International Arbitration: The Importance of a Governing Law

 Principal Attorney of the Campbell Law Group, Regina Campbell, discusses International Arbitration & Litigation: The Importance of a Governing Law & Venue Clause with Guest Speaker George A. Bermann.

George A. Bermann, Professor of Law at Columbia Law School in New York, is an active arbitrator in both international commercial and investor-state disputes. His extended experience in international arbitration would be fascinating to our audience.

The Campbell Law Group P.A. while representing clients whether in civil, corporate, commercial, employment, or family law matters, our company’s primary goal is first to help clients minimize the need for unnecessary litigation and conflict where possible. 

Contact us by calling our office at (305) 460-0145 or emailing us at service@thecampbelllawgroup.com.

Transcript

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Hi, good afternoon, everybody. We want to welcome everyone back for the episode two.  

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Episode two of season two of the legal zone. I’m your host, Regina Campbell. And today we have the  

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pleasure of bringing on a speaker very well.   Well known world round known person.  I, the attorney, excuse me, Mr.

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George Bermann, which is going to help us and be able to answer some questions for us today.  The topic is of one of specific interests and importance related to international law and  

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arbitration, and specifically the importance surrounding governing law and venue clauses.  

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So, Mr. Berman, he's the director of. Sorry, I'm going to let me bring you in. I'm sorry. Mr. Bermann.  

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He's the director. This is Mr. Berman, as everyone can see on the screen. And Mr. Berman   is the director of the center for international commercial investment arbitration at Columbia law.  

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Mr. Berman is also a world renowned authority on comparative law, European law, international trade contracts,  world trade, dispute, resolution, and trans national

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Litigation and arbitration in general law.  Welcome Mr. Bermann. Thank you. And thank  

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you for coming on with us today. It’s such a pleasure to have some with your   experience to shed some light on some of these issues. In general, we all know, of course the  

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we all know that everything as with everything in contract law, you agree, what you agree to in writing is what can make  the, make a difference, a world of difference.

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The written provisions. Can a contractor meant to embody the essence and the spirit of the   parties of what the parties have agreed to. And therefore, most general, generally, most courts  

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in the world absent a public policy issue. We’ll first review what the parties. Wrote or agreed to,  

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so, to speak, to determine how to apply different laws and what the parties intended. Since many countries have their own laws and, and governing body of law,  

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the jurisdiction can make a monumental difference in how a contract is interpreted and enforced.   So, we brought you on to help us as not just lawyers, but of course,  

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businesspeople navigate this water and the difficulties that exist. With not just including a governing law clause or venue clause as well,  

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but writing it properly and effect. So, we were hoping that you might be able to assist us  

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today. One of the first questions. Okay.  Thank you. And by the way, yeah, say, say, hi,  

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so, one of the first questions is though the requirements may vary from country to country.

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Oh, I'm sorry. Did you want to say something? Oh no, no, no, no. The other requirements may vary  

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from country to country. What do you recommend a governing law clause? Must. Okay, well, thanks  

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for having me Regina mm-hmm it's a, it's a real pleasure. It's a subject I like speaking about. So  

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let me say before I answer your question that on some of your questions we will distinguish between  

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litigation and arbitration because the, the, the circumstances are different in some respects.

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So, from time to time, I'll drive a wedge between the two. In answering you but as a general  

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matter a choice of law clause will start with those will of course, most importantly, designate  

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the jurisdiction who substantive law, the parties are submitting. I underscore substantive.  

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That means the law governing the merits of any dispute that may in the future arise.

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Mm-hmm now choosing a jurisdiction is more complicated than it may seem  

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certainly, in the us with a federal system you are advised to choose a state law  

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rather than us law, if only because we have no us. On many subjects, including Tor and contract,  

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so advised to select a state you don't need to select a county, or a city no select a state  

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and bear in mind that whatever the substantive law of that state is presumptively mm-hmm.

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the law in accordance with which your rights and obligations. Will be defined. So, Regina that's  

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that's paramount mm-hmm and we want precision about that. Now there are some more narrowly  

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gauged issues I'd like to mention mm-hmm that may not be as well known. First of all,  

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it is desirable. If you are serious about.

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The law being the law, you select, then you might want to avoid the risk.  

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And this is fairly complicated.  You might want to avoid the risk   that a court will review the law you chose as including its conflict of law rules.  

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Now, I'm not sure if that makes sense to everybody but maybe I should elaborate a little.

