CHAPTER 11 DISPUTE RESOLUTION A COMPARATIVE ANALYSIS UNDER DIFFERING LEGAL SYSTEMS

• Jurisdiction: United States

International Resources Law II: A Blueprint for Mineral Development
(Feb 1995)
CHAPTER 11
DISPUTE RESOLUTION A COMPARATIVE ANALYSIS UNDER DIFFERING LEGAL SYSTEMS
Harry L. Arkin
Attorney and Counselor at Law
Denver, Colorado and London, England

INTRODUCTION

In a very brief space, only an introduction can be made to a comparison of complex differing dispute resolution systems.

The continuing internationalization of the mineral/energy industry, despite attempts to nationalize and regionalize it, requires those involved in every aspect of the industry to be aware of the basic fundamentals of the differing legal systems one will encounter. The search for natural mineral resources continues in one way or another, to cross or involve old and new legal, tax, environmental, and cultural boundaries. Today each of those old and new boundaries contains an increasingly complex spectrum of new forums, rules, and institutions for the resolution of disputes. Each new regional, let alone global, organization and agreement contain provisions for, or refer their investors, contracting parties—nations, national, and private parties to, dispute resolution. Among the new players on the world commercial stage are: the World Trade Organization, (born out of the most recent years of semantic and economic disputes of GATT), the North American Free Trade Agreement (NAFTA), and the European Energy Charter Treaty, (signed by 45 countries in Lisbon on December 17, 1994).

What does the term "dispute resolution" mean, and how it is applied, differs from nation to nation, continent to continent, culture to culture and legal system to legal system—(including as

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to both culture and legal system those defined by religion). If you are not aware of the existence of those differences, you enter the world of mineral energy development as a blind person in a strange, new, furnished room without a guide, a stick, a dog, or even a hope of crossing it unscathed, if at all.

SYSTEMS OF DISPUTE RESOLUTION

I would ask, with reference to litigation, arbitration, and mediation, "where, and under whose law?". These are questions that define advantages and disadvantages of each method of dispute resolution, and differ depending on your perspective. As the Baron de Montesquieu wrote, "if triangles had a god, he would have three sides."¹

Litigation:

Generally speaking, and depending on where, under which law, if not which judge, litigation is perceived as the most expensive and most time consuming method of resolving disputes. It is generally conducted in public, whereby there most often is no privacy or security to testimony and evidence of, for example, technology, pricing, or marketing methods.

Who pays the fees of the victor's lawyers in litigation (and in arbitration), varies from legal system to legal system, and even within systems. For example, lawyers from the United Kingdom and most other common law countries, are appalled to discover that in the United States, except for that pre-agreed by contract or,

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rarely, provided by statute, an award of costs to a winning party in litigation does not include any of the tortuously calculated, (in England), attorneys fees of the victor. Thus, often, in litigation in the United States, (as well as in arbitration), a victory becomes a Pyrrhic victory for the client once the lawyers are paid.

Then comes the question of being able to enforce a winning court judgment, if necessary, against an opponent or their assets in a country other than where the victory was won. More often then not, one must begin again, barring bi-lateral, or, (like the Brussels Convention in Europe), regional agreements, in the courts of another country. Most often such enforcement efforts must be undertaken, under a different legal system and under different national public policies, even to attempt to have full faith and credit, given to your "foreign" judgment. All the foregoing is after you have endured, for example, in American courts, innumerable and unending discovery, depositions, production of documents, motion practice with their endless briefs, and other disruptions, and in many Civil Law jurisdictions interrupted, intermittent hearings over years of time, and, in both, a decade of appeals.

On the other hand, (my grandfather said to always hire a one-armed lawyer who would not have "an other hand"), in litigation, the taxpayers, not the disputing parties, pay for the Courts, (i.e. the rent for the Court Room, salaries of the Judges, their clerks, and their administrators). There are, however, in litigation,

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fixed rules of evidence, and known, (if you are wise enough to also employ local counsel, at least to vet your own), rules of procedure. The right of appeal in litigation can also be a blessing as well as, potentially, a curse.

