Chicago International Dispute Resolution Association

Newsletter of The Chicago International Dispute Resolution Association
Winter 2002

Negotiating and Drafting the Dispute Resolution Clause in Major Agreements

by Teresa F. Frisbie

I. Determining the Best Dispute Resolution Method(s) to Protect Your Client's Interests

When drafting a major business agreement with a dispute resolution clause, a lawyer must perform an analysis of the best type of dispute resolution method or combination of methods to protect his client's interests. Questions to consider include: What type of dispute might commonly come up as the parties do business together under the contract? Will the client be the party paying for goods or services or providing them? Will delays work against the client? Will the client want a court's assistance or a right of appeal? Does the contract involve foreign parties or performance which crosses a national border in some way?

To perform this analysis, the drafter must have a good working knowledge of the various options. There are a myriad of dispute resolution methods, but the most common are negotiation, mediation, mini-trial, arbitration, and litigation. As definitions of these methods often vary from one professional to another, a few working definitions are set forth below, along with the most basic reasons for choosing each method.

1.1 Negotiation

Negotiation in this context means negotiation between party representatives without the assistance of a neutral. Negotiation is often set out as a first step in the dispute resolution process. The negotiation will probably work better if it is between senior level people who were not involved in the details of the dispute, and the dispute resolution clause should spell this out. While breach of a negotiation clause may as a practical matter be hard to enforce, putting such a clause in the contract is still worthwhile. When it works, it can save the client a lot of aggravation as well as legal fees.

1.2 Mediation

Mediation is a voluntary, non-binding communication process with a neutral, either with or without lawyers. Virtually every case in which facilitated negotiation is appropriate but difficult is suitable for mediation, whether direct negotiations have taken place or litigation is pending.1 If the parties have any possibility of a continuing relationship, if emotions are running high, or if saving money and time are of interest, mediation should be put into the dispute resolution clause. Again, although the lack of any real enforceability may seem to make such a clause unimportant, as will be discussed later on, including such a clause up front can be extremely useful.

1.3 Arbitration

Arbitration is a confidential, binding procedure by one or three private neutrals which involves somewhat less formality than court. Arbitration awards cannot usually be appealed. Arbitration can also be faster and cheaper than litigation, but this is not always the case. As discussed below, if the contract crosses a national border in some way, arbitration must be considered.

1.4 Mini-Trial

Mini-trial is a negotiating procedure generally, not always, assisted by a neutral third party where the dispute is presented in an abbreviated trial form to senior executives, who attempt to negotiate a resolution based on how the case played to them and to the neutral. It can be appropriate where the executives desire to be very involved in the process.2

1.5 Litigation

Litigation in the context of this article means resolving the dispute through the courts of a state or nation.

II. Common Mistakes in Drafting Dispute Resolution Clauses

2.1 Waiting Until the Last Minute to Negotiate the Clause

"As a result of either superstition or etiquette, corporate lawyers often consider dispute resolution too little, too late."3 This is a mistake for many reasons, as discussed below. Just as with drafting any other clause, the more the drafter knows about the possible pitfalls, the better the clause will be.

2.2 Forgetting to Consider Whether You Are Likely to Be Plaintiff or Defendant

Defendants often don't mind delays and like to have safeguards such as a right of appeal if something goes wrong. On the other hand, a plaintiff might like the availability of a court's injunctive powers (although arbitration tribunals may have power to give interim relief.) Whether you are likely to be plaintiff or defendant may help you decide whether an arbitration clause is appropriate

2.3 Overlooking A Mediation Clause

Because arbitration has become too much like litigation with its attendant delays and expense, parties in this country and elsewhere are turning to mediation to resolve their disputes. Mediation, or "ADR" as they call it in England, of commercial disputes is growing fast. As Sir Michael Kerr, past President of the London Court of International Arbitration recently stated: "... in the same way as I have had my mind changed about litigation in favor of arbitration, my long devotion to arbitration is now being eroded by the realisation that the future will belong to ADR."4 Mediation has an excellent track record in resolving disputes. The statistics available are impressive, running in the sixty to ninety percent success range.5