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Yeah, choice. Every jurisdiction has so-called choice of law rules, which means if the parties  

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haven't selected a law then that jurisdiction tells you what law will apply to that kind  

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of case. Now, there are some countries in the world, let's say, when you choose French law,  

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first and foremost, you're choosing French choice of law, not French law.

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Yeah, it means that French choice of law might send you to Brazil. Yeah, I hope that's clear.  

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now, fortunately, there is a presumption that when you chose a law,  

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you did not choose conflict of law rules of that state and I think you'll agree with me,  

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Regina. Yes. That that’s a fair presumption. Yes. Yeah, definitely. when you're drafting your contract, you're lucky if you have a choice  

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of law clause, but you're undoubtedly not going to think about whether   you're choosing the conflict of law rules. Or the substance of law mm-hmm so there's that  

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strong presumption, but I will tell you that drafters of contracts try to leave nothing to.

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And therefore, it's been very widely the practice to say any, and all disputes will  

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be decided under the law of Illinois without reference to its choice of law rules. Yes.  

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Yeah. Notwithstanding the choice of law, you know, choice of conflict of law.   Yeah., you know, skip that. Let’s go right to Illinois contract law.

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Okay. So, there could be some, some, some surprises if you find that you. Gets governed by the  

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contract law of a country other than the one, the law you chose. The next most important thing  

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is to designate the universe of disputes that are meant to be covered by a choice  

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of law clause. Now, this will be also two of our choice of forum clause, if, and when we get to it.

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But they need to be interpreted. And depending on how the choice of law clause has drafted,  

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it can be broadly or narrowly applicable.  Let me be clear. Mm-hmm. If you draft  

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an of law clause in such a way as the following any and all disputes  

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I want to back up this contract shall be governed by and construed according to Brazilian law.

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Just take that as my example, that choice of law clause may be considered to apply  

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only to contract cases. Let me repeat this.  If you are a choice of law clause says this  

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contract. Shall I'll be governed by or and construed in accordance with the law of Brazil.  

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Then what you have designated is Brazilian law for your contract cases. Right? Right now, now practical businesspeople, if they really want a choice of law clause,  

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probably want more than the contract law of that. They want a product liability suit to  

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be governed by the law of that state. They want an OUS interference with contract. Right. So  

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decide what it is. You want to be governed by it. Most people want more rather than less mm-hmm they don’t want the confusion either. Yes. Right? Yeah.  

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Usually, you want a body of law and you're not really thinking about what the outer. Of the  

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lawsuits are that you want governed by that law.  So the way to do that the way attorneys do that is  

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generally, to say something much broader than what I have just said, rather than say, the contracts  

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shall be construed in accordance with or governed by you say something along the following lines,  

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any and all disputes that may arise out of or relate to this.

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Shall be governed by the law of Brazil.  So arising out of, or related to  

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that, that's the standard language for breadth. Don't just say arising out of,  

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because that may be read as again, contractors.  So if you want to have an it claim covered,  

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if you want a product liability covered, if you want an antitrust suit covered.

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related to is very important language. So that was a long answer. And I know you have many questions,  

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so, I'm going to stop there. On that one, but you can trust me. There's more to say.  

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Yes, I can. I know there's so much more like, and I'm glad you touched upon the fact that it’s, if you're not careful, you're  actually too narrowly defining it.

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You want to make sure you, you know, you're doing something with purposeful intent, because if not, the court will just see it that way. Yes. You said contract language. Yeah. The court will  

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read your contract just as you said. And if you said I want my contract construed, according to Brazilian law,  they're going to say that's fine.

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We'll construe the contract. But otherwise, the law will be governed by the law we designate.  

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Yes. Under our choice of law. yes. Which can make a huge difference. Like we're   talking about with torts or other issues and intellectual property rights and everything.  

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Absolutely. So, I thought that was useful. Absolutely. Absolutely. In general, though, do you find that in most countries they also  

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require of course or they require a governing law clause to be in writing? I assume there's   certain minimal requirements, right? That actually not. Oh, wow. In most jurisdictions  

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contracts themselves. except in very special categories do not need to be in writing.

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Even the contract. Oral contracts are well known. I mean, it's not advisable. Yeah,  

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exactly. It's not advisable to leave your contract in oral terms. Right. But no, there's no  

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particular requirement. I'm going to, if you ask me this question about choice of forum, clauses. Mm.  

