Choices that make the difference

In favor of success in arbitration, the parties must establish applicable procedures

Maria Cibele Crepaldi Affonso dos Santos
Vamilson José Costa
Marina Gabriela Santos Fusinato

The success in arbitration and the better enjoyment of the advantages arbitration may offer are directly related to the strategies and procedural choices made by the parties of an agreement and/or litigation.

The first step essential to succeed in an arbitration procedure is certainly the negotiation of the arbitration clause (for further details, please refer to the article “For the sake of arbitration, the arbitration clause must be simple and complete”, published on April 20, 2017, available at the link). Even though the clauses that provide methods to solve conflicts are commonly neglected during contractual negotiations – being even called “midnight clauses” -, they provide choices very important to the outcome of controversies and about which there would hardly be an agreement between the parties when facing litigation.

Therefore, one can use as an interesting example the international contracts, in which the parties dedicate significant attention to the choice of law substantially applicable to the contract and, many times, lack interest in the specifications of the arbitration clause (such as election of the seat of the arbitration). Clearly the governing law has an important impact on the solution of future litigation; however, the laws are, by definition, abstract, and, as a general rule, impartial, which means that their provisions are highly predictable. On the other hand, the impact of the election of a seat that is not stable or impartial is less predictable. Moreover, at the time of the contract, it is not possible to know the rules relating to the annulment of an arbitration award; therefore, it is necessary to consider possible undue interferences from the political, economical and social reality concerning the development of the procedure.

If it is certain that, once included the arbitration clause, arbitration will already be a reality in the life of the contract, the guarantee of an efficient procedure is still far from being reached. In addition to the negotiations prior to the commencement of the arbitration, other essential choices are still to be made jointly by the parties and by the arbitration tribunal. After all, the biggest advantage of arbitration in relation to the Judiciary is precisely its high level of specialization, being tailored to the circumstances of the present case.

Arbitration provides to the parties and to the arbitration tribunal a broad scope to optimize the procedure and shape it to the needs and specificities of each case. Indeed, when the parties and the arbitral tribunal gather efforts to manage the procedure, arbitration tends to be quick and economically profitable, properly providing the jurisdiction protection sought. However, if the parties ignore the strategic importance of the procedural choices, the flexibility of arbitration may delay the litigation and increase the costs.

Unfortunately, is common for the parties and arbitrators to apply “ready-to-use solutions” or to worry about procedural matters only during the development of the arbitration. Even if the arbitration is institutional, there will be the need to adequate the procedure to the specific litigation. The arbitration regulations are not inclined to thoroughly rule each procedural step, establishing procedures and terms. Far from that: most arbitration regulations are flexible and barely (or even do not) include provisions regarding the development of the arbitration procedure, and said details are left to the arbitrators and parties. For instance, the arbitration regulation of the International Chamber of Commerce does not have any provision on the number of manifestations, the method to hear witnesses, the way the hearings shall occur or the division of the procedure.

Indeed, it is necessary to establish the way the arbitration shall be conducted at the first opportunity, even if the decisions may be altered throughout the procedure according to the parties or as a decision from the arbitration tribunal. It is prudent to establish (and to maintain, unless there is a serious reason to change it) a realistic schedule for the entire arbitration. Accordingly, it is important to provide the rules and principles that shall guide the production of evidence, especially when dealing with cross-border litigation. Even though, ultimately, the arbitration tribunal has the power set the schedule and the main procedural rules, the opinions, claims and the control of the parties are crucial for determining these matters.