So why does mediation work better than settlement negotiations which arise during litigation? For starters, mediation focuses all the energy and talent on coming up with a first rate resolution. In litigation, it is very common for lawyers to expend a lot of effort going through discovery and preparing for trial without putting nearly the same effort and creativity into the final settlement. Most cases are settled without regard to obtaining a resolution to the dispute that actually meets the parties needs and interests and is a win-win resolution. This is a real shame, particularly as most cases are settled anyway, and a good resolution in the near term is much better for the client than just an adequate resolution after years of litigation.

Part of the reason that mediation works better is that lawyers are trained to spot issues and to tell clients what their rights are. This is very different than looking for parties' needs and interests, which is what mediators are trained to do. Moreover, lawyers often let the case drift along because they don't want to appear weak by opening settlement negotiations. The result is that the case settles on the eve of trial because the judge finally gets involved and/or the effort and expense of trial forces the parties to end the dispute. (A cynic might add that this also happens because lawyers are paid by the hour.)

The CPR Institute for Dispute Resolution has put together a good list of the reasons mediation works:

• Disputes ostensibly between dispassionate corporate entities involve human beings endowed with emotions. The mediator can help the parties deal with emotional issues. Discussions in the presence of a mediator tend to reduce misunderstandings and antagonism frequently subsides.
• Concerns beyond legal issues are discussed.
• The process itself presents a joint challenge to all participants to devise solutions. The momentum of mediation leads to accommodation. Settlement represents success for all.
• Just as an impending trial often induces litigants to stop posturing and seriously seek a settlement, commitment of the parties to a mediation is likely to motivate them to "bite the bullet" rather than to postpone unpleasant decisions. The mediator will reinforce this motivation.
• The mediator can establish ground rules designed to maximize the chances of success.
• The mediator may first urge discussions of non-controversial subjects or those for which agreement is readily achieved and postpone consideration of difficult issues. These early agreements help build a spirit of cooperation.
• Mediation provides the parties with an opportunity – at little or no risk – to crystallize issues and learn more about the other party's perceptions of the pertinent facts.
• In caucusing with each party, the mediator can diplomatically urge that party to face facts and dispel unrealistic expectations such as over-optimism regarding chances of prevailing in court. The mediator also can point to the costs and burdens of prolonged litigation.
• Once the mediator understands the true interests of each party, he or she can recommend opportunities for common gains. Many business disputes are resolved through innovative business arrangements not previously contemplated.6

The drafting stage is an excellent opportunity to get the parties to agree to mediation.

2.4. Overlooking a Multi-Step Dispute Resolution Clause

It is very common to put a combination of these methods in a dispute resolution clause. In fact, a combination clause or "multi-step clause" which takes the parties from negotiation and mediation to arbitration or litigation often does the best job in protecting the client's interests.

A possible clause is attached as Appendix A. CPR and JAMS have model multi-step dispute resolution clauses ending with either arbitration or litigation.

2.5 Being Vague About the Rules in Arbitration

Arbitrations need to be conducted by a set of procedural rules. The drafter can either refer to an existing set of rules, for example by stating that disputes "will be resolved by arbitration under the then existing Arbitration Rules of the Chicago International Dispute Resolution Association," or the drafter can draft rules such as the method for selection of the arbitrators, language, place of arbitration, discovery, use of experts, deadlines, etc. into the agreement. This is more time consuming, and it is usually easier to choose an existing set of rules.

The drafter of a clause which includes arbitration must also choose between administered and non-administered arbitration. (Mediations really don't need much administration.) Administered arbitration is where an institution, such as the American Arbitration Association ("AAA") actually administers the arbitration.7 The institution's role is not unlike a court clerk. The institution may track deadlines, route documents and collect both the administrative and arbitrator fees. Non-administered is where the arbitrator administers the proceedings once she is appointed. Certain sets of rules, such as the CPR non-administered rules and the United Nations Commission on International Trade ("UNCITRAL") Rules (for international cases), are designed for non-administered arbitration. Most institutional rules are designed for administration by that institution. However, many institutions will administer arbitrations which do not use the institution's rules.

