By: Katherine Newman, CPA, CFF
Global companies are increasingly opting to include international arbitration clauses for dispute resolution in their cross border contracts. Disputes are generally resolved more quickly, and the litigation costs can be significantly lower. Traditional litigation in the U.S. usually entails sweeping discovery, even when a major portion of it is not used. Arbitration is usually faster and less time consuming, therefore less costly in terms of both internal and external resources.
Perhaps the most compelling reason to use arbitration is having a neutral venue with well-defined procedures and standards. If a contract is between companies based in Spain and Brazil, for example, neither company wants to be at the mercy of the other’s home country jurisdiction for fear of bias, or subject to laws and business practices they may not be familiar with. The U.S. has a long history of arbitral law, which is not true for many Latin American, African or other countries around the world.
Since appeals are generally not allowed under the rules, who the parties choose as arbitrators is probably the most important factor in the outcome of the case. Most contracts refer to the rules of the institution named in the contract, such as the International Chamber of Commerce or the International Center for Dispute Resolution. When three arbitrators are selected, each party selects one and the two selected choose the third. All must be independent and impartial. The arbitrator need not have legal training, but may have extensive knowledge of the industry or niche the companies in the dispute operate in. It may also be helpful to have at least one of the arbitrators be from the country of the principal place of business of the company.
The contracts need to be very specific about which of the international arbitration entities will preside and where the arbitration will be held. When the contracts are drafted, it is helpful to use lawyers familiar with the pitfalls of arbitration versus civil litigation, the advantages and disadvantages of certain locations, and the wording of the agreements.
International arbitration in the U.S. has increased dramatically in the last 10 years, and is positioned to grow still faster as business becomes more globalized. The two cities in the Southeast best positioned to take advantage of this growth are Miami, Florida, and Atlanta, Georgia.
Miami is a second home to many Latin American and European executives and entrepreneurs. It is also a popular city for the Latin-American headquarters of global companies. Additionally, Miami has the infrastructure in place to hear complicated global business disputes. For instance, there are many law firms with extensive experience in international arbitration and the necessary cultural awareness skills. Miami also has a large population of professionals fluent in Spanish and Portuguese, and in-depth knowledge of the business practices in Latin America.
It is common in commercial disputes to use the services of expert witnesses in valuation and accounting to compute lost profits and other damages. Miami is home to many accounting and consulting firms with the language and cross border business skills to make a valuable contribution to the case. The cost savings alone from not necessarily having to translate all the documents and proceedings from the language of the dispute is a major plus, as is the comfort level of the parties when the professionals can communicate with them easily.
Moreover, in 2014, the Eleventh Circuit established an International Commercial Arbitration Court as a subsection of Miami-Dade County’s Complex Business Litigation Section to exclusively focus on international commercial arbitration matters, with two specially trained judges to hear arbitration award appeals. Judges will receive training provided by the University of Miami, in conjunction with the Miami International Arbitration Society. The University of Miami School of Law has also added a graduate program in international arbitration and is dedicating resources to globalizing its curriculum.
While much of the focus in Miami is on Latin American arbitration, Atlanta is also positioning itself as a global hub for international arbitration. The legal leadership in Atlanta is throwing its support to the practice area of international arbitration in Atlanta, with an initial focus on Africa. Recently, the Atlanta International Arbitration Society (“AtlAS”) held a conference titled, “Enhancing Business Opportunities in Africa: The Role, Reality and Future of Africa-Related Arbitration.” AtlAS is also one of the driving forces with the Georgia State University College of Law in completing the school’s newest building (scheduled to open fall 2015), which will house the Atlanta Center for International Arbitration and Mediation, a state-of-the-art facility that will offer a concierge service providing physical space and logistical support for arbitrations and other proceedings. The building will also serve as a laboratory for leading technology applicable to arbitrations and similar hearings.
Similar to Miami, Atlanta is part of the U.S. Court of Appeals for the Eleventh Circuit, which is friendlier to international arbitration than any other federal circuit, according to a recent article in the Daily Business Review (July 18, 2014). Both the Florida and Georgia bar associations allow foreign lawyers to handle arbitrations in their states.
Both Miami and Atlanta are sophisticated cosmopolitan cities that are easily accessible by international travelers, and less expensive than New York and the traditional European seats of Paris, London and Geneva—and even newer hotspots such as Singapore and Hong Kong.
With offices in Miami and Atlanta, Cherry Bekaert has a team of experts with extensive experience in cross-border investigations and international arbitration hearings. Contact one of our Advisory Services professionals for further assistance.