Of Dry Cleaning, Arbitration, and International Commercial Courts: When Courts Can Learn From ADR

By Dr Benjamin Hayward and Dr Drossos Stamboulakis

‘Those of you who have been to a dry cleaner in the United States may have seen a sign that says, “Fast.  Good.  Cheap.  Pick two.”  What this means is that you can have your dry cleaning good and fast, but it won’t be cheap.  Or you can have it good and cheap, but it won’t be fast.  Or you can have it fast and cheap, but in that case it won’t be good.  What you can’t have is all three …

Some people … seem to think that what applies to dry cleaning doesn’t apply to international arbitration.” [1]

Image: Cosmocatalano, public domain

Alternative dispute resolution might be alternative to the courts, but that doesn’t mean it’s disconnected.

International commercial arbitration and the courts have an important, and mutually beneficial, relationship.  Arbitration relieves pressure on our civil justice system.  Courts use their powers to support the arbitral process and enforce arbitral awards.  Arbitration and the courts also can – and do – learn from each other.

This last notion might seem strange, given that arbitration was traditionally seen as quicker and cheaper than litigation.  The reality now, however, is that both arbitration and litigation can be time consuming and expensive.  In light of this reality, both dispute resolution mechanisms have sought to improve their procedures over time.  When arbitration innovates, courts learn.  And when courts innovate, arbitration learns too.

All the while, both dispute resolution mechanisms must also deal with inevitable tensions arising between speed, quality, and cost.

In recent years, a number of international commercial courts (ICCs) have been established around the world.  To take just two examples, there are ICCs in Singapore and also in China.  They exist as part of those countries’ regular (national) court systems, but they specialise in hearing international commercial cases.  Australia doesn’t yet have an ICC.  Establishing an Australian ICC has been proposed, though the idea is also controversial for some.

If an Australian ICC was to be established, in the future, what could it learn from arbitration?

Potentially, quite a lot: especially given that ICCs aim to attract disputants, and as a result, they might draw inspiration from some of arbitration’s ‘distinctive features’.

One of those features is the power held by parties to select their arbitrators.  Of course, you can’t pick your judge in court.  However, an ICC can be constituted by judges having a range of international backgrounds and having specialist international expertise.  Arbitration is also renowned for its procedural flexibility.  An ICC might take a more flexible approach to the taking of evidence, and the process of proving foreign law.  ICCs may similarly allow for representation by foreign lawyers.  An ICC might further learn from arbitration’s capacity to offer more limited discovery than traditional litigation.

As courts, however, ICCs also bring with them their own benefits.  They include, for example, the judiciary’s contribution to the ongoing development of commercial law via the doctrine of precedent, and its ability to offer greater and more directive case management features designed to promote proportionality in the pursuit of civil justice.  ICCs can also more readily act beyond the parties’ autonomy, such as by joining third parties to proceedings where beneficial and expedient to do so.

Though historically thought of as rivals, arbitration and the courts have always learned from each other. The genesis of ICCs merely makes this process explicit, shedding light on the ongoing and conscious hybridisation of dispute resolution procedures in commercial dispute resolution.  It is this potential for greater responsiveness to the needs of commercial disputants, premised upon procedural innovation in the pursuit of just and efficient outcomes, that underpins the potential of a future Australian International Commercial Court.

– – –

[1] Jennifer Kirby, ‘Efficiency in International Arbitration: Whose Duty Is It?’ (2015) 32(6) Journal of International Arbitration 689, 690.

The authors are members of the Monash University Faculty of Law’s Commercial Disputes Group.

Challenges and Opportunities for Asia-Pacific International Arbitration: Symposium Report, and News on a Forthcoming Publication

By Dr Benjamin Hayward, Professor Luke Nottage, and Dr Nobumichi Teramura

Photo: Faypearse, Creative Commons

On Friday 15 November 2019, Sydney Law School hosted the ‘Challenges and Opportunities for Asia-Pacific International Arbitration’ symposium.

The event addressed a range of dispute resolution issues: international commercial arbitration, investor-State dispute settlement (including investor-State mediation), and the rise of international commercial courts.  Academics, practitioners, and (both current and former) judges were in attendance: ensuring that a wide spectrum of views were addressed throughout the day.

The symposium focused on dispute resolution in the Asia-Pacific region.  This is a topic of significant interest to the Australian arbitration community.  As far back as 2009, the then-Attorney General Rob Hulls introduced reforms to Australia’s International Arbitration Act aiming to promote Australia as a regional dispute resolution hub.  More than 10 years later, this is a goal to which Australia still aspires.

