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As world shrinks, international arbitration grows

As globalization intensifies, the business world gets smaller and smaller every day. An unintended result of local businesses buying and selling in international markets, or international businesses setting up shop in South Carolina, has been that the attorneys and law firms representing them now have to brush up on international arbitration practices.

Catherine Arrowood, a partner at Parker Poe in Raleigh, North Carolina who has practiced international arbitration for decades, said that it’s important for attorneys to have a baseline knowledge of the subject for when it inevitably comes up.

“You need to know what you don’t know,” she said in an interview. “You need to know when to pick up the phone and call a specialist, and it’s helpful to have a threshold level of knowledge to know when to make the phone call.”

There are two major forms of international arbitration, Arrowood said: Commercial arbitration, which is between two private parties from different countries, and investment treaty arbitration. She said that for all intents and purposes, most lawyers are only ever going to encounter commercial arbitration.

“Typically, two commercial parties will enter into an agreement,” Arrowood said, describing the process. “When the contract is executed, more than likely, the two companies will decide to resolve disputes according to the rules of an arbitration provider.”

There are hundreds, if not thousands, of providers throughout the world. Arrowood said that organizations like the International Centre for Dispute Resolution, with which she is involved, create the rules of the arbitration, and will oftentimes oversee it.

When it comes to actually collecting on awards, Mica Worthy, a partner at Cranfill Sumner & Hartzog in Charlotte who practices international law, said that arbitration is the only way to conclusively resolve international trade disputes.

“One key difference between arbitration and litigation is there is no treaty between countries to enforce judgments,” she said. “They must go through the arbitration process if doing business in a country that signed onto the New York Convention Treaty.”

From Bamberg to Bangalore

Worthy said that apart from the particular rules of arbitration, it’s important to know the different policy issues and court traditions of the countries where arbitration is taking place.

“If you can be aware of the differences in legal traditions and what’s persuasive there, you’ll have a better understanding of how to present the best case for your client,” she said.

She and Arrowood both emphasized the importance of being connected with a network of international contacts to get the lay of the land before conducting arbitration outside of the United States. Worthy pointed toward state bar resources, while Arrowood suggested firms that do a lot of international arbitration consider joining a formal legal network like TerraLex, which provides access to attorneys from over 100 different countries.

“One reason our firm is a member of Terralex is that 90 percent of the time we’ll have a connection with a local law firm in that country who can help us with our clients’ issues,” Arrowood said.

Arrowood said another major topic worth noting is dispute resolution agreements. She said it’s common for clients to show up with unfavorable agreements that were drafted and agreed to long before an attorney ever became involved, but that it’s important to do everything possible to prevent that.

“When drafting an agreement, what should the agreement say about dispute resolution and where will those disputes be resolved?” she asked. “As a litigator, you need to think about that.”

Judge Paul Ridgeway, who has taught some variant of international commercial litigation and arbitration at Campbell University School of Law for the past 25 years, agreed that it’s particularly important for lawyers to get involved at the beginning of a transactional relationship.

“Each transaction benefits from careful legal advice from the outset,” he said. “I think any lawyers engaged in business practice is likely going to encounter an international transaction along the way. It’s one of the most important considerations.”

Charlotte’s got a lot (of arbitration)

Establishing a favorable venue from the beginning can make a big difference in how disputes get resolved, and Worthy said that Charlotte is swiftly becoming known as a destination for international arbitration.

She cited Charlotte’s banking industry, international airport and proximity to both North and South Carolina as perks to having arbitration hearings there compared to larger cities like New York or Atlanta. In addition, Worthy pointed toward the Charlotte International Arbitration Society, which she is a founding board member of, as a great resource for those who wish to host arbitration hearings in the city.

“Why go to New York? It’s not good for anybody,” she said. “The great thing about contracts is you can pick your venue. We’re hoping North and South Carolina attorneys will recognize the potential and start putting Charlotte in as the venue.”

Arrowood said that spread of global trade affects a wide swath of South Carolina attorneys.

“There is a huge number of lawyers in every size city and town being asked to advise companies moving overseas, buying overseas, selling overseas; and they need to get this basic training,” she said.

Worthy said that attorneys in the Carolinas need to be able to adapt to meet the demands of their clients.

“Because clients are having these issues, if we’re going to serve them, we have to understand international arbitration,” she said. “For our clients to benefit in the business of exporting and importing goods, it is vital for attorneys to understand how to use those mechanisms for their benefit.”

Arrowood, Worthy, and Ridgeway will all be speaking at a CLE event on the subject in Cary, North Carolina on Oct. 19.

George Doyle, a solo practitioner and mediator from Chapel Hill, North Carolina, is also helping with organizing and promoting the event. He said it is open to attorneys from both states, and that a live stream will be available for those who can’t attend in person.

Follow Matthew Chaney on Twitter @SCLWChaney

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