Some of the advantages of administered arbitration are the availability of pre-established rules, administrative assistance from the institution; appointment of arbitrators; physical facilities for arbitrations; review of the final award to assure it meets basic requirements; and institutional encouragement of reluctant parties to participate.

Some of the disadvantages of administered arbitration can be higher costs, delays and institutional bureaucracy.

The institutions themselves, however, can vary in their methods of administering arbitrations and the drafter must be aware of the differences. For example, under the Chicago International Dispute Resolution Association ("CIDRA") Rules, when there are to be three arbitrators, the parties must each nominate a neutral arbitrator and CIDRA uses a list procedure to appoint the third.8 The AAA International Arbitration Rules, by contrast, provide that while the parties may nominate, if they do not, the AAA will appoint the arbitrators.9 An example of differences under domestic arbitration rules is that "The AAA rules permit party attorneys to issue subpoenas, while CPR limits that right to the arbitrator."10 The various institutions are constantly updating and improving their rules, so the best bet is to look up the rules on the website. (The drafter should also consider this when using "then existing" language).

2.6 Agreeing to a Place of Arbitration without Learning the Arbitration Law

As set forth in some detail below, the place of the arbitration will control the procedures and whether a court can interfere with the arbitration. The drafter must learn what she is agreeing to up front. If the agreement does not provide to the contrary, the place of arbitration will control the national law applicable to the procedural aspects of the arbitration, including discovery, use of experts, and selection of the arbitrators, as well as availability of provisional relief, qualifications of arbitrators, contract formation, conflict of laws rules and actions to vacate awards.11

2.7 Overlooking Fast Track Arbitration Provisions

If arbitration makes sense for the client, but there is concern that there will be delays as arbitration becomes more like litigation, the drafter can provide for this in the clause. The clause can provide for such things as the arbitration hearing must occur no more than 45 days after the arbitrator is appointed, and the hearing will last no more than one day. Care must be taken, however, that these types of provisions are truly in the client's best interests. It can be burdensome to be forced to drop everything and attend to the arbitration.

2.8 Mistakes Naming An Institution or Number of Arbitrators

Don't name two arbitrators. Don't name an institution that does not exist. (Yes, parties really do make these obvious mistakes.) Two co-mediators, on the other hand, can be quite effective.

2.9 Failing to Provide Confidentiality Protection

Confidentiality provisions in contracts contemplating arbitration, and particularly mediation, are a good idea because of gaps and variations in the law of the place of the mediation or arbitration as to confidentiality. The drafter may want to provide that all written and oral information, documents, etc. disclosed in the course of the proceedings are to kept confidential and are exempted from any use outside the mediation or arbitration.

2.10 Overlooking The Use of Technology in Dispute Resolution

Technology can assist parties in dispute resolution. While it is critical for the parties to meet face to face in most mediations, and an arbitrator often needs to hold a hearing to assess witness credibility, there are many ways that technology can assist the process. Not every meeting or exchange of information has to be in person. Institutions are beginning to recognize this. For example, CIDRA rules provide that the mediators and arbitrators are "committed to... using available technology." WIPO and other organizations already use online dispute resolution schemes.

Online Resolution, Inc. which can be found at www.onlineresolution.com, has an excellent tool called an "e-room" which can be used to augment offline mediation or arbitration. The e-rooms can be used by any neutral who wants to rent an e-room to conduct an arbitration or mediation. The company can also provide mediators and arbitrators. The e-rooms are easy to use and have document repositories, caucus rooms, calendaring features, e-mail, live chat, etc., thus offering the parties a way to save a substantial amount in courier, travel and telephone expenses as well as legal and neutral fees. As video-conferencing technology improves, online tools will assume an even more important role in dispute resolution.