The symposium addressed arbitration in the Australian, New Zealand, Japanese, Indonesian, Hong Kong, and mainland Chinese contexts.  It followed a counterpart event hosted by the University of Hong Kong in July 2019.

The symposium’s international comparisons provide much food for thought for the Australian arbitration community, as we seek to continually improve the local landscape.  For example, what degree of confidentiality should be preserved in Australian arbitral proceedings?  And what lessons can we learn from arbitration experience, in the region, relating to the possible future establishment of an Australian international commercial court?

A collection of papers presented at both events will be published in late 2020 (or early 2021) in a Kluwer volume titled New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution.  Details of the volume, including links to pre-publication versions of some papers, are available here.

Of particular interest in the Australian context will be:

* Professors the Hon Marilyn Warren and Clyde Croft’s chapter titled ‘An International Commercial Court for Australia: An Idea Worth Taking to Market’;

* Albert Monichino SC and Nobumichi Teramura’s chapter ‘New Frontiers for International Commercial Arbitration in Australia: Beyond the “(Un)Lucky Country”’;

* Luke Nottage addressing ‘Confidentiality and Transparency in International Arbitration: Asia-Pacific Tensions and Expectations’; and

* Luke Nottage and Ana Ubilava’s chapter on ‘Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS Policy’.

Readers of this blog might also be particularly interested in Stacie Strong’s chapter titled ‘Promoting International Mediation Through the Singapore Convention’, that Convention also having been addressed at the December 2019 ADRRN Roundtable.  This chapter will mention some empirical data from a study addressing the use of mediation in resolving international commercial disputes.

Interestingly, while Australia’s geographic isolation is thought to be impeding its emergence as a regional dispute resolution hub, COVID-19 has led to the rapid adoption of virtual hearings in civil litigation and in arbitration.  The pandemic may have unintentionally highlighted a means by which Australian arbitration and an Australian international commercial court could flourish in the region: notwithstanding the unavoidable ‘social distance’ between Australia and our neighbours.

These recent developments, post-dating the symposium, will be addressed in the forthcoming Kluwer volume.  They will be of great interest to those invested in Australia’s potential as a venue for international commercial dispute resolution.

International Commercial Arbitration, its Application of the Law, and the Flexibility of its Process

By Dr Benjamin Hayward

Photo: Dennis Jarvis, Creative Commons

In a previous contribution to the ADRRN Blog, I argued in favour of taking a little bit of flexibility away from international commercial arbitration.

In my previous post, I noted that while arbitration is ADR, it remains a type of formal dispute resolution.  It also involves application of the law.  Still, where a contract doesn’t include a choice of law clause, arbitrators have to identify the law they will apply.  My doctoral research explored the significant discretion arbitrators have in this regard.

That discretion is a problem if parties chose to arbitrate because they want enhanced certainty about their legal rights.  It’s even more problematic in some particular categories of case where arbitrators have to identify the governing law even after the parties tried to agree on this issue themselves.

I’ve been thinking a bit more about this topic following a recent episode of The Arbitration Station podcast, which included a really great discussion about becoming an arbitrator.  Co-host Brian Kotick made some interesting observations about this issue, set in the context of how arbitrators decide their cases:

‘[I]t’s all discretionary at the end of the day and you can’t really predict universally what’s to be decided … I think it depends on how you approach being an arbitrator.  I know some arbitrators, their approach is “I’m only going to decide on the arguments – legal arguments and factual arguments – that are presented to me”.  And if you take that approach I think it’s much easier because your intellectual curiosity will not lead you in the wrong direction …

Another approach is finding justice – “capital J justice” – in which case you’re going to kind of take a more active role, do your own independent research perhaps … in which case it’s much more difficult of a task …”

So is arbitration about applying the law, or is it about more general notions of commercial justice?  Or is the true position somewhere in between?  Parties can specifically agree to give arbitrators the power to decide based on principles of equity and fairness, but this is extremely rare.  What, then, is the best view of arbitration’s decision-making process where they don’t do so?

In 2013, the High Court of Australia decided a constitutional challenge to the validity of an important part of Australia’s International Arbitration Act.  In upholding the legislation, it conceptualised the role of courts in enforcing arbitral awards as holding the parties to their initial agreement to arbitrate: rather than merely rubber-stamping arbitrators’ legal analyses.  The Court also held that there is no strict legal rule, in international commercial arbitration, that arbitrators must apply the law correctly.

This gets us part-way to the answer.  For a bit more, we can look to the grounds for challenging arbitral awards.