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We're not there yet, but if you were to ask me, I would give you a different answer. Uh huh. Wait, would you like to go there first?  I mean, would you like to go there now? well,  

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let's stick with choice of law. Cause I think that’s the sequence of your questions or am   I mistaken? No, you're correct. Yeah. And, and just remind me to go back to that one.  

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If you can. Yes. Absolutely. Thank you. So is, I mean, in general, so there is, it can vary  

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significantly from country to country, but there are some norms like you're indicating, right? That yes. You necessarily have to be in writing.  I assume one of the things that the courts may  

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look at, even if it is oral again, not advisable. But did the parties intend,  

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I guess, to be bound by certain contracts?  I think they would look at certain, I guess   they would look at extrinsic evidence or some evidence as to what they might have intended,  

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or they would just purely apply the law one. If you're talking about the choice of law clause itself. Yeah. Mm-hmm then, then yes,  

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the plain meaning rules. These are not complicated clauses. Gotcha. This will be a lot easier than  

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some of your contract clauses, so, gotcha.  okay. So, you can rest assure that if you  

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say any and all disputes, a rising out of, or related to this contract, it will cover.

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Okay. I can't resist telling you though, that this  

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practice of allowing parties to choose their own law mm-hmm is I won't say of recent vintage, but  

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if you go back enough decades that wasn't allowed, parties were not allowed to choose their law.  

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We assume it. And we've assumed it for decades now, but there was a time when choice of law  

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clauses were viewed as against public policy and unenforceable because parties do not  

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have the authority to tell courts what law to apply to the disputes that come before them.

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That probably sounds rather quaint to you right now, but we live under a regime of party autonomy.  

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As it goes. I just don't want people to assume   that it would necessarily have to be that way because at one time it wasn't. Right.  

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Okay. So, it it's a benefit. And I think that’s why courts also probably look at what you did. Right. And what you did agree to with more oh yes. All the more reasonable.  

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Yes. Makes sense. Definitely. So, some of the also. So, the question number two   I had is are any of the other factors to be considered in drafting a governing law clause?  

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You know, should you consider, of course that spec, you know, of course a favorability in one, maybe  a country versus another for industries.

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Right. But is there something else that you would also recommend that we don't always know? Right.  

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Very good. Yes. Here will be a simple answer. You before you choose a law  

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to put in your contract, you should, this is my advice. You should try to anticipate  

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what kind of what kind of dispute is likely to arise.

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Sometimes that's not feasible, but let me give you an example of where it is feasible  

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and distributorship contracts. Almost invariably, the claim will be. That the manufacturer abusively and prematurely terminated the  

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distribution agreement. So, it will be acclaimed by the distributor against the manufacturer.

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And therefore, we know with high level of confidence, what the dispute is going to be. We  

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don't always reg Gina, I'm giving you an unusual example. The more you can predict. what dispute  

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or what category of dispute is likely to arise.  The more it behooves you to do some research and,  

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and because countries do differ in the extent to which they protect consumers and on and on and on.

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So, I would, my answer to your question is yes, but in proportion   to the predictability of the disputes that are apt to. okay. That makes sense. And unless you  

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indicated some countries are also friendlier towards transparency or economic or, you know,  

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trying to bring in the business also.  So a little bit more friendlier to yes. Re and they want to be known for that as well.  Right. They want to be known for liberality.  

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Yes. Toward party autonomy. Yeah. In arbitration I just want to insert here mm-hmm that you're  

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not only going to choose a governing law., but you're going to also choose a seat of  

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arbitration. Now, I don't know if you want to go down the arbitration rabbit hole right now.

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but this is one of the examples I was alluding to where there are some differences. So just as a,  

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to round this out, mm-hmm in arbitration, you should not only select your governing law,  

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but select the. Of the arbitration that will take place because that arbitration will be  

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governed. The arbitration itself as a process will be governed by the law of arbitration of the seat.

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And the law of arbitration of the seat is not the same in all jurisdictions. And  

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some jurisdictions are regarded as more arbitration friendly. Then other jurisdictions  

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are. So, I would just say this. On many of the questions you're asking me and   are going to ask me mm-hmm the answer will be bifurcated between litigation and arbitration.

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This is a good one. Yes. And that's one of the examples I was going to go into,  or I was talking about what would be the  difference if you, in a governing a law clause,  

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which I presume also would go into the venue clause as well in making   sure it's clear that you choose arbitration versus litigation and that you've success.

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Written it that way. So, there's no, even if it's a question as to whether   you intended to arbitrate. Yes. The question of arbitration goes to an arbitrator first  

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versus now litigating whether the intent to arbitrate should go here or there, you know,  it becomes another fertile  ground for litigation, right?