Drafters may want to take advantage of this by providing that the mediator or arbitrator shall use her best efforts to streamline the process by using available technology.

III. Checklist

Here is a checklist of other considerations when drafting arbitration provisions:

• Discovery. "American style" discovery is not always available in domestic arbitrations and rarely in international arbitrations. The drafter should describe the discovery that will take place if the client wants depositions or much beyond exchanging documents. (Consider first whether discovery is really needed. Many countries get along without it.)
• Provisional Remedies. "Concerns sometimes arise that one party will try to avoid the agreed ADR procedure and win a 'race to the courthouse'."12 This can be addressed with a clause that protects venue or gives provisional relief to maintain the status quo pending resolution.13 (While many rules of international arbitration contemplate provisional judicial relief to preserve the status quo pending arbitration, some courts in the U.S. have found such relief to be inconsistent with an agreement to arbitrate.)
• Tolling Agreement. Applicable statutes of limitation can be tolled by agreement during mediation and/ or arbitration.
• Continuing Performance. The client might want a clause which provides that each party is required to continue performance under the contract pending final resolution of any dispute arising out of or relating to the contract.14
• Allocation of costs and attorney fees. If the intention is that the losing party pays, this should be stated in the clause, particularly in domestic arbitrations. A tribunal might decide to have the loser pay, or might choose to apply the "American Rule" under which limited costs and no attorney fees are assessed to the loser. In international arbitration it is common for the losing party to pay all or a portion of the opponent's attorney fees.
• Disputes to be arbitrated. The clause might cover all disputes "arising out of or relating to the contract," or only certain types.15
• Parties. The arbitration clause should be signed by as many potential parties to a future dispute as possible. (One of the great disadvantages of arbitration is that only those who agree to it are bound.)
• Judgment on Award. To be fully effective, "entry of judgment" language in domestic cases is important.16
• Number of Arbitrators. It is normally a good idea to state whether a panel of one or three arbitrators is to be selected.17
• Procedure to be used. If the contract includes a general choice of law clause, it may govern the arbitration procedure used in the arbitration. The consequences should be considered.18
• Punitive Damages. If the parties wish to include or exclude punitive damages, they should specifically so state.19
• Special rules. Consideration should be given to incorporating specially tailored rules such as the AAA's Supplementary Procedures for Large, Complex Disputes and other specialized arbitration rules.20

IV. Whether International Arbitration Statutes and Treaties Apply and Why it Matters

4.1 Overview

Because court judgments can't easily be enforced in other countries, but, as discussed below, through international treaties, arbitration awards can, most contracts which cross national borders have arbitration clauses. Therefore, any drafter of a major business agreement needs to be aware of the legal environment for international commercial arbitration.

4.2 Illinois International Arbitration Act / UNCITRAL Model Law

Lawyers who usually draft business agreements between domestic parties might think they do not need to know about such matters as international treaties. However, due to globalization and the Internet, even middle-market businesses are involved in contracts that cross national borders in some way, either because a party or some aspect of performance is located in another country. Moreover, the threshold for a deal to be "international" under the law applicable to dispute resolution clauses can be very low.

For example, it takes very little under the United Nations Commission on International Trade ("UNCITRAL") Model Arbitration Law ("Model Law"), which has been adopted in countries all over the world, as well as in a number of U.S. states, including Illinois as the Illinois International Commercial Arbitration Act. The Model Law provides:

Therefore, under the Model Law, even if the two contracting parties are both U.S. businesses, if the conduct which gives rise to the dispute takes place at the Canadian warehouse of one of the businesses, the dispute could be subject to the Model Law.22

4.3 The New York Convention

Any discussion of international commercial arbitration must include a description of the treaty which gives meaning to the concept, specifically the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York) June 10, 1958 or "New York Convention." The importance of the New York Convention cannot be overemphasized. The New York Convention has now been ratified or signed by more than one hundred countries.23 The effect of the New York Convention, and certain other similar treaties, such as the Inter-American (Panama) Convention, is that most countries recognize and enforce arbitration awards awarded in other countries. The enforceability aspect of international arbitration awards is one of the most important advantages of including an arbitration clause in any international contract.

