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special to the national law journal The use of arbitration in international legal disputes is expanding dramatically, and law firms around the country are scrambling to keep up with the rapid increase. And attorneys say the fallout from the war in Iraq, the world’s current economic problems, the evolvement of the European Union and the emergence of developing countries into international trade will fuel the growth well into the future. The arbitration caseload has more than doubled during the past five years, from 320 cases in 1997 to 672 in 2002, at the American Arbitration Association’s International Centre for Dispute Resolution (ICDR), according to Mark Appel, senior vice president in charge of operations at that group’s Dublin, Ireland, office. The ICDR is the largest international commercial arbitral institution in the world, based on caseload. Besides the rise in international trade, Appel said a key element spurring growth “is how long it takes a case in arbitration from filing to award, an average of 10 months. International litigation in court can take years.” The Paris-based International Chamber of Commerce (ICC), which led the world in international arbitration through the end of the 1990s, confirmed the dramatic growth. A record number of 593 cases came before the ICC’s International Court of Arbitration (ICA) in 2002, according to Emmanuel Jolivet, general counsel to the ICA. In December alone, the latest time for which statistics are available, the ICA registered more than 80 new cases, also a record for a single month. “Arbitration has become the norm for solving international business disputes,” Jolivet said. A growth industry The upsurge also has made its impact on U.S.-based law firms, where the number of cases have increased both here and in offices abroad. For example, the international disputes caseload at New York-based Debevoise & Plimpton roughly doubled over the last three years, according to Mark W. Friedman, a partner who moved to London last August to help stay abreast of the boom. Of Debevoise & Plimpton’s 180 litigators, Friedman said about 40 to 50 in New York, London or Paris spend most or all of their time on international disputes. Calling the rise “extraordinary, impressive and increasingly important to our clients,” Friedman cited several contributing factors, including being faster and cheaper than litigation. But businesses are also attracted to the arbitrators’ neutrality and competency, the flexibility and confidentiality of the process, and the certainty of the awards-countries must quickly enforce arbitration awards or face being drummed out of the international trade community under various treaties and conventions. In late May, Debevoise won the Global Chambers Award as the International Arbitration Firm of the Year in the United States, given by Chambers & Partners, the prestigious London legal publisher. Also in May, Friedman, along with Debevoise partner John Kiernan, won a $355 million award in favor of Central European Media Enterprises Ltd. (CME) in its arbitration against the Czech Republic. Friedman called the case “especially unusual because it was filled with political intrigue and personalities.” Kiernan, co-chairman of Debevoise’s litigation group in New York, said CME, founded by American Ronald Lauder, heir to the Estee Lauder cosmetics fortune, brought the case in 1999 after its Czech partner forced it out of operating a highly profitable television station. The arbitrators found that Czech broadcast regulators wrongly conspired with the Czech partner, Vladimir Zelezny, to give Zelezny control of the station. Zelezny was a TV talk show personality who later became an elected member of the Czech parliament. Kiernan described the process as an ad hoc arbitration, as opposed to one using an established forum like the ICDR. A Czech treaty called for applying United Nations trade rules, in which each party appoints an arbitrator and those two appoint a third who becomes arbitration chairman. Ad hoc arbitrations are not uncommon when a sovereign nation is involved, Kiernan said. Standard contract clause Besides such treaty requirements, more international businesses are insisting on arbitration clauses in contracts, according to Paul Friedland, a partner and co-head of the International Arbitration Practice Group at New York’s White & Case. Friedland, author of a book entitled Arbitration Clauses for International Contracts (2000), said such clauses “are becoming the standard in international contracts of most major companies and investors.” He added that his firm’s New York office has 12 full-time arbitration practitioners, compared to two or three 10 years ago. The growth of arbitration also has affected New York-based Hughes Hubbard & Reed. “Our figures for 2002 alone probably reflect as many arbitration matters as we would have had all kinds of litigation some years ago,” said John Townsend, who chairs the firm’s arbitration group. Townsend said his firm has coped with the “very substantial growth” by turning more litigators into arbitrators. In 2002, he said, 47 of the firm’s 300 lawyers were involved in arbitration matters, including about half of the litigation department. They handled 28 arbitration proceedings, up from 12 in 2000. Steven Hammond, co-chairman of the international practice at Hughes Hubbard, said arbitration cases are “spilling over into all our offices” and involving “more and more commercial litigators.” Hammond predicts major growth in all areas of international practice, including arbitration, particularly in Latin America and the Middle East. “Historically, the less developed countries were hostile to it, but are now beginning to accept it,” Hammond said. He cited Brazil as a major economy that is seeing its first arbitration cases arising from agreements made in the mid- to late 1990s. Debevoise’s Friedman agreed that growth will continue “because I don’t see people getting more satisfied with court systems,” but he also pointed out some problems. “Arbitration has in some instances become not cheaper and faster than litigation, or at least the gap has narrowed,” he said. He blamed the size and complexity of cases, as well as some arbitration rules, such as those that bar accessing evidence from nonparties or that prohibit joining people who are not parties to a contract. The ICDR’s Appel conceded that for the growth to continue, there will need to be changes to the arbitration process. Still, Appel said, one asset of arbitration is its flexibility and openness to experimentation. For example, in one case, arbitrators decided to save time by “witness conferencing”-bringing all the witnesses together to answer questions at the same time. Appel added that the European Union’s developing body of competition law will help force the arbitration process to keep evolving. Although details of cases are confidential unless both sides agree to waive confidentiality, Appel said one change will occur on July 1, when his organization will be able to publish redacted versions of awards, “so that parties can know how arbitrators rule on procedural issues; how they handle their responsibilities.” Changes are also in store at the ICC’s International Court of Arbitration. The ICC has announced that by the end of 2003, arbitrators there will be able to conduct much of their work online, using a secure network on which they can draft, exchange and store documents.

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