising finding and arbitration institutions and arbitrators are
and should be concerned about this trend. For users of arbitration, although
arbitration is considered expensive, it is also an efficient process and several
benefits of the process outweigh the problem of costs. This is why there is a
constant increase in the number of arbitration cases.
Sixty-five in-house lawyers answered the question on the total cost of their
most recent arbitration. The results were as follows:
•
•
Thirty-four paid between US $100,000 and US $500,000
•
Nine paid between US $500,000 and US $1 million
•
Fourteen paid between US $1 million and US $5 million, while
Eight paid over US $5 million.
Unfortunately the respondents did not indicate what the amounts in dispute
were and what percentage the costs represented.
These costs include all monies spent on the dispute from commencement to
completion of the arbitration proceedings, including costs of external counsel and
arbitration institutions, administrative costs, arbitrators’ fees and reimbursable
expenses, but not including the cost of in-house counsel.
The responses from the interviews revealed that geographical location of
corporations may be relevant in this regard. Corporations operating in the West
appeared to be less worried about the cost incurred in international arbitration
proceedings. They would almost certainly use external counsel specialist in either
the subject matter of the dispute and/or international arbitration. Lack of
familiarity and the threat of cost are putting off parties from developing countries.
At the same time corporations from common-law jurisdictions as well as several
civil-law jurisdictions (such as Sweden, France and Italy) consider the costs to be
adequate given the expertise of arbitrators and overall quality of services provided
in arbitration.
The following represents counsel’s fees:
•
•
In 18 cases counsel fees accounted for 75% of the total cost of arbitration.
In 24 cases counsel fees was between 50% and 74% of the total cost of
•
arbitration.
In 24 cases counsel fees was less than 50%.
These figures confirm that the cost of using external counsel in international
arbitration proceedings is at least almost 50% of the total cost of arbitration and
could be as high as 75% of the total cost incurred. In a survey conducted by Klaus
Sachs94 the conclusion was that most of the money is spent on lawyers (about
85%) not on arbitrators or arbitration institutions. He has compared several ICC
cases:95
Amount in Total fees of Total fees of Share of

dispute * Arbitrators Counsel to Parties Arbitrators’ fees
on total fees
USD 218,836,536 USD 624,800 USD 4,294,631 13%
USD 4,919,431
USD 59,148,553 USD 404,790 USD 4,288,926 8.6%
USD 4,693,716
USD 12,598,548 USD 225,313 USD 1,874,472 10.7%
USD 2,099,785
USD 40,520,624 USD 126,722 USD 2,116,365 5.6%
USD 2,243,087
USD 50,328,666 USD 650,000 USD 2,506,988 20.6%
USD 3,156,988
* Conversion rates to USD at the date of issuance of award
If compared to the considerable amounts in dispute, counsel fees in such

amounts seem less remarkable; in absolute terms, they are impressive. It is further
interesting to note that the relative importance of the costs of the tribunal
compared to the total cost of the proceeding is not insignificant, but clearly the
tribunal’s cost represent the lower share, spanning from 5.6% to 20.6%, the
average being 12.12%.
On the time spent on arbitration proceedings, some in-house lawyers
interviewed agreed that as compared with litigation in their home jurisdiction,
international arbitration may be quicker. However, in terms of the time required
by the standards of modern business and turn around times, the time spent on
arbitral proceedings from commencement to rendering of the final award may still
be too long. Linked to this is the time it takes to enforce an award. In one of the
well-known investment (or BIT) arbitrations in the 1990s, the in-house lawyer to
the winning party explained that the State party paid up immediately after losing
the setting aside challenge before the Swedish courts. This was in her opinion
because the award had included the payment of a daily interest for each day the
94
Klaus Sachs, supra note 49, at 103-115.
95
Id. at 111.
award remained unpaid. The corporation also sought enforcement against an