By contrast, if no arbitration clause is included in the contract, the parties will be left to try to obtain and enforce a judgment from a court system located in either the United States or another country.

Enforcement of a U.S. judgment in another country can be quite difficult. First, there is no reciprocal enforcement of judgment treaty that binds any other country with the United States.24 Thus, other nations often are only bound to recognize U.S. judgments under principles of "comity", i.e., "the principle in accordance with which the courts of one jurisdiction will give effect to the laws and judicial decisions of another jurisdiction, not as a matter of obligation, but out of deference and respect."25

Different countries have different requirements for recognizing foreign judgments. Most foreign courts are required to examine the procedural and substantive laws that formed the basis for the domestic judgment to determine whether they comport with the foreign country's notions of judicial fairness. If the laws of the domestic forum are considered incompatible, enforcement of the judgment is generally denied as a matter of public policy.26

4.4 Transnational Litigation Problems

The other alternative, proceeding in a foreign court, removes the problem of achieving an enforceable judgment, but is often undesirable for reasons of inconvenience and lack of neutrality. There are often difficulties in establishing jurisdiction over the person of the defendant, particularly if the defendant is an individual rather than a corporation doing business in several places at once.

A look at it from the client's point of view is helpful:

Therefore, before entering into a contract which crosses a national border, a party must consider how difficult it would be to obtain and enforce a U.S. judgment in the other country or to litigate in that country, and whether an arbitration award enforceable under the New York Convention would be preferable. Typically, in the international setting, the benefits of an arbitration clause outweigh the possible disadvantages. A drafter should keep in mind that in order to reap the benefits of the New York Convention, the arbitration agreement must be in writing and the arbitration must take place in a signatory state.28

4.5 Federal Arbitration Act

A drafter of a dispute resolution clause in an international contract also needs to be aware of the Federal Arbitration Act29, the law which usually governs international arbitrations in the United States. The FAA currently consists of three chapters; (a) the "domestic" FAA, Sections 1 to 16, applicable to awards affecting either interstate or foreign commerce; (b) Sections 201 to 210, the New York Convention's implementing legislation, and (c) the Inter-American Arbitration Convention's implementing legislation.30

A drafter must be aware of the differences and be deliberate in her choice of a state arbitration procedural law or the U.S. Arbitration Act. The Supreme Court has held that if you refer in the contract to state law, the state arbitration statute will apply. Volt Information Sciences, Inc. v. Board of Trustees.31 Although that decision was limited by a subsequent decision32, it is probably a good idea to spell out which substantive law and which arbitration law is intended so the client doesn't have to pay lawyers to dispute these issues.

4.6 Choosing the Substantive Law of the Contract

If the other side insists on applying it's own or some neutral (but irrelevant) country's law, the parties can avoid problems with choice of an undeveloped substantive law by providing in the clause that the arbitrators shall decide the dispute using (a) the terms, spirit and intent of the contract; (b) the commercial practices of [the particular international industry]; and (c) the law of [developing country]. This should work well as the arbitrators will look to the contract first and major business agreements often provide for most contingencies.

4.7 Choosing the Language of the Arbitration

In international arbitration it is always a good idea to specify the language of the arbitration. Agreeing that versions of the contract in two different languages are equally "official" can lead to a lot of misery later on and should be avoided.

V. The Importance of the Place of Arbitration

5.1 The Legal Rules Which Impact International Arbitral Proceedings

It might seem as though choosing the place of the arbitration should really depend on convenience and cost, and that a place should be selected which is not too far away from where the witnesses and events relating to the dispute are located. However, the place of arbitration has far more importance than this. It determines the law applicable to the proceedings.

