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Guide to Regional Arbitration (volume 8 - 2020)

Whitelist / Institutions Worth a Closer Look – North America

23 January 2020

Overview

The United States is home to the mighty American Arbitration Association (AAA). When it first sought to attract international cases, it hit some obstacles. One was its name, which didn’t sound very neutral. This led to a different persona – the “ICDR” – for foreign-related work.

But a bigger obstacle was that “American arbitration” had come to be regarded as different from “international” arbitration. In Europe (the home of international arbitration), it was traditional for all the arbitrators to be neutral; in AAA arbitration, only the chairman had to be. Indeed the wingmen in AAA were expected to be partisan; their role was to be advocates for whoever appointed them.

The ICDR had to adopt this European approach. Which it did – becoming in the process a big international player (particularly in Latin America). But the perceptions surrounding the “American-style” arbitration slowed the AAA/ICDR’s international arrival down.

Nor did it help that US companies are so often one of the sides in international cases or that the US’s national arbitration law – the Federal Arbitration Act – is so creaky (it dates from 1926). Both have helped keep work from the shores of the US.

Nowadays, the era of Trump is creating visa problems for lawyers and key witnesses hoping to attend hearings in the US.

Still, despite these obstacles, the US is an important international seat. And it has three arbitration institutions worth knowing about: notably the AAA (ICDR), the CPR and JAMS.

White List

  • International Centre for Dispute Resolution (ICDR)/American Arbitration Association (AAA)
  • Judicial Arbitration and Mediation Services (JAMS)

Worth a Closer Look

  • ADR Chambers Canada
  • International Institute for Conflict Prevention & Resolution (CPR)

White List

International Centre for Dispute Resolution (ICDR)/American Arbitration Association (AAA)

What is it?

The oldest and most respected arbitral provider in the US.

How old?

The AAA was established in 1926, a year after Calvin Coolidge signed the Federal Arbitration Act. This marked the culmination of a period when successive presidents – beginning with Theodore Roosevelt, who initiated the second Hague Convention in 1907 – had thrown their weight behind international arbitration.

Why does it have two names?

The ICDR is the global face of the association, set up in 1996 to provide conflict management services in non-domestic cases.

Where is it based?

The ICDR has a multilingual staff and a geographically diverse board of directors. It has offices with hearing centres in New York, Mexico City, Bahrain and Singapore, but its headquarters are in New York (also home of the AAA).

How international is it?

It is widely used by non-US parties. In 2018, it registered 993 new cases under ICDR rules. The largest single claim was worth US$2.8 billion

Is it like the LCIA and ICC in having a multicultural, international oversight body?

Very much so. The ICDR’s international board includes some very familiar names – George Bermann, John Fellas and Jean Kalicki, for example. Kaj Hobér in Sweden, Kevin Kim in South Korea and Makhdoom Ali Khan in Pakistan are on the non-US side.

How has it developed such a reach?

By putting in the legwork. The ICDR has had a number of senior figures who have been based in particular regions, or else have travelled them extensively, over the years, and that promotional effort has over time paid off – particularly in Latin America. They’ve also led the ICDR into a joint ventures, such as in Bahrain.

What are the rules like?

The revised current ICDR rules came into force at the beginning of 2014, and included a number of adjustments to increase transparency, efficiency and speed.

Among the changes were: a new rule to ensure mediation is offered as a first step in all matters; a revision to its list system, which now kicks in when the parties fail to select a panel (under this system, parties have to strike out names on the list they don’t want and whoever remains at the end is deemed worthy of appointment); and a change to the upfront payment required to get a case started. It also announced an ICDR twist on the expedited procedure.

What was that twist?

Cases of US$250,000 or less are now automatically expedited, while those of US$100,000 or less are arbitrated on documents alone.

The ICDR says cases going the expedited route will be decided within 135 days of filing.

Who are the case handlers and what role do they play?

Similar to the ICC, the ICDR has a fair-sized secretariat which performs key functions under the rules, especially at the outset of the case. In the past, lawyers using it regularly had a series of grumbles about this group – trivial, sometimes but generally heartfelt – mostly to the effect that the ICDR staff weren’t multilingual enough for their role, or seemed too junior or inexperienced for the gravity of the decisions that sometimes fell to them under the rules.

Happily, those comments appear to be a thing of the past. This may in part be thanks to the growth in international LLM programmes in the US, which has given the ICDR a supply of well-qualified (and affordable) foreign lawyers to recruit from. If the ICDR staff are still “not quite as good as the ICC”, as one New Yorker maintains, the gap is much less. And they don’t tend to interfere as much as the ICC staffers do!

How busy is it?