individual in a sister dispute. This enforcement took the corporation to over 15
jurisdictions and a period of 18 months in which the full sum awarded was not
recovered. The arbitration proceedings themselves took three years from
commencement to the rendering of award.
The average duration of institutional arbitration proceedings for international
disputes, according to the ICC and AAA, is in the range of 18 months which
compares favorably to most court proceedings.96 In addition the finality of awards
also ensures that there will be no further delays. And the enforcement process will
often be automatic. Matters are of course complicated if assets have been
dissipated but this is a problem common to arbitration and litigation. Statistically,
over 90% of arbitration awards are complied with voluntarily, pursuant to
anecdotal evidence from arbitration institutions and arbitration practitioners.
The general counsel of a state-owned petroleum corporation in a developing
jurisdiction said arbitration, “is very expensive and not cost effective,” while the
general counsel in a machine tools manufacturing corporation in Japan for his part
believes, “Arbitration is expensive for low value disputes but for high value
disputes, the value and cost even out as it is cost and time effective.”
The senior counsel in a multinational mining group said “[arbitration] is
obviously a more expensive process when compared to litigation or other dispute
resolution processes. … Its outcome is unpredictable unlike litigation…”
However, the general counsel of a major international automobile manufacturer in
Japan said that arbitration of larger scale disputes is cheaper than litigation of the
same in the United States and his firm estimates that it costs $4,000,000 for each
year they are involved in litigation in the United States.
3. Conclusions
It is not surprising that cost is a controversial issue. Interestingly enough the
respondents do not distinguish between the cost of arbitration and specific costs.
This survey provides evidence that most of the costs are legal costs, which in
principle should be the same as in transnational litigation. The survey, however,
makes a different point: international arbitration is at least as expensive as
litigation for middle and smaller sized cases. Is it better value for money on larger,
more complex cases? The fact that the costs of international arbitration are
comparable to transnational litigation indicates that although arbitration costs may
be substantial in actual terms, they do not excessively overburden the totality of
expenses. What seems to be the issue here is that the perception that arbitration is
inexpensive can no longer be supported. The number of respondents who express
96
It is reported in the interviews that court proceedings can take anywhere from 18
months to ten years, if one were to exhaust all remedies available in legal systems.
Proceedings appear to last longer in civil-law jurisdictions.
concern about costs is significant, so that the issue should be explored and
discussed further.
Consequently, the various debates on the costs and the concerns expressed in
the survey by at least 38%, possibly 64% of the respondents, mandate a discussion
on the cost of international arbitration. Such a discussion should not only address
actual figures, but also whether arbitration has become too complicated and
litigation-like in a way that the costs are amplified.
K. Sophistication of Users
1. Perception
There is a perception that international arbitration is a rather young dispute
resolution mechanism and in-house counsel have yet to gain significant
experience in managing international arbitration cases.
It is rather difficult to put an age to international arbitration, partly because of
its Protean nature97; in many respects is a much older dispute resolution
mechanism than international litigation in state courts, but it is one that has
changed over the years. However, it follows from all interviews conducted that
arbitration is an “esoteric” or even “exotic” topic: most law schools either do not
offer the subject at all or they offer a couple of lectures in another course.
Consequently, most lawyers are unfamiliar with this process and try to put in
different familiar “boxes”: civil procedure, conflict of laws, international business
transactions, and international commercial law are some of the likely boxes.
All these classifications disregard the fact that international arbitration is itself
a subject. International arbitration is at the junction of national, international and
conflicts of laws, public and private law, and substantive and procedural law. Its
practice requires comparative law and cultural sensibility, cosmopolitan panache
and open mindedness (thinking out of the box). As if this complexity is not
sufficient, one can observe not only different arbitration styles but also the
emergence of international arbitration practice.
Most lawyers acquire arbitration knowledge and skills through legal practice
in large international law firms or through the experience of multinational
corporations with international disputes. Interestingly enough, as noted above, all
in-house lawyers interviewed confirmed that they are expected to be and are
actually involved in managing the arbitration proceeding one way or another. The
involvement implies at least serving as the link between the corporation and
outside counsel. Four interviewees (i.e. 10%) confirmed that they believe they
lack the necessary resources in-house. The remaining 90% felt that there are
97
William W Park, The 2002 Freshfields Lecture — Arbitration’s Protean Nature:
The Value of Rules and the Risks of Discretion, 19 ARB. INT’L 279 (2003).
capable of performing their role in arbitration proceedings, but they wished they
had more adequate training.
3. Conclusions
It follows from the survey that in-house lawyers in larger multinational
corporations are better informed about international arbitration and many have had
experience of managing the process. The need for further training specifically
designed for in-house lawyers has been empirically confirmed. Such training
should address specifically the design and formulation of dispute resolution
clauses, advanced knowledge of arbitration law and practice and the issues
associated with recognition and enforcement of arbitration awards.
L. The Future of International Arbitration
1. Perception
Several issues need to be established in relation to the future of international
arbitration. Will international corporations continue to opt for arbitration? Are
there specific issues they would like to see change or improve?