In drafting an international arbitration clause one must consider six sources of law:

1. The law governing the parties capacity to enter into an arbitration agreement
2. The law governing the arbitration agreement and the performance of that agreement;
3. The law governing the issues in dispute - - the substantive law of the contract
4. The law governing the recognition and enforcement of the award (which may be more than one law if you are trying to enforce it against assets in more than one country);
5. The conflict of laws rules that are to be applied; and
6. The law governing the existence and proceedings of the arbitral proceedings – this is the "curial law" of the arbitration or lex arbitri;33

The situs of the arbitration impacts many of these.34

5.2 The Legal Environment for the Conduct of the Arbitration

As noted above, the law of the place of arbitration usually provides the procedure for the arbitration. It is unusual to negotiate anything else. If the dispute is subject to the Model Law, the Model Law is an important "gap filler" for the procedure of the arbitration. "[The Model Law] offers a default determination of a range of procedural issues."35 There are provisions about the number of arbitrators, an arbitrator appointment procedure, the determination of rules of pretrial and trial procedure, the language to be used, how experts will be used, what discovery can be performed, etc.36 U.S. parties who find their dispute subject to the Model Law might be surprised by some of its provisions, as they are more akin to court procedures in civil law countries. For example, under the Model Law, books, records, documents and other evidence may be subpoenaed by parties for the purpose of presenting evidence at the arbitration hearing but the arbitration "will not include pre-trial discovery as known in common law countries."37 Evidence depositions may sometimes be permitted, but "no other discovery shall be permitted unless otherwise agreed by the parties."38 Furthermore, under the Model Law, civil law style is used where the tribunal "may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal."39

The Model Law discussed above has been enacted in a number of countries, including Australia, Bermuda, Bulgaria, Canada, Cyprus, Hong Kong, Mexico, Nigeria, The Russian Federation, Scotland, and Tunisia40 as well as U.S. states such as Illinois, Florida, California, Connecticut, Oregon and Texas.41 If the Model Law has been enacted at the place of arbitration, a drafter knows she getting a predictable framework for international commercial arbitration, although some countries have adopted the law with modifications.

Liberal arbitration laws in the United States, France, England, Canada, New Zealand, Switzerland, Sweden, the Netherlands, and Germany also qualify all of these jurisdictions as "arbitration-friendly," although this list is not exhaustive.42 Even in these places, however, there are substantial differences. For example, if Switzerland is the place of arbitration, the award can be overturned for many more reasons than here in the U.S., where it is limited to such things as bias, corruption or manifest disregard for the law.43

British Columbia can be a good choice. It has adopted the Model Law and "offers the advantages of being located outside the United States, often an imperative for the non-U.S. party, but still within an English-speaking common law jurisdiction relatively convenient for the U.S. party."44 It also has the British Columbia International Commercial Arbitration Center.

It is better to name the city or town which will be the place of arbitration rather than the country, because the law may change from state to state within a country as it does in the United States. As stated above, a drafter would also be wise to be sure that the place of arbitration is a signatory to the New York Convention, to ensure that the award is later enforceable.45

5.3 Mediation Considerations in International Disputes

In many countries, including Belgium, Italy, and Sweden, professional confidentiality privilege can be invoked by lawyer mediators, but not by non-lawyers.46 This should be provided for in the clause.

It should be noted that if the case is resolved by mediation, it should be reduced to a formal agreed arbitration award, so it can be enforced under the New York Convention. This underscores the advantages of a mediation-followed-by-arbitration clause. (Having the same person act as both mediator and arbitrator is not a good idea, however, as a mediator has access to confidential information.)