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Well, yeah. And there is standard form on arbitration clauses, most, most parties  

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that choose to arbitrate their dispute, select an arbitral institute. Yeah, the international chamber  

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of commerce, the American arbitration association, the London court of international arbitration.  

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They, they select that, so we know they’ve chosen arbitration, right, right.

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Because the vehicle they've chosen is an arbitration institution. I've  

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seldom seen a case where it was unclear that.  Whether arbitration was contemplated or not.  

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Mm-hmm in the interest of full disclosure though, mm-hmm,   there is, and this is a detail, but there is  something known as an expert determination.

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Now let me just explain parties are entitled to delegate to a decision maker,  

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a FA one or more factual findings, not legal issues, but factual issues.  

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and if they do that, they don't go to arbitration because arbitration is about the   application of law. Yeah. So just to make this very concrete for you, I, I sat in one case  

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where there was a rupture of a cable under water and the parties agreed very sensibly.

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Mm-hmm that since I had a dispute over who was responsible, they would first have  

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an expert determination as to where the leak occurred. And all the scientific and technical  

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stuff they wisely said, we don't need an arbitrator for that. We need an expert for that.  

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And when that was decided, then I'm the arbitrator and those facts have now been determined  

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and I will proceed to the issues that are appropriate for me. So, I would say. The only real confusion might be if what you intended was expert determination.  

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Okay. Okay. I've seen a couple of cases more recent and actually I do see arbitration clauses  

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written much more clear, like, they'll say, you know, the American, you know, arbitration,  

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but some, every so often someone will say, especially when you have small business owners,   we agree to arbitrate in the event of dispute.

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And it's sort of like,  what is that? what they've opted for, has a name.  It's called ad hoc arbitration. Yeah. ad hoc  

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only here means non institutional. So there are no ground rules. Right. And I, and I think that segue  

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start our next question too, that talks about a governing law. Its clauses. Can they account for  

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the distinction of how like a forum country would apply procedural versus substantive?

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And then I think this is really fertile ground for the distinction between   arbitration and litigation, right? Because in an arbitration you're kind of already setting.  

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The ground, the procedural rules are in place.  Yes. Yes. Fair enough. So, you are right. And  

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your questions to me, to at least initially draw a distinction between choice of law,   clauses and forum, selection, clauses, and  well drafted contracts should have both.

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It shouldn't be assumed that because you chose a forum. You chose its substantive  

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law. Yeah. You simply chose its courts.  Okay. So, mm-hmm I mean, that's fundamental.  

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So basically the jurisdiction whose law you chose will govern the substance of your dispute.  

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The jurisdiction whose courts you chose will govern the procedural aspects of your dispute.

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and the courts of every country have civil procedure laws and rules. So  

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substance procedure distinction, which is sometimes discredited as you know,  

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not, not as sharp as it sounds is really critical here. Yeah.  

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And you're right. If you choose arbitration.  Then you're not looking at civil procedure codes.

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Mm-hmm, you're looking at the  procedural rules of the institution.  

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Who which you selected, right. And anything mandatory, meaning you can't contract around  

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it. Mm-hmm in the law of the seat, the arbitration law of the seat. When you choose a seat of  

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arbitration, you choose its law of arbitration.  You don't use its substantive law, right?

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You choose its law of arbitration. Most. Rules in those laws are what we call default rules,  

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meaning that you can contract around them.  But if you don't, those are the rules. So  

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part of the autonomy is really built into this very heavily mm-hmm , but in every jurisdiction,   there will be something that will be  deemed mandatory in the arbitration law.

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And you, you can't contract. And you can’t contract on it. Okay. But, and I,  

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and I think to myself, because people do, they often look overlook what one country   can call procedural versus another, and it  can't make a difference in definitions of,  

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you know, I'm so glad you said that really glad you said that.

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One of the, one of the issues over which there is a division of views among courts around the world  

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that can be outcome determinative is the statute of limitations.  

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Now this is really remarkable. Yeah. We teach our students in the United States and they learn that  

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the statute of limitations applicable to a dispute is the statute of limitations in the forum.

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It's procedural, right? That's just what we do.  We save. It doesn't matter what the governing  

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law is. It could be, it could be a French law dispute, but if it's coming into a New York court,  

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it's New York statute of limitations, that is a minority view around the world. Most jurisdictions  

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in the world, I think rightly but that's my opinion. Take the view that the length of time. within WIC, you are permitted to bring a lawsuit.  

