The Rise of International Arbitration
The impact of the global economy and the continuing trend of increasing volume, size and complexity of cross-border transactions have served to fuel the demand for international arbitrations as a means to resolving trans-national disputes. Even relatively modest size companies are now routinely undertaking business away from the home market which, in the event of contractual dispute, opens up the uncertainties associated with litigation in a foreign court. International arbitration is now the accepted way of dispute resolution between parties to international commercial contracts and allows companies to avoid the national courts in favour of a demonstrably neutral predetermined decision-maker. In particular, international arbitration allows the parties to a contract to agree in advance how matters will be addressed in the event of an unresolved dispute: the choice of arbitral organisation of which there are many, the place of arbitration, the language to be used, the number and selection of arbitrators, the prevailing law and procedures to be followed. Generally, an arbitral tribunal in a complex commercial matter will be composed of three arbitrators: a jointly or independently determined chairman with each party then free to select one independent arbitrator each. An important factor also is the issue of confidentiality: international arbitrations are private affairs whereas court cases are generally part of public record, although public companies may, of course, be required to disclose proceedings in any event.
International arbitration developed out of domestic arbitration but the procedures and practices relevant to an international arbitration have now evolved to such a degree that demands for this service are often met by discrete and separate group of professionals.
This is true not just for lawyers but also for the forensic accountants who act as expert witnesses in international arbitrations and are called upon to calculate losses for claim purposes.
I find myself increasingly required to act as an expert forensic accountant in international arbitrations and have been called upon to give evidence in the International Chamber of Commerce, International Court of Arbitration (ICC) and the London Court of International Arbitration (LCIA), two of the more significant Arbitral Tribunals. The protocols and guidance for experts that have evolved during recent years in the High Court remain relevant as a measure of best practice, but you must not lose sight of the fact that an international arbitration is not the UK High Court and indeed one of the main advantages of an international arbitration is that the parties are not tied to any one country’s jurisdictional procedures.
In international arbitrations, the forensic accountant needs to be able to adapt to the different cultures and business practices. Frequently, sufficient understanding can only be achieved by spending time with the client in their country of operation. As cases are often complex and significant sums of money are at stake, it is fundamental that the forensic accountant invests time in understanding the key legal issues involved in the dispute. The challenge is to retain the objectivity and neutrality required of an expert witness whilst maximising your contribution to the case by working closely with the legal and client team. You also need to be resilient as an expert witness giving evidence to an international arbitration. Arbitrators frequently put questions to the expert witness so with each side’s appointed legal advocates and often three arbitrators, questions can come in quick succession from perhaps five people.
Industry sectors such as construction and energy were quick to latch on to the advantages of international arbitration as the preferred method of dispute resolution but these days commercial arrangements involving engineering, supply contracts, distribution and license agreements, intellectual property, maritime charter, joint ventures and many other areas are as likely to be subject to international arbitration arrangements. Similarly, in the past parties were often multinationals, state-owned and/or state agency organisations. Today, parties may be medium-sized companies with a need to manage the risks associated with overseas trade.
Parties to international arbitration can come from almost any combination of countries. I was fortunate enough to spend several years working in Italy during the early 1990s and it was this background that led me to become involved as a forensic accountant in my first international arbitration dispute between UK and Italian multinationals in around 1994. Since that time I have acted as an expert witness in international arbitration disputes involving parties in the UK, USA, India, Romania, Russia, Austria, Finland, Israel and East Africa – the list continues to grow.
Of course, parties to an international dispute may be able to resolve their differences by mediation and avoid the need for further argument, whether it is trans-national litigation or international arbitration. However, given the added complexity of different languages and cultures, it seems safe to say that international arbitration will remain the preferred solution to international contractual disputes for the foreseeable future.
Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.
Julie is a member of the Insolvency Practitioners Association and the None Administrative Receivers Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.