VI. Ten Tips On Getting Existing Disputes Into Mediation

As the purpose of this paper is to discuss issues which arise when drafting a dispute resolution clauses, rather than drafting agreements to submit existing disputes to mediation or arbitration, it may seem odd to include a section on getting existing disputes into mediation. From this author's experience, however, it is crucial for any lawyer drafting a major business agreement to understand just how difficult the litigators will find it to raise mediation as an option in the event of a dispute. The big question in mediation is always how to propose it without appearing weak. Providing a mechanism up front in the form of a mediation clause can save the clients substantial sums over the long term. Even though the negotiation and mediation aspects of a dispute resolution clause may seem unimportant at the time of drafting, particularly in light of enforceability questions, having such a clause in the agreement may provide the parties with a way to avoid this quagmire.

Eileen Carroll and Karl Mackie of the Centre for Effective Dispute Resolution in London have put together an excellent list of ways to get a dispute into mediation without losing face.47 As stated above, having a contract clause obviates the problem and therefore heads the list:

1. "Refer to contract provisions which either require mediation or which imply it, for example ‘references to best or reasonable endeavors to find amicable settlement;'"
2. Let the business contacts who are not part of the dispute make the first effort;
3. Acknowledge that you are in a stalemate and that arbitration or litigation are inevitable so you might as well try mediation, which, if it works, is much cheaper;
4. Tell the other side that as a lawyer you have made it your policy to always at least attempt mediation;
5. Tell the other side that your client has a policy of always attempting mediation;
6. Contact an institution such as the Centre for Effective Dispute Resolution in London (or the Chicago International Dispute Resolution Association) and ask the institution to approach the other side;
7. Point out that the court or the arbitrator will send you to mediation anyway, so you might as well start talking about it;
8. Offer to have just a preliminary mediation now. "Ask a ... mediator to talk to both sides without obligation on anyone's part to enter mediation until they are satisfied that the process has benefits for them;"
9. Call it something else besides mediation. This is where you suggest something that sounds more appealing to the other party, such as "independent case review" or "Board-level appraisal."
10. Let the other side choose the mediator or offer to hold the mediation at the other side's location. Since the mediator does not make a binding decision, there is little risk in doing this. If the mediator is not very good, you can always just terminate the mediation proceedings. Also, the travel expense should not be an obstacle because mediations often do not last more than a couple of days and the savings from avoiding a protracted proceeding can more than justify it.48

CONCLUSION

Negotiating the dispute resolution clause is often the last thing the lawyers want to do when they feel they have put the rest of the deal to bed. Of course, this is actually the best time to negotiate it, because the parties are still dealing amicably. In the international setting this is particularly true. It is a real mistake to draft a dispute resolution clause which provides for litigation in United States courts if the foreign party has no assets in the United States against which to enforce a judgment and has its principal place of business and assets in a jurisdiction which does not recognize U.S. court judgments. Moreover, in the case of arbitration, the drafter must understand the procedures that will apply either because they are set forth in the clause, or by default based on the place of arbitration. As clients know only too well, much of the money spent in litigation, and particularly litigation relating to arbitration, is spent on procedural issues. This can be avoided by the use of negotiation and mediation up front and by careful drafting of arbitration provisions.