Arbitration:

Arbitration then? Possibly. Again, where, under whose laws, what arbitrators and/or institutions. Arbitration has, in the past, and still in some jurisdictions, been perceived generally as less expensive in both time and cost than litigation. Arbitration is conducted in private. Under the 1958 New York United Nations Convention on the Recognition Enforcement of Foreign Arbitral Awards² , (hereinafter "New York Convention") an arbitral award is, almost automatically enforceable in over 90 countries of the world.

Dr. J. Gellis Wetter, Solicitor Royal to the Court of Sweden, in 1992, wrote a scathing critique³ of the best known of the International arbitration institutions, The International Court of Arbitration of the ICC, headquartered in Paris. To summarize, Dr. Wetter, a brilliant, highly respected and experienced international arbitrator, wrote that arbitration, at least as administered by the ICC, had become so cumbersome and costly that many of its advantages over litigation had been lost. Too many lawyers and arbitrators in American arbitrations, (and in some other common law jurisdictions), have allowed excessive litigation techniques of

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discovery and pre-arbitral motion like proceedings to invade arbitration. Thus arbitration has too often become convoluted into another form of adversarial litigation, loosing what were the advantages of arbitration over litigation.

In arbitration, but for very few grounds, the award or decision of the arbitrators is binding, i.e. there is no appeal from what may be an arbitrary arbitration award.

In arbitration the costs of the arbitrators, the chambers and the administration are borne by the parties, their recovery and that of fees of counsel of the prevailing party again depend on the arbitration rules, statutes, agreement of the parties, and the law of the jurisdiction applicable to the procedure and the proceedings.

Reported decisions of arbitrators in particular cases are few unless they are the subject of a court appeal attempting to overthrow them. Otherwise, only recently have arbitration decisions been published, only to a very small extent, and often sanitized as to the identity of the parties, except with respect to those decisions growing out of the Iran-U.S. Claims Tribunal, pursuant to the Treaty of Algiers. Perhaps one of the best sources of these reported decisions is in the annually produced Yearbook-Commercial Arbitration by the International Council for Commercial Arbitration (ICCA).⁴ Another recent report of arbitration decisions has recently begun to be published by UNCITRAL relating

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to decisions involving the UNCITRAL Arbitration Rules and the UNCITRAL Model Law of Arbitration.

Due process and public policy arguments which would often be valid in Court cases, i.e. litigation, are not in some cases ordinarily valid defenses in arbitration. A defense in this country that public policy would restrict to the courts particular claims in arbitration based on statutory prohibitions have been held not a valid defense to enforcing arbitration agreements, simply because statutory rights are also involved, e.g. securities law (Sherk v. Alberto Culver)⁵ ; anti-trust (Mitsubishi v. Solar Chrysler-Plymouth)⁶ ; bankruptcy (Fotochrome v. Copal)⁷ , and others.

The U.S. courts have held that a severing of diplomatic relations, (e.g. war), will not excuse compliance with, (or for that matter participation in) an arbitration agreement, proceedings or award, even if witnesses are unavailable due to those circumstances.⁸ Thus for example, if your company has agreed in a contract or concession to arbitration in Iraq; it would be no defense to not appearing or participating in that arbitration, or subsequent execution on an award against you, that you could not lawfully travel to Iraq. I thus suggest that you include in a dispute resolution clause within, especially third world countries, a force majeure provision which includes an escape or alternative

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venue provision.

The International Center for the Settlement of Investment Disputes (ICSID) was established by the Washington Convention in 1965 to promote foreign investment which Convention has now been ratified by over 100 countries. Until 1981, (i.e. over 16 years), however, only 9 cases were submitted to arbitration under the rules of ICSID. However, in the following 9 years 15 cases were registered, two of which were referred to conciliation rather than arbitration.

In 1985 the United National General Assembly adopted the Model Arbitration Law drafted by the United Nations Commission on International Trade Law (UNCITRAL). The Model Law was the work product of delegates from over 30 countries with a purpose of creating a uniform or common law of arbitration throughout the world. The purpose was to provide a well thought out body of arbitration law for those countries that did not have a current arbitration law or sufficient international arbitration experience or volume to put their indigenous laws in practice. The Model Law has, however, been adopted by a number of very...