It follows from the survey that 95% of the corporations currently involved in
international arbitration will continue to use it. Based on an exceptional interview
with its CEO, for one U.S.-based corporation, however, this shall not be the case.
The CEO’s major complaint related to the quality and ability of the sole arbitrator
appointed by a major institution under whose rules a dispute was arbitrated. All
interviewees expressed the view that there will be a further steady increase in the
number of arbitration cases, proportional to the increase of international trade.
Several issues of concern were also noted. These include specifically:
• The need for more countries to become members of the New York
•
Convention.
Difficulties with enforcement of interim measures in international
arbitration, especially where the place where enforcement is sought is
•
different from the place of arbitration.
•
The need to find a mechanism for reducing the cost of arbitration.
The need to improve the framework for multiparty, multi-contract and
multi-claim disputes.
A well-defined trend appears to be towards escalating (multitier) dispute

resolution clauses. It appears that in the future dispute resolution clauses will no
longer contain a direct reference to arbitration but a combination of non-biding
processes leading up to arbitration or litigation. The choice of a non-binding

process will be dependent on the subject matter of the contract and industry sector.
As mentioned above in Section Four, the available pool of international
arbitrators requires overhauling. In-house lawyers would like to see more
specialist arbitrators available for appointment.
Appeal on the merits is not attractive to corporations; in-house lawyers would
prefer to have an end to the dispute rather than take another bite at the apple;
however, 7.5% of the interviewees believe this issue should be left to the parties in
the exercise of their party autonomy. The parties should have the power to decide
whether they want an appeal on the merits or not and to make adequate provisions
3. Conclusions
The future of international arbitration is quite rosy. Corporations identify
specific issues which have to be addressed, including cost, multiparty disputes,
and enforcement, but they appear confident that the law and practice can generate
adequate solutions. The expectation is that there will be more arbitration cases in
the future, but the arbitration clauses will develop into rather complex, multistep
dispute resolution policies. The need is also expressed for a larger pool of
arbitrators.
III. FUTURE OF INTERNATIONAL ARBITRATION

AND THE ROLE OF EMPIRICAL SURVEYS
International surveys as this one aim to be food for thought and reflection.
They exist in a particular time (and often geographical) framework. The time
available to us mandated limiting questions addressed. Further empirical surveys
will undoubtedly carry on and work on specific findings, attempting to verify or
falsify them. The following sections deal with the methodology employed, and the
limitations of this survey as well as some ideas for future surveys.
1. What We Have Left Out and Why