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Is inextricably related to what your rights and obligations are. It's almost part  

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of the definition of your right and obligation and people from those many, many, many jurisdictions  

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cannot wrap their arms around the idea. Mm-hmm that we think the court.  

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Should be supplying the statute of limitations from its own law and applying it to a dispute  

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governed by the law of another country. So I couldn’t give you a better example of what you  

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have just said. Okay. Which is characterizing an issue. One further example remedy.

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There are some courts in the United States that again, they think, well,  

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we'll get your rights and obligations.  From the law you chose, but will decide  

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under heart. You're entitled to, because remedies are procedural. Other countries can't believe that  

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they think the remedy is indistinguishable from the right true from the heart.

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That's that is my view, but it's not the prevailing view in this country.   But what a difference it can make what a difference. Yes. And then  

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if you don't know better and you choose a particular, okay. Let's use New York law,  

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you know, and, and it changes the statute of limitations are used to something different. No, you know what? There's a case I’ve become familiar with with  

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it's a defamation case and the statute of limitations on defamation.  

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In New Jersey, because it was arising in New Jersey is one year. Oh, wow. But the defamation  

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occurred in Belgium if it was defamatory and the statute of limitations is 30 years.

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Wow. Okay. No. So have I, have I impressed upon you?  

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that it can, it can make a big difference and remedies. Yeah, that, that, that makes sense in  

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the world. What kind of damages you're entitled to, and also entitled injunctive relief. Exactly.   Are you entitled to specific performance?  Mm-hmm are you entitled to punitive damages?

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Just on and on. Yeah. Yeah. And I think some of those things also, like you were saying,   when you're planning and doing research on  something that's important, you know, if a  

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client has a particular concern or heightened risk in a transaction, Think about how that's gonna  

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come about that could help. Why you're drafting a clause or picking a certain forum things. You understand these things. Unfortunately, that doesn't happen as often as we'd like,  

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I mean, contracting parties don't know who’s gonna be the claimant and who's, who's gonna   be the plaintiff and who's gonna be the defendant  ex anti. Yes. Yeah. Yes, yes. It's true. I mean,  

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I'm sure even the car manufacturers in a large multinational corporations, they wish they could.

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Kind of foresee things a little differently foresee. Yes. Yeah. But they don't know. And their   interest would diverge yeah. On any given issue, depending upon whether they were plaintiff or  

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defendant. You're exactly correct. Yes. So I don’t wanna exaggerate the level of predictability. You,  

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you asked about other considerations on choice of law. Let me just say this. You did ask me, I.  About whether the body of law would be  

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well suited for the subject matter. And, and that is interesting as an example,  

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parties very often international contracts choose the law of the United Kingdom,  

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even though the United Kingdom has nothing to do with their case. Mm-hmm because they think rightly or wrongly that English commercial law.  

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Is the most is the soundest body of commercial law. There is,  

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they may choose English courts. Mm-hmm. But we’re talking about the law now for, for a moment. So  

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you could say I want that body of law, even if it's unrelated to my transaction  

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because of what I think is the expertise or the leanings or the biases.

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Whatever it might be. right. That's of that look. Yeah. And in general, like, I guess the  

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country might just be more welcoming for certain either industries or certain transactions or just,   and then you say, okay, you know, it's  kind of like Delaware, you know? Yeah. So  

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they're just very well versed and people would rather bring me especially shareholder options. Exactly. Right. Yeah. So, well that's in terms of the choice. Of jurisdiction whose law you  

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want. Yes. Yes, definitely. So that kind of leads us also. And a lot of this has been intertwined  

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because when you think about governing law some people don't always connect, governing law with  

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venue, and I think we've already given a couple examples of as why it can make a big difference. Yes. So we talk about Excuse me, sorry. Even your jurisdiction clauses.  

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Talk to me about some of the other factors that you would think that are necessary and also   why it makes such a distinction so everyone can  understand. And then we gave a little bit of an  

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example on procedural and substantive, but why it’s so important also to pick where the court,  

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I mean, where is where's the dispute gonna happen? Of course. Well where the dispute is going to be litigated, let's say rather than the  

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underlying transaction. So where the dispute is going to be litigated. Well,  

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there are so many factors that parties will take into consideration in determining what  

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is the optimal court. Whose courts, which country’s courts are the optimal courts.

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Now one obvious if you think your own home court mm-hmm will tend to favor you,  

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then you will prefer that your adversary won’t , that will probably not fly.  