1 CPR European Mediation Procedure (1996) www.cpradr.org/formbook/index.html
2 George W. Coombe, Jr., State of the Art ADR: Multi-Step Dispute Resolution, Chartered Institute of Arbitrators, North American Branch, Entry Level Course Materials p. 14. (1997)
3 Dana Haviland and Jeffrey Hassekiel, "Worldly Preparation: Alternative Dispute Resolution in a Global Setting," San Franciso Daily Journal (1999)
4 Eileen Carroll, and Karl Mackie, INTERNATIONAL MEDIATION -- THE ART OF BUSINESS DIPLOMACY, p.2 (Kluwer Law International 2000)
5 Mickey Meece, Postal Service Becomes a Model of Conciliation, THE NEW YORK TIMES, September 6, 2000; The Center for Analysis of Alternative Dispute Resolution Systems (CAADRS) statistics on Major Civil Litigation Mediation Cross-Circuit Summary Report, October 23, 2001; www.cpradr.org
6 CPR European Mediation Procedure (1996) www.cpradr.org/formbook/index.html
7 CPR, JAMS, JDR and others can also administer arbitrations. In international cases, CIDRA, the ICC, the LCIA, AAA (under international rules) and many others will perform this task.
8 CIDRA Arbitration Rules, Article 9.1
9 AAA Commercial Arbitration Rules, Rules R-13 to R-15
10 Terry L. Trantina, Design ADR clauses that satisfy client's needs and minimize Litigation Risk, Alternatives May, 2001
11 Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION IN THE UNITED STATES, pp. 71-76 (Kluwer Law International 1994).
12 www.cpradr.org
13 Id.
14 Id.
15 www.adr.org
16 Id.
17 Id.
18 Id.
19 Id.
20 Id.
21 710 ILCS 30/1-1 et seq.
22 Although there is a lack of precedent concerning the Model Law as enacted in U.S. states, it seems that the Federal Arbitration Act permits parties to contract for arbitration procedures other than the ones provided in the FAA. Roadway Package System, Inc. v. Kayser; 257 F.3d 287(3rd Cir 2001); Great Western Mortgage Corporation v. Peacock, 110 F.3d 222 (3rd Cir. 1997)
23 Institute for Transnational Arbitration Scoreboard of Adherence to Transnational Arbitration Treaties
24 Park, W., When the Borrower and the Banker Are At Odds: The Interaction of Judge and Arbitrator in Trans-Border Finance, 65 Tulane Law Review 1323, 1328 (1991).
25 Novicoff, M., Blocking and Clawing Back in the Name of Public Policy: the United Kingdom's Protection of Private Economic Interests Against Adverse Foreign Adjudication, 7 J. Intl. L. Bus. 12, 1 (1985), citing Doescher v. Estelle, 454 F. Supp. 943, 948 (N.D. Tex. 1978).
26 Campbell, D., Enforcing American Money Judgments in the United Kingdom and Germany, 18 S.Ill.U.L.J. 517, 520 (1994).
27 Dana Haviland and Jeffrey Hassekiel, "Worldly Preparation: Alternative Dispute Resolution in a Global Setting," San Franciso Daily Journal (1999)
28 Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION IN THE UNITED STATES, p. 75 (Kluwer 1994).
29 9 U.S.C. Section 1, et seq.
30 Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION IN THE UNITED STATES, p. 29 (Kluwer 1994)., p. 29.
31 489 U.S. 468 (1989)
32 Paul Davis Systems v. Paul W. Davis Systems, 1998 WL 749041 citing Mastobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57-54 (1995). See also, note 22 supra
33 Alan Redfern & Martin Hunter, THE LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, p. 72 (Sweet & Maxwell 1991)
34 Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION IN THE UNITED STATES, pp. 71-76 (Kluwer 1994).
35 Peter V. Baugher and Steven M. Austermiller, A New Way to Resolve International Business Disputes in Illinois, 88 Illinois Bar Journal 582 (2000).
36 Id.
37 Id.
38 Id.
39 Id.
40 Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION IN THE UNITED STATES, p. 38 (Kluwer 1994).
41 Id.
42 Dana Haviland and Jeffrey Hassekiel, "Worldly Preparation: Alternative Dispute Resolution in a Global Setting," San Franciso Daily Journal (1999)
43 Drafting Effective Dispute Resolution Clauses, September 18, 1996 presented at Baker & McKenzie, New York office by Newman, Hannesian and Rovine www.bakerinfo.com/offices/56/litigation/091896.asp
44 Dana Haviland and Jeffrey Hassekiel, "Worldly Preparation: Alternative Dispute Resolution in a Global Setting," San Franciso Daily Journal (1999)
45 Id.
46 CPR Model Mediation Agreement for Business Disputes in Europe, Commentary, p. 11.
47 Eileen Carroll, and Karl Mackie, INTERNATIONAL MEDIATION -- THE ART OF BUSINESS DIPLOMACY, p.2 (Kluwer Law International 2000)
48 Id.

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