Under the Model Law and the New York Convention, both adopted in Australia, these grounds don’t include an error of law.  They do include public policy grounds.  Public policy doesn’t cover arbitrators’ ordinary legal errors, but it might cover very significant infringements of fundamental legal principles, such as the rule against double recovery.

Of more interest to me, however, is the ground relating to arbitrators not following the parties’ agreed procedure.  Application of the law is a matter of substance, but identifying what law to apply in the first place is a procedural question.  As I’ve discussed previously on this blog, arbitration laws and rules give arbitrators significant discretion in identifying the governing law.  However, they do still set out at least broad frameworks for making that decision.

While potential mistakes in the law’s application are just part and parcel of choosing arbitration as a form of ADR, in my view, parties remain protected against arbitrators violating the procedure required for identifying that law in the first place.

This is an idea I’ve been interested in for a while now.  What does it say about the exact nature of decision-making in international commercial arbitration?  I’m not yet sure, but I’m looking forward to exploring that question in my future research.

On the passing of Frank Sander: A critical, grateful view from the Antipodes

Frank Sander, dispute resolution visionary and hero, recently died, aged 91.

I thought it would be worthwhile exploring some of Sander’s achievements and impact from an Australian civil justice perspective. In particular, I will consider the relevance of  Sander’s multi-door court house idea to Australia today.

For many years, I have been teaching Non-Adversarial Justice to undergraduate law students at Monash University. The wonderful, far-ranging discussions we have in those classes have given me the chance to reflect on the impact of Sander’s work here in Melbourne, Australia.

Sander was a professor of law and dispute resolution at Harvard University in the USA. He is associated with developing the ‘multi-door courthouse‘ idea: that a single court could triage the civil matters that came before it and provide a range of dispute resolution services (both litigious and settlement-based)  depending on what is needed in each case. A multi-door courthouse is a dispute resolution centre where a grievant, with the help of a screening officer at the court, is directed to an appropriate process or series of processes. This approach is underpinned by the view that court costs and delay are increased by ill-matched disputes and processes.

In many ways the multi-door courthouse is the civil equivalent of the criminal problem-oriented court, which aims to reduce re-offending by addressing the underlying causes of criminal behaviour.

doors

Multi-door courthouse: right for Australia? image Credit: Dan Boss, Exit at the Acropolis Museum, Creative Commons

Sander is also credited with developing the now ubiquitous idea of fitting the forum to the fuss (that each matter should use an appropriate dispute resolution process). In Australia in 2018, this an uncontroversial goal, which, unfortunately, is still a long way from reality in the civil justice system.

To develop ideas that become pervasive and which define a field has a something to do with luck (timing, place, race, gender etc). But not every lucky person has clear thinking, vision and the ability to convince others. Sander was clearly an ideas man and we listened. The impact of his thinking on civil justice systems and court practice is significant, even in far-away places such as Australia.

Sander gave a famous speech in which he first set out his ideas on the civil justice system at the 1976 Pound conference held in St Paul, Minnesota and organised by then Chief Justice of the Supreme Court, Warren Burger. Many, including Jeffrey Stempel regard this conference as the genesis of the modern ADR and court reform movement.  Stempel argues that this conference was notable in its criticism of the litigation process, its promotion of ADR by its “all star cast” including the cream of the American court and legal establishment as well is the publishing of its proceedings in West’s Federal Rules Decisions, guaranteeing wide exposure of the conference’s pro-ADR sentiments, especially to the nation’s federal judges.  The proceedings of the Pound Conference can be found in ‘National Conference on the Causes of Popular Dissatisfaction with the Administration of Justice’ (Apr. 7-9, 1976) in 70 F.R.D. 79 (1976). The 1976 conference has, of course, spawned the contemporary Global Pound conferences.

Sander’s speech was at the heart of what the conference acheived. According to Diane Levin, at the 1976 Pound Conference, Sander

reminded conference participants of the limitations of traditional litigation with its “use of a third party with coercive power, the usually ‘win or lose’ nature of the decision, and the tendency of the decision to focus narrowly on the immediate matter in issue as distinguished from a concern with the underlying relationship between the parties.” He urged conference participants to envision alternatives, a “rich variety of different processes, which, I would submit, singly or in combination, may provide far more ‘effective’ conflict resolution.” And he reminded them of “the central quality of mediation”, namely “its capacity to reorient the parties toward each other, not by imposing rules on them, but by helping them to achieve a new and shared perception of their relationship, a perception that will redirect their attitudes and dispositions toward one another.”

This is a call for the integration of ‘ADR’ with the ordinary everyday business of civil courts. (There is a very readable exploration of the origins of Sander’s Pound paper  here).