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But I mentioned the UK, when I mentioned expertise in commercial. but there are other factors  

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about courts. You've got to determine, frankly, unless you don't care about it, whether there's  

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competence, whether the courts are competent, whether the courts have intolerable delays.

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Exactly. Yeah. I don't wanna name names, but even people from India are very quick to say  

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that the delays in the Indian courts. Colossal.  So you have that, it doesn't help that's too long.  

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Well, it may help the defendant, but it doesn’t help. Yeah. it doesn't help the plaintiff. Yeah.  

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There is concern about corruption. Yeah. And I know many horror stories about choosing a jurisdiction whose courts are  

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end up being demonstrably. Hm. So there are a lot of those considerations.  

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If you have council mm-hmm, if you have council  in whom you have great confidence and whom you use  

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with some regularity then it's good to choose the jurisdiction where that council is based.

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Okay. Yes. The council knows the court. The council is obviously admitted to the bar,  

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but even just know. Move the court. Mm-hmm . Now I've just given you a scattering of,  

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of considerations in choosing your court. But let me say here that the degree of party autonomy  

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in choosing a court mm-hmm, may somewhat less than the autonomy in choosing a law.

32:59

And that may not be obvious why that is so, but. sometimes our courts are  

33:07

more concerned about whether you've, you've chosen a court where you won't get justice. Mm-hmm now  

33:14

one view is, well, you chose it and that's the end of the story. Right? Right. You chose it. However,  

33:22

we do have a very important Supreme court decision on this question. It's called the Braman case.  As in Braman, Germany. Yeah,  

33:31

and it it's well worth reading if anybody’s interested. And it, it tells you that choice of  

33:38

forum clauses are valid. Mm-hmm presumptively enforceable to be construed favorably. Mm-hmm

33:52

not if sending a case to that court would be contrary to the public policy of the  

33:58

court. You're in mm-hmm. not, and this is the more interesting thing, not if  

34:04

you would not have a cause of action.  Yeah. Makes in that sense. Makes sense.  

34:11

So there are some limitations, I think anybody interested in,   in the, the conditions mm-hmm to which cardio  autonomy in choice of court is subject.

34:22

To take a look at the Braman case. Mm-hmm   okay, fantastic. So also I have to assume with arbitration, you would think. That kind of gets  

34:32

you over some trouble, right? You think?  Okay, well, arbitration and we're gonna go by   arbitration rules is procedurally and we'll apply certain laws, but is there a difference in venue,  

34:42

cuz let's say, okay, I'm not going to your place and you're not gonna go to my place.

34:47

you know. Okay. Enough. Yeah. So let's talk about the arbitration clause. I'll say you're   not choosing a court. You're choosing a seat of arbitration. That's very different when you choose  

34:59

a court. Of whatever country you like, you’re choosing its judges. Yeah. That, yeah. You're  

35:06

choosing its civil procedure law, its view of any number of things, evidence, whatever it might be.

35:16

So that's a choice. Once you make that choice, you’ve made many choices. You don't even know  

35:22

you've made. Yeah. By choosing a court, when you go to arbitration. You have chosen the arbitration  

35:31

law of that country and that's all okay. The arbitration law of that country. So before  

35:38

you choose a seat, it's advisable to familiarize yourself with the arbitration law of the country.

35:47

They differ. There is a a model law that has been widely adopted drawn up by the United nation.  

35:56

That many, many countries have enacted with or without modification. So, you really wanna do that.  

36:05

And you wanna bear in mind that an award that has been rendered at the seat is subject to  

36:16

a new element by court at that seat, and only at that seat. So, when you choose a seat, you’re choosing the arbitration law and the court  

36:26

that will have the power to nullify the award.  Now, whether you care about that or don't  

36:35

is another matter, but most people are assumed mm-hmm not to want a jurisdiction  

36:43

whose courts mm-hmm are going to treat with what they were doing.

36:48

Facility. Yeah. With disrespect or for Avol. The award rendered on its territory.  

36:56

So, so that's an interesting consideration with respect to arbitration. And I want to repeat that  

37:05

the law of arbitration usually tells you very little   about how the arbitration is to be conducted.  Yes. What the institutional rules do.

37:16

They are a kind of code. Of civil procedure, the civil procedure. Yeah. Mm-hmm for the  

37:22

arbitration. Mm-hmm and it's. And it's it’s when you indicated, I always think to myself.  