The AAA usually handles around 1,000 cases a year.

What’s it been doing recently?

In 2016, the ICDR reorganised its staff along sector lines. From now on counsel and directors will work on the same types of dispute repeatedly. It also created specific panels of arbitrators for aerospace, aviation and national security cases. In 2017, it appointed new leaders for its under-40 group. It has also said it plans to make information on arbitrator challenges publicly available and to create an arbitrator research tool, but after trailing this in 2018 it has released no further news.

Judicial Arbitration and Mediation Services (JAMS)

What is it?

JAMS was founded in 1979 by retired Californian judge Warren Knight, who decided to create a panel of former judges to arbitrate and mediate complex commercial cases as an alternative to the US court system. Today it has 25 offices in the US and two overseas.

It’s big then?

Yes. And getting bigger. In July 2018, JAMS revealed that it is opening two new centres in Los Angeles and New York, which will be dedicated exclusively to international arbitration proceedings. The Los Angeles centre hopes to take advantage of a softening of California’s arbitration law when it comes foreign lawyers appearing in cases (hitherto, a deterrent to sending cases there).

JAMS also has a panel of nearly 300 full-time neutrals, who between them turn over more than 12,000 cases most years. Though 70% of these cases are mediations, that’s still more than 3,500 arbitrations a year.

How international is it?

It’s trying, is probably the fairest description. JAMS has now gone through several phases in its approach international work – none transformative. Initially, around 2007 it forged strategic alliances with entities such as the HKIAC (but these are not much mentioned any more), followed by the announcement of JAMS International in 2011, an international arm with partnerships and offices in Toronto, London, Amsterdam, Milan, Ireland and Rome.

More recently JAMS International seems to have been reabsorbed into JAMS and the website now lists only two foreign locations: Toronto and London. But, as mentioned, it is opening new “international branches” in California and New York.

JAMS has its own international rules. In 2017 it released statistics suggesting it handled around 115 new, international arbitrations that year (“230 filings, evenly split between arbitrations and mediations”).

Is there evidence of really big cases going there?

JAMS does occasionally handle huge matters. One example was between BlackBerry and Qualcomm in 2018, in which a JAMS tribunal ordered Qualcomm to return US$815 million in overpaid royalties to BlackBerry. JAMS also handled the case filed by the embattled Hollywood producer Harvey Weinstein against his own studio after it fired him in the wake of sexual misconduct allegations.

How does the JAMS process work?

JAMS use a “managed arbitration process” made up of checklists and procedures intended to keep things to time and budget. Because its neutrals are required to be available full time, at least domestic arbitration hearings are scheduled promptly and most matters are resolved within six months of the appointment of the arbitrator, it says.

Are the arbitrators “imposed” on the parties?

No, there’s more or less full party autonomy, and the list of neutrals is fully public (and detailed – see the institution’s excellent website at www.jamsadr.com). But if you don’t pick at least one JAMS neutral for the case, JAMS won’t administer the case.

Is the list still just made up of retired judges?

No, it also welcomes lawyers, an increasing number of whom hail from outside the US. A notable recent arrival was Olswang’s former head of arbitration, Andrew Aglionby, who was rumoured to be returning to the English Bar before it emerged he had joined JAMS’s “completely independent, credible chambers-type set-up in London” in 2015. Neutrals are in some cases attracted by a feature of JAMS’s ownership structure.

How is it structured?

JAMS is a for-profit (it turns over much more than US$100 million a year) owned by approximately 100 of its neutrals and management, who have one share each.

Hasn’t this ownership structure caused problems recently?

Yes. In October 2019, the 9th Circuit overturned a sole JAMS arbitrator’s award because he failed to disclosed he was one of these 100 shareholders. (See “Arbitrators must disclose stakes in arbitral bodies, says US appeals court”), 24 October 2019, Global Arbitration Review).

Is that not a problem?

Yes and no. It sounds bad, but in fact the ruling arises more from US arbitration law’s fetish for disclosure (failure to disclose is the greatest sin of all) than any real underlying problem. Nobody who is not a conspiracy theorist believes that JAMS is institutionally unfair.

On the other hand, it won’t help JAMS: as it threatens to inspire a wave of similar cases.

Going forwards, the problem is easily solved with a change to JAMS’s standard disclosure processes.

How up to date are the rules?

The international rules came into force when the initiative began in 2011 and the Comprehensive Arbitration Rules and Procedures in the US came about in 2014. The latter set includes streamlined procedures for matters under US$250,000.

In 2016, JAMS updated its international arbitration rules and procedures, introducing emergency relief first for the first time

Worth a Closer Look

The following providers are also all worth considering, for the right sort of case.

