'Are We There Yet?'
'Are we there yet?' This often-asked question is usually made by a restless child already exhausted from a long journey with the family with no end in sight. The parents typically respond in the negative, reprimanding the child for his constant repetition of the question. While the child may be asking out of genuine curiosity, the parents generally know where they are but are equally frustrated and tired by the length of the journey. In many ways, international alternative dispute resolution (ADR) is on a similar journey in the Americas. Like the family trip, some of us may not know where we are, and others have an idea but all are tired and concerned as to how long this journey is taking, especially since we all expected to have already arrived. In our case, the destination is the development and embrace of international ADR culture throughout the Americas and, for this journey, the response to the question 'are we there yet?' would have to be 'no'; like the travel-weary parents and child, we will certainly arrive at our destination but it just might take a little longer than we thought.
It is beyond the scope of this article to provide an analysis of the state of international ADR on the American continent and one must guard against overly broad generalisations that fail to provide any meaningful data from a region as large and diverse as the Americas. Candidly, I fear that even the opening metaphor would not equally apply to all the countries of the western hemisphere. Yet from the institutional perspective of an administrator and provider of a full range of international and domestic ADR services, I am of the opinion that while tremendous progress has been made, we have arrived at a crossroads where one path offers opportunities for growth and progress while the other offers the prospect of further delay and the possible loss of the regional advancements made.
The fast lane
By all indications from the 1970s until 2001, we were certainly justified in the shared optimism that international ADR was on the fast-track to continued growth and acceptance throughout the Americas. During that period, we saw the US ratify the New York Convention) in 1970.1 Chief Justice Warren E Berger in 1971 spoke out in support of arbitration and the American Arbitration Association (AAA). The US Supreme Court in Bremen2 held that the agreement of the parties to arbitrate their disputes arising out of their international commercial transaction was to be respected and enforced by the federal courts and in accord with the provisions of the Federal Arbitration Act. In 1974, the US Supreme Court upheld international trade arbitration in Scherk.3 In the 1980s, Chief Justice Berger issued a nationwide call for greater use of private arbitration as an alternative to litigation. The US Supreme Court ruled in Southland4 that the US Arbitration Act creates federal substantive law that is applicable in both federal and state courts and which supersedes conflicting state law in transactions evidencing commerce. In a landmark ruling in Mitsubishi,5 the Supreme Court held that where a transnational contract contains a broad arbitration agreement, antitrust claims are arbitrable. The arbitrability of claims by investors against securities brokers was upheld by the Supreme Court in a major ruling handed down in Shearson/American Express.6 These cases and others clearly established a strong federal policy favouring arbitration.7
In Latin America between the mid-1970s and the late 1990s we witnessed a remarkable change in attitude towards international arbitration. Before this period of optimism, the 'Calvo doctrine' represented the region's attitude towards international arbitration. Calvo, an Argentine diplomat, formulated the doctrine in response to European armed interventions in Latin America to collect or enforce a number of claims on behalf of its citizens. He took the position that aliens doing business in Latin America were to be required to submit their claims for grievances to the local courts. This doctrine developed into the Calvo clause, which some countries included in their Constitutions.8 By the mid-1970s, Latin American countries were interested in attracting foreign direct investment (FDI) and took steps to reject Calvo and offer protections to foreign investors including embracing international commercial arbitration. Latin American countries enacted new arbitration laws and in 1975 the Inter-American Convention on International Commercial Arbitration (the Panama Convention) was opened for signature.9
The Panama Convention is a regional treaty whose aim is to ensure the enforcement in national courts of arbitration agreements and arbitral awards. Its importance to the region's embrace of international commercial arbitration cannot be overstated with fundamental changes being made to the regions legal framework of international commercial arbitration. The United States ratified the Panama Convention in 1986.10 Moreover a number of Latin American countries at the time had ratified the Panama Convention before ratifying the New York Convention.11 One of the unique features of the Panama Convention12 is its article 3, which requires that if the parties provide for arbitration and do not select a set of procedural rules in their arbitration agreement, the arbitration rules of the Inter-American Commercial Arbitration Commission (IACAC) shall apply. As one author writes:
The incorporation by law, in the absence of an express agreement between the parties, of the IACAC Rules into an arbitration agreement subject to the Panama Convention makes it imperative that the parties' negotiators and counsel are familiar with these (IACAC) rules.13
The IACAC is an administrator of international arbitrations and mediations. It is an international institution that has a specialised focus on the alternative dispute resolution landscape for the Americas. To provide its services, it relies on its network of national and associated sections, which consists of local offices throughout the western hemisphere and includes offices in Spain and Portugal. To date, the IACAC network includes 28 national and associated sections with additional applications for associated membership currently under review.14 During the aforementioned period of optimism, IACAC and its national sections were active in many of these pro-arbitration reforms.
