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We recently successfully defended a Japanese client in the first phase of an international arbitration. After eight days of trial, the arbitrator issued an interim decision finding in favor of our client on each of the disputed
issues of contractual interpretation in the case. As we prepare for the second phase of the arbitration, we look back on some of the lessons we learned from phase one.
If Possible, Identify a Specific Arbitrator Acceptable to the Client in the Arbitration Agreement Before Any Disputes Arise
In our case, the parties had agreed to settle a prior dispute, in part, by entering into a distribution agreement. As the parties had a history of prior disputes, it was important to our client that the parties agree on a mechanism which
would ensure that any future disputes under the distribution agreement would be decided by a neutral arbitrator acceptable
to our client. Accordingly, we negotiated the following arbitration clause in the distribution agreement before any disputes had arisen:
"The arbitrator shall be a mutually agreeable retired federal judge. In the event that the Parties are unable to agree upon the selection of a retired federal judge to act as arbitrator within
ten (10) days following the initiation of any such arbitration proceeding despite each Party’s reasonable, good faith efforts
to make such a selection, the arbitrator shall be the Honorable John Smith[fn1] (which selection is pre-approved by the Parties if Judge Smith is available and willing to serve as arbitrator)."
This clause was helpful because once the first dispute did arise, the parties were in fact unable to agree on a retired federal
judge to serve as arbitrator. Accordingly, the default provision came into play, and Judge Smith was appointed as the arbitrator because he was "pre-approved"
by the parties.
If the Parties Have Agreed to Arbitrate Their Disputes, Use a Broad Arbitration Clause to Discourage Collateral Litigation
In our case, the parties had a history of prior disputes over the arbitrability of various claims. In order to avoid the risk of having some claims decided in litigation while other claims would be arbitrated (thus losing
the benefits of arbitration for some claims and running the risk of inconsistent rulings by the court and the arbitrator),
it was important to our client that all disputes, including disputes over arbitrability, be decided in arbitration. Therefore, we negotiated the following broad arbitration clause:
"Any claim, controversy or dispute between or among the Parties and/or their Affiliates and/or any of their officers, directors,
employees or agents, including, without limitation, any claim, controversy or dispute regarding arbitrability or the jurisdiction
of the arbitrator and any claim, controversy, or dispute arising out of, relating to or connected with this Agreement, or
the breach thereof, shall be resolved by binding arbitration . . .
and judgment confirming the award rendered by the arbitrator may be entered in any court having jurisdiction."
We believe that this broad arbitration clause discouraged the parties from bringing any collateral litigation against each
other in an effort to deprive the other of the benefits of arbitration. With the benefit of 20/20 hindsight, we might have negotiated an even broader clause so that it would also apply to non-signatory
third parties such as the parties’ respective licensees, distributors, and customers. Although such non-signatories would presumably not be bound by the parties’ arbitration clause, they would most likely have
the option to elect arbitration in the event they are sued by one of the parties.
If Arbitration Counsel Was Also Involved in the Negotiation of the Agreement in Dispute, Consider Bringing in Additional Arbitration
Counsel for Objectivity
In our case, arbitration counsel for both sides had also been involved in the negotiation of the distribution agreement at
issue. Therefore, while there were great benefits for both sides to having arbitration counsel involved with personal knowledge
of all the underlying facts, there was also some risk that such arbitration counsel might not look at the dispute with complete
objectivity. Recognizing this risk, we selected a trial team for our client that included three lawyers who had nothing to do with the
underlying dispute. We believe that our client benefited at the arbitration from the objectivity of these three lawyers.
Keep It Simple
Most international arbitrations involve multiple witnesses, multiple boxes of potential exhibits, and multiple potential arguments. After spending months preparing a complex international dispute for arbitration and analyzing all of the evidence (including
potentially thousands of email messages), counsel must resist the natural urge (a) to trot out at the hearing every single
argument, witness, and exhibit that directly or indirectly supports its client’s case, or (b) to rebut every single argument,
no matter how tangential or weak, made by the other side. We found that it is much better to select a few strong simple themes and stick to them. Otherwise, you run the risk of confusing (or more likely boring) even the most patient and conscientious arbitrator.
Focus on the Documentary Evidence
In many cases, the oral testimony from the witnesses presented by both sides will be in sharp conflict. The arbitrator may then be faced with making a difficult credibility determination. In such cases, to assist the arbitrator, it is critically important to present a clear, cogent, and chronological presentation
of the documentary evidence that supports the oral testimony. Our case was no different and we believe that by consistently focusing on the documentary evidence in our pre-trial briefing,
our opening statement, our direct examination and cross-examination of witnesses, and our closing statement, we assisted the
arbitrator in finding the facts without having to rely solely on disputed oral testimony.
If the Witnesses Are Located in a Different Time Zone from the Location of the Arbitration Hearing, Fly Them to the Hearing
Early Enough to Avoid "Jet Lagged" Testimony
In our case, our witnesses mostly lived in Japan and the arbitration hearing was in California. Although our witnesses would have strongly preferred to attend to other business in Japan right up until the beginning of
the hearing, we arranged for them to arrive early so that they would be as fresh as possible for their testimony. We also insisted that their depositions be taken in Japan for the same reason. In such cases, it is equally important for counsel taking and/or defending depositions in a different time zone to arrive
early so as not to be "jet-lagged."
If English is Not the First Language of the Witnesses, Make Arrangements for a First-Class Lead Interpreter and "Check" Interpreter
to Be Available at the Hearing and at Any Depositions
We cannot stress enough the importance of having a good lead interpreter and a good "check" interpreter. Otherwise, the testimony may become garbled on the record and make the witnesses appear to be inarticulate through no fault
of their own. First-class interpreters are often booked far in advance and so it is important to make arrangements as soon as you know
that you will need interpreters. In our case, we booked "check" interpreters for the depositions in Japan as soon as they were scheduled. During the morning session of the first deposition in Japan, both sides realized that the lead interpreter was inadequate
and that our "check" interpreter was doing a better job of interpreting. The parties therefore stipulated to the use of the "check" interpreter as the lead interpreter for the remainder of the depositions. If we had not booked first-class "check" interpreters well in advance of the depositions, we would not have had this option
and the record would have suffered.
Footnote:
1 This is not the real name of our arbitrator.
