Taylor English recently secured a significant victory for its client in an international arbitration. The dispute between Taylor English’s client, a US company (“Claimant”), and a foreign entity (“Respondent”), concerned a joint venture formed to operate a business in Respondent’s country. Claimant alleged Respondent had breached the parties’ contract in multiple respects, forcing Claimant to terminate the parties’ agreement. Claimant sought monetary and injunctive relief, and a declaration it had properly terminated the contract. Respondent counterclaimed for improper termination of the contract and significant monetary damages, among other things.
The arbitration involved the typical logistical challenges of translating documents into English, using translators for examination and cross examination of witnesses, and accommodating witnesses in different time zones. After a weeklong evidentiary hearing involving numerous witnesses, both live and remote, expert testimony, and substantial financial evidence, the arbitrator ruled in Claimant’s favor, rejecting Respondent’s counterclaim and awarding injunctive and declaratory relief along with substantial financial damages to Claimant. The arbitrator also assessed all arbitration costs and arbitrator fees against Respondent. The winning Taylor English team consisted of Charles McKnight, Mickey Ross, and Toby Tatum.
Drafting Dispute Resolution Clauses: Why It Matters
Although parties and counsel hope for a smooth business relationship, counseling clients in the drafting of dispute resolution provisions in cross-border business contracts is crucial to establishing a clear and efficient framework for resolution of disputes that arise down the road. Here are some considerations:
- Efficiency: By addressing arbitration-related factors during the drafting phase, companies can minimize the expense and inefficiency of preliminary disputes concerning the administration and conduct of the arbitration.
- Clear Guidelines: Well-drafted provisions establish clear guidelines for arbitration, including selecting the institution administering the arbitration and governing rules, specification of the governing substantive law, location of proceedings, determining the place (seat) of the arbitration, and language of the arbitration, thereby ensuring parties are on the same page.
- Efficient Resolution: Specification of potentially applicable expedited procedures up front can streamline the resolution process, potentially saving time and resources.
- Neutrality: Specification of the number of arbitrators, manner of selection, and any appropriate qualifications helps ensure a fair and unbiased dispute resolution process.
- Evidentiary Clarity: Addressing evidentiary rules and discovery parameters maintains clarity on what information can be obtained and used in the arbitration.
- Interim Relief: Provisions concerning provisional relief help ensure parties can seek temporary remedies if needed, safeguarding their interests in the initial phases of the dispute.
- Customization: Careful attention to the scope of the arbitration clause, including any “carve outs" and identifying who will resolve disputes over arbitrability allow parties to tailor arbitration agreements to their specific circumstances.
- Contract Value: Well-crafted dispute resolution provisions enhance the overall value of cross-border contracts, providing confidence to all parties.
- Long-Term Relationships: Consideration should be given to the desirability of pre-arbitration dispute resolution mechanisms, such as senior management involvement and mediation. Properly managed disputes potentially help preserve business relationships despite disputes.
By addressing these and other considerations in advance, businesses can establish a solid framework for handling cross-border disputes, safeguarding their interests while increasing the ability to maintain positive relationships with business partners.