Clearly, by the end of the 1990s, there were numerous reasons for believing that international ADR would continue to grow in the region and the positive attitude of Latin American countries favouring arbitration confirmed this trend.15 These advancements were also aided by the work of the United Nations Commission on International Trade Law (UNCITRAL) as it promulgated its Arbitration Rules, which were used at the time as the basis for a number of institutional arbitration rules16 and for its Model Law on International Commercial Arbitration, which were adopted completely or in part by numerous countries as they drafted new and modern pro-arbitration legislations. The optimism and positive trends for international ADR were not only limited to private international ADR but applicable to the investor-state arbitrations as well. Latin American countries, as a further rejection of their past hostility to arbitration and in order to attract FDI, provided investors with additional ADR mechanisms in the form of arbitrations administered by the International Centre for the Settlement of Investment Disputes (ICSID) by signing the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention).17 The ICSID Convention provides a forum for the resolution of disputes by the investors from member countries and the host states for the investments from other member countries. ICSID applies its Rules of Procedure for Arbitration and Conciliation Proceedings and maintains an Additional Facility to handle disputes that do not fall within its usual jurisdiction. The ICSID Convention was opened for signature in 1966 and the United States ratified it that year, but the majority of Latin American countries would not sign the treaty until the 1980s and 1990s;18 and by 1998, only 14 cases had been brought to ICSID. Moreover after the acceptance of more Latin American countries of the ICSID Convention,19 we also saw an increase in the number of free trade agreements, an increase in the number of bilateral investment treaties (BITs) and, in 1995, the acceptance of the dispute settlement procedures found in the World Trade Organization (WTO). These developments in the field of investor-state arbitration seemed positive at the time and, along with the advancements made in private international commercial arbitration, the shared feeling was positive in North America and in Latin America Calvo was gone. We were making excellent time in the fast lane with few obstacles ahead.
Throughout the Americas, we had arrived at a crossroads that can arguably be traced back to 2001 and the Argentine economic crisis along with the subsequent investor-state arbitration backlash. The Argentine's government's currency devaluation and the reduction in value of Argentine assets led to over 40 ICSID cases being filed against Argentina. During this period, these cases were highly contested, with the government taking the early position of asserting its sovereignty and challenging ICSID's jurisdiction, which was covered extensively in the media and throughout the international ADR community. ICSID cases were filed against other Latin American countries and the majority of the early decisions went against these governments, further fuelling the perception that the ICSID system favorued the investor. These investor-state problems were further exacerbated by Bolivia's withdrawal from the ICSID Convention and Ecuador's notice to ICSID that it would no longer accept its jurisdiction over oil, gas and mining disputes. Venezuela has also suggested that it may also withdraw from the ICSID Convention. While scholars have debated over the practical significance of these actions the turmoil that stems from these cases in response to a number of nationalisations is gaining support in these countries as a consequence of a number of growing populist and nationalist movements.20 Unfortunately these investor-state arbitrations that are playing out in the media have had an adverse effect on private international commercial arbitration, prompting some scholars to argue that we may be seeing a return of the Calvo doctrine.21 There has been a chilling effect on supportive ADR legislation, a number of troublesome judicial decisions and an increase in the arguments against arbitration citing the potential for abuse by secret tribunals, lack of access to courts and violation of the state's sovereignty. The investor-state cases have also affected North America, with NAFTA disputes being heard by ICSID's additional facility.22
The investor-state arbitrations are not solely to blame for slowing us down on our journey. Other obstacles have included the rising costs of the process, the increase in the common law practice and abuse of 'discovery' in international ADR and the growing danger of having the process resemble litigation more than arbitration, which is delaying the resolution of these disputes. The debate over the proper scope of the arbitrator's disclosures and challenges continues to be a problem. Moreover, in the past few years, hundreds of arbitral institutions have been created throughout the world with many lacking the experience, staff, ethics, rules and arbitrators to be able to provide ADR administrative services efficiently.