More than 40 years later, Sander’s call has largely been answered.  We know that settlement has always been part of civil litigation (thanks Marc Galanter for giving us the term ‘litigotitation’). But since Sander gave that speech, various forms of ADR, especially mediation and arbitration, have become part of standard court practice in most jurisdictions. For example, the Supreme Court of NSW offers both mediation and arbitration for civil matters under Parts 4 and 5 of the Civil Procedure Act 2005 (NSW). Referral to ADR can be mandatory in most Australian courts. Court-connected ADR services in Australia are provided by in-house staff or by external service providers.

However, most Australian courts could not be called multi-door courthouses. One reason why, is that formalised dispute resolution screening processes are not in place in most Australian courts. (The NSW Land and Environment Court is a clear exception).

What I think Sander didn’t quite get it right is that his focus was largely on the courts. To my mind, the locus of conflict and dispute resolution is not at the pointy court-end of the dispute resolution pyramid, but the heavier bottom-part. Most people who have a ‘legal problem’ don’t go near a court but choose or are forced to use other methods of dealing with their matter. These methods include direct action such as physical retaliation, seizure of property or removal of offending objects, informal negotiation or exit and avoidance (‘lumping’ the problem). That’s certainly what goes on in my house!

Court-based triage and assessment of problems is going to offer very little to most people who never even conceive of their ‘problems’ as court-worthy nor have the funds to litigate. When researchers measure ADR use, there is always very low awareness of ADR processes in the community and low uptake and use of formal ADR services. Even ADR services are not the only answer.

The multi-door courthouse doesn’t reflect more recent government efforts to encourage efficiency in the civil justice system in Australia and the UK. Pre-action protocols/procedures have been implemented widely in England and Wales following the Lord Woolf Report and more sparingly (but significantly) in Australia. Pre-action procedures encourage early settlement of disputes, full disclosure of information between parties and, where the matter cant be resolved, the narrowing of issues in dispute, but all before proceedings have commenced. Pre-action procedures are important because they force the location of ADR services away from the courts and towards pre-trial services offered by non-court providers or undertaken informally. Tania Sourdin argues that pre-action procedures are a significant shift away from Sander’s multi-door courthouse and towards  a “more modern multi-option  dispute resolution model.”

I would argue that they key idea behind Sander’s multi-door courthouse idea, matching the forum to the fuss, should and does still exist as a guiding principle of Australian civil justice systems. While the location of dispute resolution activity has shifted away from the courts (in Australia at least) Sander’s ideas have shaped the civil justice landscape of our country.

Thank you, Frank.

Aspects of this post are based upon ‘Chapter 7: ADR: Appropriate or Alternative Dispute Resolution’ in King, Freiberg Batagol & Hyams Non-Adversarial Justice (2nd ed, 2014).

Hybrids have arrived – hosted by the beautiful city of Vienna

Hybrid processes are not new to those of us who teach and write in the ADR space. We have all heard of arb-med and med-arb. Some of us have even heard of Baseball Arbitration, Night Baseball Arbitration and Medaloa.

Step into the practitioner’s world and the view is different.

Here the processes of mediation and arbitration remain distant strangers, practised and accredited separately. Few practitioners have dual qualifications and even those who do are rarely comfortable with the concept of offering a hybrid process.

The next generation of practitioners is being given the opportunity of seeing things differently via a new student mooting program.

The starting point is the Willem C. Vis International Commercial Arbitration Moot (Vis Moot) which has just reached its 24th anniversary.

This moot tests the oral and written prowess of students in dealing with a complex international commercial conflict. This long established arbitration competition now has a sibling.

town hall vienna

View of the historic Town Hall in Vienna – site of the competition cocktail party. Photo Copyright Rosemary Howell

Established three years ago, the IBA-VIAC Consensual Dispute Resolution Competition (CDRC) commences in Vienna on July 10th at the beautiful University of Economics and Business (Wu Wien). Students participate either as negotiators or as mediators with separate scoring and evaluation for both roles.

The competition follows the Vis Moot and draws on the same case study (amended to remove all the procedural challenges of the arbitration). The competition opens with the news that the arbitration has been adjourned for a little over a week to give the parties the opportunity to see if they can resolve the conflict by mediation.

The competition gives an important signal that extends far beyond the students who are participating. The working committee drafting the problems has required consultation between arbitrators and mediators and encouraged a collaboration that is not often seen. Expert assessors too are being given experience in both the arbitration and mediation arenas.

The significant outcome is that not only is the next generation of practitioners being given the chance to consider hybrids up close, but practitioners are also joining the dots to draw together practices that once were very separate.

A great outcome.