37:27

Okay. It's the arbitration law of the forum and I, you don't quite always think about   the country. Does it have to be validator, be converted to a judgment in that country.

37:36

We don't think about that sec. We just assume it's a, it's a given a lot of times,  that's a very good point. The law has evolved in this respect. There was a time  

37:45

when. If you won an award in country X in order for it to be enforced anywhere else in the world,  

37:54

you had to convert it into a judgment mm-hmm by a court of country X.

38:00

We don't do that anymore.  That's been eliminated by   an important vital treat. To which we’re a party called the New York convention  

38:11

on the recognition and enforcement of foreign arbitral awards. And that makes it very clear  

38:17

that the award does not need to become a judgment in order to be exported. So, the award travels  

38:26

and where it is going to be enforced mm-hmm , it may need to become a judgment.

38:33

Okay. So it needs to become a judgment where it is going to be enforced, not where it was  

38:39

rendered. Okay. So technically, but time it had to be at both places, both places. Okay. Because  

38:47

that comes into question. So that court still, that receives the incoming arbitration award,   I assume for the most, but I know most countries  are more friendlier and recognizing them if it's  

38:56

done and done with proper procedure, but I assume it still has the right to. Say no, we're not going to recognize it.  Yes. We don't think you had, you know,  

39:03

jurisdiction when you got the original whatever for whatever reasons. Right? Well,  your instinct is is correct. The convention I just referred to, which is really all important,  

39:12

the New York convention. Yes mm-hmm, which has over 160 signatory states. It's one of the most widely ratified conventions in the world that convention obligates the courts  

39:24

of every signatory. to give full force and effect to awards rendered outside that state  

39:34

most countries have demanded reciprocity. So only awards rendered   in yeah. Other countries that have signed that convention.

39:42

Mm-hmm subject to seven. Okay. Seven exceptions, five of which parties are expected to raise.  

39:53

And two of which. Are considered so important that the court can raise it on its own.  

39:59

So, we have, it's very discreet. We know the seven grams. I'd be happy to go through them,  

40:06

but you probably don't want me to, if you wanna go through 'em quickly. It's actually very interesting. Especially since you, I think you helped write a lot of that, the,  

40:14

your convention, right? The treaty itself. Yeah.  I mean, it, it's a very short convention. It's an  

40:19

easy read. So, the seven grounds quickly, the one, the first is the one you've already mentioned.  

40:27

Okay. The, the arbitration agreement is invalid. The arbitration agreement is invalid and the judgment of the enforcing court,  

40:36

the award is as well. Second, let's call it due process was due process respected. If not,  

40:45

the award can be denied enforcement. Third did the arbitrator or the tribunal exceed  

40:54

its authority? Did it decide to dispute falling outside the scope of the arbitration agreement?

41:01

Okay. If it did it won't be enforced, but to the extent it did it, won't be enforced fourth.  

41:09

Did the tribunal disregard. any, now it's gonna have to be important. Any important procedural  

41:20

decision the parties had reached. Okay. Where the part   did the tribunal respect the party’s procedural choices.

41:29

Okay. E fifth, this is fascinating. One. You can deny enforcement. If the award brought to you  

41:38

was in fact UN old. By a court at the seat.  Oh, wow. Okay. So, if the, if the award was  

41:46

Anol mm-hmm we just talked about that. Yes.  Yeah. If the award was Anol at the seat,  

41:52

that's a ground on which you can deny enforcement.

41:58

Now those are the five that you will waive. If you don't raise them.  

42:05

The other two are, are considered to have, you know well, literally  

42:11

a public policy dimension. Yeah. So, one of them is public policy. What are the values?  

42:18

What are the values that are held in such esteem are considered so paramount  

42:26

in the society, in which the enforcing court sits that it will not.

42:34

A particular, an award looking for an example   maybe you have an award based on a violation of a contract for trafficking in human beings.  

42:47

Yeah. Imagine yes. Imagine I, I think there are contracts. Yeah. I mean, that happens and  

42:57

they deals are made. They may be oral. Right, but you’re you're yes. Yeah. But there are agreements.

43:02

Don't question about it. Exactly. So, so I'm just giving you a rich example. Yes. Yeah. Of were  

43:09

a court would say, well, there's nothing else wrong with this award, but that's wrong with this  

43:15

award. Yeah. We won't enforce it. And finally, and this is, I think very important to know  

43:22

the court where the, where the award is brought. May regard the dispute as one that is not legally arbitrable.  