The express lane
Clearly there are challenges ahead for all of the stakeholders in international ADR. The role of the institutions will be an important one as guardians of the arbitral process they will have to respond to these problems in a proactive way. The International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association (AAA), has implemented a number of initiatives aimed at keeping international ADR heading in the right direction. The ICDR operates globally with offices in New York, Dublin, Mexico and Singapore as well as a network of cooperative agreements providing alliances with local institutions around the world. In response to rising costs, the ICDR carefully monitors all expenses, offers mediation where possible, suggests a streamlined process that can be filed online based on documents only before a sole arbitrator and offers a refund schedule should the parties settle their matter in mediation. In response to the 'discovery' problems, the ICDR has promulgated a set of Guidelines for Arbitrators Concerning Exchanges of Information, which reflect the institution's policy and expectations for the cases administered pursuant to it rules. The purpose of these guidelines is to make it clear to arbitrators that they have the authority, the responsibility and, in certain jurisdictions, the mandatory duty to manage arbitration proceedings so as to achieve the goal of providing a simpler, less expensive, and more expeditious process.23 Although ICSID will be at the forefront of the investor-state arbitrations, the ICDR, which also administers cases with state parties, will be monitoring developments and changing attitudes in the field to consider whether revisions or procedural changes are needed to respond to the evolving case load at hand. In addition, the ICDR is working with its global network, IACAC and the Association of American Chambers of Commerce in Latin America (AACCLA) throughout the Americas to reinforce that investor-state arbitration is different from private commercial arbitration and that there has been and continues to be advancements made in private international ADR in the region. Countries like Peru and Chile have new modern arbitration laws and join Mexico and Brazil as they move in a pro-arbitration direction. Other countries have also made significant advancements and these must be recognised and encouraged as well. Arbitrators, lawyers, the judiciary and the legislatures will hopefully work together along with the institutions to ensure that international ADR will continue to gain broader acceptance in the future. International ADR in the Americas has made great strides and while we may have hit a speed-bump or two, there is no turning back. We will all arrive at a fully developed arbitral culture in the Americas providing predictable dispute resolution systems where speed, efficiency and justice will be the custom meeting the needs of international trade today and for the future.
The ICDR's model arbitration clause
Practitioners who wish to designate the ICDR as their administrator can arbitrate future disputes by inserting the following clause into their contracts:
Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.
The parties should add the following provisions:
- 'The number of arbitrators shall be (one or three)';
- 'The place of arbitration shall be (city and/or country)'; and
- 'The language(s) of the arbitration shall be __.'
The International Centre for Dispute Resolution is an international institution that can provide efficient, neutral and affordable dispute resolution services to parties from all over the world. For further information and contact details please visit the ICDR's website at www.adr.org/icdr.
1. UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 21 UST 2517, TIAS No. 6997, 330 UNTS 38 (the New York Convention). The text of this Convention is reprinted in the notes under chapter 2, section 201 of the Federal Arbitration Act, 9 USCA section 201 (West 1999).
2. M/S Bremen v Zapata Off-Shore Co, 407 US 1 (1972).
3. Scherk v Alberto-Culver Co, 417 US 506, 519, 94 SCt 2449, 2457, 41 L Ed 2d 270 (1974).
4. Southland Corp v Keating, 465 US 1, 104 SCt 852, 79 L Ed 2d 1 (1984).
5. Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, 473 US 614, 638, 105 SCt 3346, 3359-3360, 87 L Ed 2d 444 (1985).
6. Shearson/American Express v McMahon, 482 US 220, 224-25 (1987).
7. Information obtained from material copyrighted by, and posted with the permission of, the American Arbitration Association. For more info visit the AAA's web site at www.adr.org.
8. Donald Shea, The Calvo Clause at 21-24 (1955).
9. Inter-American Convention on International Commercial Arbitration, opened for signature 30 January 1975, OAS SER A20 (SEPEF), 14 ILM 336 (1975) (the Panama Convention). The text of this Convention is reprinted in the notes following chapter 3, section 301 of the Federal Arbitration Act, 9 USCA section 301 (West 1999).
10. Charles R Norberg, 'International Arbitration and ADR in the Western Hemisphere', 14 Institute for Transnational Arbitration 3, 3 (2000).
11. See Panama and Brazil.
12. For an in-depth analysis of the Panama Convention, see John P Bowman, The Panama Convention and its Implementation under the Federal Arbitration Act, Kluwer Law International, (2002).
13. Id at 30.
14. IACAC national sections are located in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Portugal, Spain, United States, Uruguay and Venezuela; associated sections: Santa Cruz, Barcelona, Medell’n, Valpara’so and Arequipa.
15. Horacio A Grigera-Na—n, 'Latin America: Overcoming Traditional Hostility Towards Arbitration', 477 International Commercial Arbitration: Recent Developments 375, 380 (Practising Law Institute, 1988).
16. The IACAC Rules of 1988 were based on the UNCITRAL Arbitration Rules.
17. Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965, 5 ILM 532 (1965) (the ICSID Convention).
18. See www.icsid.worldbank.org/icsid (last visited 10 October 2008).
19. With Mexico, Brazil and Canada notable exceptions but Canada has signed and its ratification is expected.
20. Arif Hyder Ali, Alexandre de Gramont, 'ICSID Arbitration in the Americas', Global Arbitration Review: The Arbitration Review of the Americas, 6, 9 (2008).
21. See Bernardo Cremades, 'Resurgence of the Calvo Doctrine in Latin America', 7 Business Law International 53 (2006).
22. Ali, supra, note 20, at 6.
23. See generally International Centre for Dispute Resolution, www.adr.org/icdr (last visited 10 October 2008).