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The growth of international trade, investment and commercial transactions in the 21st century has resulted in a system of private commercial dispute resolution that spans national borders. Whether dealing with mergers and acquisitions, joint venture agreements, building projects or sales initiatives, corporations involved in cross-border business routinely express their desire to avoid the uncertainty and delay associated with litigation in foreign courts. San Francisco’s legal community has long been a leader in the development of arbitration and mediation within the United States. San Francisco is also a significant hub for international commercial activity with its involvement in economic matters involving Asia, Latin America and Canada. It is for these reasons that the American Arbitration Association’s San Francisco regional office has seen consistent growth in its caseload. The International Centre for Dispute Resolution (ICDR), the international division of the AAA, reports a 75 percent increase in international cases filed over the past five years. In today’s climate of political and economic uncertainty, businesses and their counsel must look to options that foster efficient and amicable resolution of disputes. It is therefore imperative for counsel to incorporate adequate dispute resolution mechanisms into international commercial contracts. Alternative dispute resolution in the international arena can be used not only to resolve a conflict but also to prevent conflict in its earliest stages. Also, when an agreement to arbitrate a future dispute is applied in the commercial setting or in any segment of society, it effectively reduces the amount of discord and dispute, perhaps to the point where the formal process of arbitration may not even be necessary. The preventative and procedural elements of incorporating a well-drafted arbitration agreement into an international contract combine to increase efficiency and decrease associated costs. When parties incorporate an arbitration clause during the contracting process, they are able to choose the procedural rules, arbitrators, governing law and place and language of arbitration, allowing for an agreed-upon format if a dispute escalates. With this extent of party-based participation, individuals on both sides of the dispute develop more faith and confidence in the process, thus facilitating a speedier resolution — only 10 months from filing to award, on average. The parties’ ability to appoint the decision makers in a dispute is a defining aspect of the arbitral system and provides a powerful instrument when used wisely by the parties. Counsel for the parties may either rely on the default processes provided by arbitral institutions or they may choose to provide for a customized process in their arbitration clause. Counsel are therefore able to note the different requirements and expectations of the arbitrators in international disputes, taking into account language needs, cultural knowledge and multinational legal experience. The arbitration process can be structured to reduce the fear of nationalistic bias, which is often a concern when disputes land in foreign courts. While arbitrations are typically held under the arbitration law of the chosen place of the arbitration hearing, the arbitration may occur in a third country or be conducted by neutrals from third-party nations. Yaroslav Sochynsky, an international arbitrator from the San Francisco Bay Area who practices international arbitration and business litigation, notes the flexible communicative methods that can be used in international arbitration proceedings. “With e-mail and fax machines, these cases can be administered from anywhere by multilingual specialists in international disputes,” he says. This represents a tremendous benefit when considering the often-cumbersome alternative of litigating a matter in foreign courts. When engaging in the process via an established arbitral institution, parties benefit from institutions’ experience and reach in the global arbitral arena. Some of the leading institutions include the ICDR, International Chamber of Commerce, China International Economic and Trade Arbitration Commission and the Stockholm Centre, among many others. The ICDR and AAA have entered into cooperative agreements with 59 institutions in 41 countries throughout Africa, Asia, Eastern Europe, Russia, the Middle East and Latin America. The most basic agreements commit the signatory institutions to cooperate in the use of arbitration, mediation and conciliation through education, publications and information sharing. The more complex provide guidelines for the proceedings and the administrative steps desired by the parties to the dispute. Moreover, research initiated by such institutions can ultimately contribute to the efficacy of the arbitral process. Mediation is emerging as a viable step in international dispute resolution. A mediated negotiation offers parties the opportunity to exercise complete control over their dispute and how it is resolved without submitting to the binding terms of arbitration. Statistics from the ICDR show that more than 80 percent of commercial cases submitted to mediation settle, eliminating the need for many to proceed to arbitration. David Heilbron, a San Francisco-based partner at Bingham McCutchen, says, “Mediation is not as well accepted internationally as it in