First, we have only interviewed lawyers employed by international
corporations. We have not interviewed any lawyers in private practice, arbitrators,
academics or arbitration institutions. Our objective was to ascertain the views of
corporations rather than “arbitration lawyers.”
Second, we have not asked any specific questions relating to the arbitration
procedure, or any questions relating to the enforcement of arbitration awards.
Third, we had difficulties reaching lawyers in developing countries, although
we have managed to interview several lawyers from emerging economies (10% of
the pool).
Finally, we aimed to establish general policy rather than choices relating to
specific issues. These could be addressed in future surveys.
2. Methodology
This survey has collected data and employed and applied both qualitative and
quantitative analyses. This was made principally for the convenience of our target
respondents and also because different data can emerge from quantitative and
qualitative methods:
An online questionnaire was used for the quantitative stage. This ensured
that respondents answered the same questions for comparative purposes.
Respondents answered a total of 36 substantive closed questions with optional
answers to choose from. The first phase commenced on May 3, 2005 and was
completed on October 31, 2005. The online questionnaire was completed by 103
respondents. The respondents targeted (via mail and/or email) were heads of legal
departments, general counsel (or deputy) or counsel in charge of arbitration
and/or litigation in the legal department of corporations involved in cross-border
transactions. The online questionnaire was completed by:
o Twenty-one general counsel

o Eight deputy general counsel
o Thirty-seven heads of legal and
o Twenty counsel from legal departments
o Seventeen respondents did not indicate their roles in their corporation.
There were 103 valid responses from the online questionnaire (10 invalid
responses were also submitted). Respondents from the following industrial sectors
participated in the research:
•
•
industrial manufacturing
•
financial services and banking
•
energy, oil & gas
•
engineering and construction
•
automobile and transportation
•
retail and consumer
•
media and entertainment
•
insurance, and
telecommunications
Profile of Participants in the Survey
General Counsel
17% 20%
Deputy General
Counsel
8% Head of Legal
19% Dept
Counsel from
Legal Dept
36% No indication
Respondent corporations, though involved in cross-border transactions and in the

majority of cases with offices in more than one country, are primarily based in
and/or operate from:
•
•
Europe
•
UK
•
USA
•
Japan
•
Pakistan
•
Mexico
•
Saudi Arabia and
South Africa
Geographical Origin of
Participating Corporations
3%
3%
15%
Europe
Asia & Australia
49% Americas
Middle East
30% Africa
Financial Profile of respondents:
• Nineteen corporations with an average yearly turnover of more than US
•
$5 billion,
Thirty corporations with an average turnover of between US $500 million
•
and US $5 billion,
Twenty-six corporations with an individual turnover averaging US $500
•
million;
The remaining 28 did not indicate what their turnover is.
Financial Profile of Participants

25% 17%
26%
32%
Annual turnover of more than US$ 5 billion
Annual turnover between US$ 500 million and US$

5billion
Annual turnover up to US$500
No indication
At the qualitative stage and for a more detailed insight into the issues raised in
the online questionnaire, interviews were conducted with in-house lawyers who
had consented to be interviewed. Of those who consented, a representative pool
was selected; the criteria were (a) to have a pool with wide geographical
representation; (b) to have representations of major industrial sectors and (c) to
ensure that all participating corporations operate internationally. Three
corporations were in the top 10 biggest companies in the world.
A set of guideline questions, divided into quantifiable data, effectiveness of
arbitration, choices and policy, strategy, perceptions, procedure and future of
international arbitration, was forwarded to interviewees before each interview and
formed the basis of the interview. Respondents discussed issues, as time and
confidentiality permitted. This meant that some respondents discussed more issues
than others; not all issues discussed are reported in the current survey. Half of the
interviews were face-to-face and the other half were on the phone. Interview times
varied from 15 minutes (for phone interviews) to two hours for face-to-face
interviews. The second phase commenced on June 2, 2005 and concluded on
October 31, 2005. Arguably this is one of the largest international samples ever
interviewed on arbitration matters.
The responses from the online questionnaire and interviews were collated,
statistically analysed and interpreted. The responses from the online questionnaire
and interviews form the basis of our report. The quotations are extracts from the
interviews. Where interviewees had also completed the online questionnaire they
gave a more detailed discussion of the issues raised at the interview.
3. Issues for Further Research

