Miami Now a Hot Spot for International Arbitration

Miami Now a Hot Spot for International Arbitration

When the news broke that the $1 billion dispute over construction overruns of the Panama Canal would be arbitrated in Miami, a reporter writing a story about this “placing Miami on the arbitration map” called me for a quote. I agreed she was on the trail of a good story, but not because the case made Miami an arbitration player.

The story starts with the fact that several years ago, the ultra-sophisticated parties contracting for work on one of the world’s most important construction projects agreed that future disputes would be heard not in Paris, not in London and not in New York, but in Miami. The parties to the Panama Canal contracts were and are advised by some of the world’s top attorneys who know what is happening in Miami. So, the insertion of Miami as the arbitral seat in the contracts was likely not a happenstance.

Perhaps the bigger story is that the choice of Miami as the arbitral seat for such an important dispute is a surprise to some. Miami was on the arbitration map long before the news of this particular Miami-bound dispute broke. That’s, in part, why the International Council for Commercial Arbitration decided to hold its 2014 Congress in Miami. The Congress goes to cities that have worked hard to build the infrastructure for international arbitrations. From April 6 to 9, more than 1,000 of the world’s top international arbitration experts, corporate counsel and attorneys will gather in downtown Miami.

On a most basic level, an arbitration is only as good as the end result. By choosing arbitration, parties seek an effective means of finally resolving their disputes outside of the courts. In making their selection, parties need to know that, absent exceptional circumstances, the arbitral agreement and award will be respected, and that the courts will not interfere with the arbitral process. If the process is undercut along the way as a result of judicial interference, or if the process of arbitrating in the seat is unduly costly or inconvenient, or if the ultimate award is subject to unwarranted review by the judiciary, arbitration will have failed to achieve its potential.

The legal framework, then, is a key driver in choosing arbitral seats. The choice of seat normally determines the arbitral law that will govern the process and the court that will have primary jurisdiction over the arbitration (see “Choosing the Seat for an International Arbitration”). Thus, whether the jurisdiction has an adequate arbitral law and adheres to the conventions that protect arbitral agreements and awards, such as the New York Convention, is an important question in selecting the seat. A survey by the Queen Mary University of London and White & Case, “2010 International Arbitration Survey: Choices in International Arbitration,” found that corporate counsel consider “formal legal infrastructure” as the most important factor when choosing the seat. This includes the seat’s national arbitration law, the way courts enforce arbitration agreements and awards there, and the jurisdiction’s neutrality and impartiality.

In the United States, arbitral law is primarily federal. While there are a few issues at the margins—as there tend to be in every jurisdiction—the arbitral law in the U.S. generally is regarded as suitable, and the judicial system’s treatment of arbitration satisfactory.

As are all cities in the U.S., Miami is in a jurisdiction that has a suitable arbitral law (the Federal Arbitration Act) and the benefit of the New York Convention (given that it is incorporated in Chapter 2 of the FAA). As it turns out, Miami is in the Eleventh Federal Appellate Circuit, which is strongly protective of international arbitration—even more than other federal circuits. It has, among other things, warned counsel to think carefully about challenging arbitral awards without an adequate basis, and held, in contrast to other circuits, that an international award is not subject to vacatur on nonstatutory grounds.

Considerations of cost, convenience and other factors make for a second cut and lead parties to consider alternative seats. Will the process of arbitrating in the seat be unduly costly, burdensome or difficult? That’s where a place like Miami has a competitive edge. In the Queen Mary survey, the general infrastructure of the seat was also cited as an important consideration. Within “general infrastructure,” cost (42 percent), transportation connections (26 percent) and hearing facilities (including translators, interpreters and court reporters—21 percent) were most influential in choosing the seat. Convenience was also cited (45 percent), along with “language” and “established contacts with specialized lawyers operating at the seat.”

Miami is well-positioned in each of these areas. It has one of the leading international airports in the hemisphere, with direct flights to Europe, Latin America and elsewhere. Miami, of course, is one of the hemisphere’s most multicultural cities. Spanish is not simply “spoken” in Miami—it is a normal language of business there. Hearing facilities include those at arbitration institutions. Miami has an array of specialized, national and international law firms with experienced arbitration lawyers. And a survey revealed that the cost of arbitration-related services in Miami, such as court reporters and interpreters, can be substantially lower than in other important arbitral centers.

It’s fair to say that Miami is an arbitration-friendly city, also an important factor cited in the survey. In 2003, the Florida Bar promulgated rules that allow parties to use their non-Florida lawyers to represent them in international arbitrations in the state. The Florida international arbitration law, modeled after the UNCITRAL Model Law, provides immunity for arbitrators. Plus, in 2013 the state court in Miami created an international commercial arbitration court staffed by experienced commercial judges with specific judicial education on international arbitration issues.

As parties have evaluated the pros and cons of each arbitral center, they have often found that a seat such as Miami offers the combination of convenience and lower cost that tip the balance in its favor over traditional centers such as New York, London and Paris. Add the reliable legal infrastructure, judicial transparency and legal predictability, and the advantages over still-developing, up-and-coming arbitral seats are clear.

That said, Miami’s strength is found in its ties to Latin America. It is a center for Latin American business. The competition among traditional and emerging arbitral centers is a good thing for clients. As the market shakes out, the identity and strengths of arbitral centers will emerge. Traditional centers such as New York, London and Paris will continue to be seats of choice for important disputes. New arbitral centers such as Hong Kong and Singapore, well-positioned as they are for east-west trade, will also be seats of choice for important disputes. And in this hemisphere, an array of cities from Patagonia to Ontario will similarly find their places as the market segments.

So we come full circle to the reporter’s question. There is nothing surprising in having an arbitration over one of the world’s most important construction projects seated in Miami. The true story lies in the fact that more companies choosing arbitral seats aren’t aware of Miami’s offerings as a seat.

José Astigarraga is shareholder of Miami-based Astigarraga Davis, an international litigation and arbitration law firm. He has more than 30 years of experience as an advocate in international business disputes. He serves as vice president of the 35-member London Court of International Arbitration, is a member of the International Chamber of Commerce’s Commission on Arbitration and chairs the Americas’ Initiative of the Institute for Transnational Arbitration. The U.S. Government appointed him to the tripartite committee to advise the NAFTA Commission on commercial dispute resolution and to serve as legal expert at the Organization of American States. He has served as vice chair of the International Bar Association’s International Arbitration Committee.