By Sadaff Habib
Disputes are rarely, if ever, sought after intentionally. Typically, a commercial relationship turns sour where one party fails to fulfill payment obligations for goods, services, or completed projects. It is during such instances that the often-overlooked dispute clause in a contract comes in the spotlight.
By addressing disputes in arbitration proactively, there is potential to navigate arbitration in a manner that is both efficient in terms of cost and time. This article explores such strategies that in-house counsel could apply before and during a commercial arbitration to sculpt an arbitration into an efficient and effective process.
Paving the Path Before Arbitration
Pay attention to your arbitration clause
The recurrence of poorly drafted arbitration clauses remains a concern. For instance, in the case of Mekwunye v. Imoukhuede (2019) 13 NWLR (Pt. 1690) 439 in Nigeria, the Court held a poorly drafted ad hoc arbitration clause as valid. This clause referred to a non-existent appointing authority—the “Chartered Institute of Arbitration (London) Nigerian Chapter.” Such issues can be prevented at the stage of drafting the contract and can save parties time and cost during arbitration and on enforcement of any final award.
Other issues to be mindful of when drafting your arbitration clause are:
- The seat of the arbitration which is the legal home of the arbitration. The seat is not merely a symbolic designation; it carries substantive consequences. It determines the procedural laws to be applied and the intervention and support from local courts. The seat is where any final award rendered will be deemed to have been made and will therefore determine the grounds on which an award can be challenged before the local courts.
- The choice of the arbitral institution where institutional arbitration is agreed. Each institution has something different to offer and the costs of each differ. For example, does the contract concern the construction of a complex power plant that would warrant having the ICC as the institution or is it construction of residential villas where another institution would work better.
- The number of arbitrators. A three-member tribunal may be excessive for a supply of labour subcontract in the same way that it would be unrealistic to have a sole arbitrator on a power plant dispute. For large disputes it is advisable to have a three-member tribunal because this allows each party to nominate a co-arbitrator and for three minds to work on the complex issues that may arise.
Choose your lawyers and arbitrators wisely
Lawyers who may be unfamiliar with arbitration can inadvertently apply litigation tactics for example by introducing excessive discovery requests. The same way that one would not ask a plumber to fix faulty socket one would ask an electrician to do so is the same way a party should pick and choose its lawyers and arbitrators depending on the nature of the dispute.
One of the biggest and most consistent advantages of resolving commercial disputes by arbitration rather than litigation is the parties’ ability to appoint arbitrators with specific technical or industry expertise. However, it is important to balance such expertise with one or more tribunal members who possess strong case management abilities and have the confidence to make difficult procedural decisions. With the right mix one can have the perfect tribunal or a recipe for disaster that will prolong proceedings and add to parties’ costs.
In house counsel should not shy away from making detailed enquiries about the ethical behavior of arbitrators, their experience and/ or a potential arbitrators’ availability and the arbitrator’s interest in carefully studying lengthy submissions and witness evidence, and comprehending technical expert reports, drawings and other data. To this end, parties can consider opting for lesser known but well qualified arbitrators, who may have more availability and willingness to “roll up their sleeves”. In house counsel should also consider whether the arbitrator that they are choosing has a cooperative personality and a willingness to work in a team of arbitrators.
Strategies for Cost and Time Efficiency During the Arbitration
Active Participation by In-House Counsel
The active involvement of in-house counsel during the arbitration is important. For example, where in-house counsel is present in a preliminary meeting and a question as to the authority of the lawyers and their scope arises, this can easily be resolved without the need for further emails on the issue. In house counsel can actively engage in agreeing the procedural timetable and monitor any requests for extension of deadlines.
Efficient Case Presentation
The strategic role of in-house counsel is particularly important. The key to a successful case is bringing out and focusing your client’s strong points and this is what assessing claims is about. By working closely with legal teams and claims consultants the party’s key claims and their legal basis can be focused on as opposed to arguing the entire basket of claims. This in turn would save cost and time.
Prudent Management of Document Production
Given the document-intensive nature of arbitration especially construction disputes, in-house counsel can educate teams on meticulous record-keeping, ensuring claims are substantiated.
Parties should engage early and regularly to agree procedures and protocols for the disclosure of electronic documents, for example, by agreeing how metadata is managed, and whether agreed search terms or predictive coding are to be used. Open communication between the parties and the tribunal during the document disclosure phase may help to decrease the need for ongoing and costly skirmishes over disclosure.
In the realm of arbitration, proactivity and strategy are paramount to leveraging it as an efficient dispute resolution mechanism. By meticulously drafting arbitration clauses, selecting qualified legal professionals and arbitrators and optimizing procedures, parties can transform an arbitration into a strategic tool for resolving disputes effectively and economically.