ADR Chambers Canada

What is it?

A private company made up of retired judges and experienced lawyers, based in Toronto.

How well established is it?

It’s been around since 1994, and, around the time of its 20th anniversary, was reporting a caseload of 17,000 arbitrations and 23,000 mediations a year. If those numbers make it sound big, it actually has an “active members” list of around 40 names.

How does it manage the work?

Neutrals are divided into “expert panels” that focus on the various types of disputes the centre handles, which are split fairly evenly between commercial and civil matters.

Who’s on the neutrals list?

Among the judges, GAR readers will recognise names such as Babak Barin and Barry Leon.

Why’s it only “worth a closer look”?

Its caseload to date has been fairly domestic.

Could that change?

On paper, Toronto has the makings of a great arbitral seat. It’s a multicultural, international city (about half of its residents were born outside Canada) with good international connections. It also has one of the world’s nicest hearing centres – Arbitration Place – a purpose-built venue not dissimilar to Maxwell Chambers in Singapore. It is in the heart of Toronto’s financial district.

Are the two connected?

Arbitration Place is an independent business with plenty of partners, including the ICC and LCIA. But ADR is among them, and its neutrals have conducted hearings there.

International Institute for Conflict Prevention & Resolution (CPR)

Why’s it worth keeping an eye on?

The CPR was established in New York in 1979 by a group of enlightened in-house counsel who wanted to find ways around the cost of US litigation. In those days it was called the Centre for Public Resources. It changed its name (though not its initials) in 2004, but it still has the same ties to the US in-house world (and to a lesser degree to non-US in-house lawyers too).

Who are the people to know there?

CPR’s president is now Allen Waxman, a former general counsel at Pfizer and other lifesciences companies and more recently a partner at Arnold & Porter Kaye Scholer.

He took over from Noah Hanft, president and, former general counsel of MasterCard in 2019.

There is also a full-time team and eminent board that includes both in-house counsel, such as Richard Hill of Shell, and private practitioners, such as Renato Grion of Pinheiro Neto and George Bermann, the US academic and arbitrator. Mark Baker of Norton Rose and Hagit Elul of Hughes Hubbard & Reed who may also be familiar to readers holding CPR positions too.

Is it busy?

We don’t know. Thus far, the CPR hasn’t released caseload statistics, and its annual review for 2018 is no different. Rathern it likes to point out that its panel of neutrals continues to expand, etc. To its credit, that panel does now feature a number of famous names, such as Albert Jan van den Berg and Michael Pryles.

Is there any anecdotal evidence regarding its use?

It does come up in cases – we know that from the material that GAR 100 firms send in. There will be a clutch of CPR disputes every cycle.

It has a track record for innovating too, so it gets mentioned fairly often at conferences. Indeed, it received a GAR Award for innovation in 2016.

What are some of its innovations?

One is its appellate option, which allows the losing side to appeal the case to essentially a new tribunal. It’s fair to say, that receives a mixed reaction when discussed in the wider IA community.

Another innovation is its screened appointment process. This gets much more approval as a clever way to avoid the moral hazard created when an arbitrator knows who has appointed them (the hazard being they will pander to that side). Under the screened procedure, the arbitrator simply doesn’t know who has appointed him or her. GAR gave the screened process its innovation award. How it works in practice remains to be seen.

More recently, CPR also introduced a “young lawyer rule”, giving tribunals discretion to permit junior lawyers to examine witnesses and to present arguments if lead counsel and the client agree to it.

What are its rules like generally?

The rules have a big focus on efficiency and avoiding delays. For example, they require the centre to approve any scheduling orders or extensions that would cause an award to be rendered more than a year after the formation of the panel.

They also cap the administrative fees at US$34,000. And they include a mandatory pre-hearing conference that the parties must attend.

Another change is that they make the CPR the case’s administrator – something it hadn’t previously done.

Have the rules been tested yet?

They’re still fairly new, having come into force at the end of 2014 and having been revised in 2018. And, again, there’s no way of knowing without access to the centre’s stats.

Why isn’t it yet on the White List?

Lack of hard data, mainly. The centre has only recently moved formally into case administration, which was introduced in the 2013 rules (by all accounts it had administered cases before then, for private company schemes and so on).

When it releases more case statistics taking that step will be easier. For now, none of the practitioners GAR has asked in New York yet had direct experience of the CPR as a case administrator (in contrast to the ICDR). Thus it remains for now in our untested category.

There is, however, no doubting its deep connections with the local international disputes bar – many of whom (Ank Santens, Larry Newman and Rob Smit) have chaired its arbitration committee. The current chair is Hagit Elul.

So the signs are favourable and it ought only to be a matter of time.