Several issues can be explored in future research. These include:
• Full cartography of arbitration institutions and establishment of standards
•
for their annual reporting of cases and statistics;
•
A survey into the attitudes of arbitration lawyers and arbitrators;
Exploration of the practice relating to multiparty, multicontract and
•
multiclaim disputes in international arbitration;
Issues of enforcement of awards as well as of interim measures of
protection; one particular issue would be to identify how many awards are
•
complied with voluntarily;
•
A survey on the law and rules applicable to the merits of the dispute;
Matters relating to the taking of evidence and matters relating to the
conduct of the proceedings.

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INTERNATIONAL ARBITRATION –

CORPORATE ATTITUDES AND PRACTICES

Professor Loukas Mistelis**

I. Introduction – The Context of the Survey ...................................................527

5. Ad hoc v. institutional arbitration................................................559

I. INTRODUCTION – THE CONTEXT OF THE SURVEY

Disputes are an inevitable occurrence in many international commercial

Table 1: Arbitration Cases in Selected Arbitration

Numbers often speak better than words: arbitration appears nowadays to be a

In June 2003 an unscientific survey by the American Lawyer “ruffled

- China – Chinese Law of 1994. as amended

International arbitration is a specially established mechanism for the final and

What is clear is that there are four fundamental features of arbitration:

A. Purpose of this Survey

The specific objectives of the research are:

• To obtain empirical evidence of the attitudes of major corporate entities

Consequently, the research also sought to verify or falsify29 various myths,

B. Background – Previous Surveys

There are two types of arbitration surveys: those conducted by or on behalf of

Several notable data included in 2004:33

• Parties nominated the co-arbitrators/party-appointed arbitrators in 94.1%

Other institutions also provide useful data.34

• Dealing in Virtue, by Dezalay and Garth.36 This survey was published in

• Dispute-Wise Business Management, an AAA sponsored research.38 This

C. Scope and Limitations of this Survey

• The first phase commenced on May 3, 2005 with an online questionnaire

Respondent corporations, though involved in cross-border transactions and in

This survey addresses perceptions in respect of:

While it appears that one in ten corporations actively uses or is prepared to

II. THE SURVEY: PERCEPTIONS TESTED –

A. Use of International Arbitration

• Corporations rely on international arbitration as a mean of resolving

• Threat of lack of independent judiciary

• Lack of knowledge of language

2. Data and Analysis

Experience with Dispute Settlement

Litigation and ADR Litigation

In fact, of the 91 online respondents who answered the question on the

Preferred Dispute Resolution Method

• 40 preferring a combination of international arbitration and ADR (multi-

d1who_e.htm and a list of 50 least developed countries: http://www.wto.org/english/

The group maintains a written guideline on jurisdictional preferences. [We] either

• Arbitration is more consistently relied upon than litigation as a means of

B. Advantages and Disadvantages Associated with the Use of International

A study by Richard Naimark and Stephanie Keer asked participants in AAA

Table 2: Reasons for Using Arbitration44

There are, of course, several perceived disadvantages. These include increased

2. Data and Analysis

Table 3: Top Reasons for Using Arbitration

Flexible procedure 119 points 71 respondents 11 respondents45

Other factors perceived as making arbitration advantageous include, neutrality

Scoring - Top Reasons for Using Arbitration

Most Important Reason for Using Arbitration

Other Flexible procedure

most important disadvantage of arbitration. Fifty percent of them (40 respondents)

Table 4: Top Disadvantages of Reasons Arbitration

Main Concern about Arbitration

On the issue of costs, some in-house lawyers interviewed believe that a

• Flexible procedures used in international arbitration: indeed the

• Selection of arbitrators: the right of parties to select arbitrators of their

The top drawbacks of international arbitration are:

• Expense: it is often alleged that arbitration is expensive and this is the

control.55 The problem is that parties sometimes employ dilatory tactics