San Francisco and other urban areas. However, international arbitrators have acted on numerous occasions as mediators of international disputes.” Actively engaging in a cross-border arbitration spanning both the civil-law and common-law systems can present challenges to counsel — but ones that are certainly not insurmountable. The civil-law system derives directly from Roman law and is the predominant legal system in Europe and Latin America. The common-law system derives from English law and is the legal system in use in countries that were once part of the British Empire. The difference between the civil-law and common-law systems is often faced by corporate counsel drafting an agreement involving parties from various countries. Even if corporate counsel have described the elements of the dispute resolution provisions in an international agreement, the counsel making the presentations at the arbitration may be from different legal systems — and accustomed to following different preparatory rules. In an arbitration involving parties and counsel from civil-law and common-law systems, an arbitrator or a tribunal will often need to amplify and clarify the dispute resolution clause in an international agreement. It may also be necessary to fashion a pre-hearing procedure dictating how the two systems can be combined and incorporated in the hearing itself. In international arbitrations, the arbitrator or the tribunal has considerable flexibility in accommodating the customs of counsel in evidentiary preparation prior to the hearing, provided that the procedures devised are applied equally to all parties and afford the parties an opportunity to fully present their respective cases. Combining the civil-and common-law approaches, the arbitrator, for example, may require the parties to submit detailed pre-hearing briefs, including all exhibits and declarations from all witnesses. Each party may then designate the witnesses that they wish to cross-examine at the hearing. The party offering the testimony of a witness must then produce the witness at the hearing. In this manner, much of the evidence is produced in writing pursuant to the civil-law tradition. At the same time, the common-law lawyers have an opportunity to conduct their cross-examination. Utilizing this method, the length of arbitration hearings can be shortened from what would take weeks under the common-law system to two or three days. In December 1976, the United Nations General Assembly adopted the Arbitration Rules of the U.N. Commission on International Trade Law. These rules combine common-law and civil-law rules of procedure. Since they have been adopted by the United Nations, the rules are widely acceptable to parties, particularly non-western parties and nations. While the principle intention of these rules is to govern international ad hoc arbitrations, the primary arbitral institutions — including the ICDR, the International Chamber of Commerce and the London Court of International Arbitration — also support the rules and often serve as administrators under their provisions. Another important step in the international arbitration process is the enforcement of the arbitral award, once the hearing has been concluded and the award issued. At the root of arbitration’s broad acceptance in transnational dispute resolution is the near-universal enforceability of an arbitration award. Enforcement can be easier to achieve than a judicial judgment in which the court has ruled against the foreign party. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards — also known as the New York Convention — is an international treaty established in 1959 in which signatory nations recognize and enforce both foreign arbitral awards and agreements to arbitrate. The New York Convention gives them the same force and dignity of national courts’ awards — the basis for a particularly effective alternative to the courts, given that no international treaty covers enforcement of court judgments across nations. At present, 132 nations are signatories to the New York Convention — more than to any other international accord. With ever-increasing cross-border trade activity under the umbrella of international free trade agreements, corporate counsel representing parties from leading industrialized countries, as well as emerging nations seeking to enter the mainstream of world trade, should consider the advantages that alternative dispute resolution provides for their global commercial relationships. In selecting trading partners, U.S. multinational companies prefer ties with those able to operate in the context of effective and reliable contract dispute resolution systems. Although the conduct of international business is rife with potential pitfalls that may trigger disputes, the benefits of alternative dispute resolution techniques — increased efficiency, reduced costs and preservation of business relationships — are all available to businesses and individuals in the global context. Richard W. Page practices in the areas of international business, real estate and intellectual property litigation and is a member of The Page Firm, based in San Diego. He also serves on the American Arbitration Association’s international arbitration and mediation panel. Richard Naimark is senior vice president of the American Arbitration Association and the International Centre for Dispute Resolution.

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