43:33

Okay. Arbitrability is an important concept.  Every country in the world without except  

43:40

treats some kinds of disputes as non-arbitral, because they feel that those cases belong  

43:49

in courts and courts only mm-hmm they could be matrimonial cases.

43:56

They could be antitrust cases to give you a sense of yes, yes. Country decides for itself. We,  

44:05

we, in this country, in the us have very few claims that are not arbitrable. Yes, very, very,  

44:11

very few. But some countries have very broad non arbitrability. So, if you bring your reward to a  

44:18

country that says Hush, that that kind of claim is not arbitrable, it can be denied, enforce.

44:24

Wow. Okay. All these seven grounds are viewed as permissive, meaning mm-hmm that  

44:31

the court may deny enforcement, but it is not required to, it could enforce it.  

44:39

Even if one of these were present, which doesn’t usually happen. Doesn't usually happen,  

44:44

but you know, there, there you go again, we still have the element of forum law and human beings. So, at the end of the day, me, yeah, I know you see this Regina you're a lawyer,  

44:53

but every, and that was everybody listening.  None of these grounds, none implicates the merits  

45:01

and that is fundamental. Okay.  The substance of the dispute,  

45:06

the merits, the rights and obligations of the parties, the quantification of damage.

45:12

Not reviewable either by the emailing court or the enforcing court.  

45:19

So, you, you have to imp mm-hmm you have to be impuning the arbitration agreement  

45:28

or the arbitral procedure, right. Or the bias maybe also, or the bias. Yeah.  

45:35

Or the offense to public policy mm-hmm or non-IT arbitrability. But not the tribunal.

45:43

Got it wrong, right. Then not the merits. You're not getting, you’re not getting an appeal and there is no appeal in arbitration unless you specifically  

45:51

contract for it. Parties seldom do mm-hmm but some of the institutions are changing their rules to  

46:00

accommodate arbitration. Yeah.  Yeah. I've been seeing that. I think they're not satisfied with leaving the arms. Well, you know what they're worried  

46:08

about? People love arbitration because they think they're going to save time and money   and, and formalities mm-hmm. But you know, if a tribunal really runs them up mm-hmm, if it really  

46:19

makes an egregious error of even of law, it’s, it’s not remediable no, I know that's a scar.

46:27

It's a little scary sometimes as well. It is, it is the risk. You it's the risk you're taking and.  

46:32

you can't complain. You need to have your eyes open.   You won the risk that arbitral tribunal will be foolish will maybe even be dishonest,  

46:44

but without your being able to prove it. Right. Okay. Right. No, it's true. I can't. And, and you have no recourse except you can try to try to acknowledge. Yes. You can  

46:57

try to defeat its enforcement in another country.  It's very limited. But the grounds are limited.  

47:03

Yeah. They're limited. So that's kind of why it, you know, it's international litigation spec. I   mean, it's hard enough when you go from state to state that has its own difference laws and  

47:12

the way they apply them going from country to country, which could be a civil law country. Yes. Where you're coming from a common law country. So, there's so many distinctions, but  

47:20

then again, they both have S and, and things to be concerned with. Yeah. But in terms of enforcement,  

47:26

there is a parallelism. If you get a judgment from.   it too, would need to be enforced in the United States. That's true.

47:32

So, we will also look at foreign judgements.  That's true too. Yes. Yes, no. So foreign  

47:38

judgements will get scrutinized. Arbitral awards will get scrutinized or ordinarily  

47:44

only on the grounds of the sort that I went over with. You. okay. Wonderful.  

47:50

I thank you for being a little more patient and going over the seven points, cuz you have so much knowledge and I think  it's so important to know that there's a lot.

47:57

There's a lot out here. Yes, I know. I know we could talk for days. I know it's like trying  

48:02

to pinpoint here and there, you know, but at least it gives us a broad overview and, and some examples specifically on how it  can make such a difference. On how response  

48:12

and can be outcome determinative in the extreme. Yes. Which are ultimately what clients and lawyers have been, are concerned about. Of  

48:19

course, you know, when you make these decisions. So, yeah. So, I want to think, I just want to stress that. Go ahead. The reason parties take the risk that arbitration entails  

48:29

mm-hmm is a number of reasons.  I, I I'll mention them   and then may, maybe I've overstayed my welcome when I, no, not at all at all.

48:37

Go ahead. It's thought to be less time consuming   this, that subject to doubt it's said to be less expensive, that's also subject to doubt  

48:49

because the biggest cost is the lawyer, and you get the lawyer either way. Yeah.  

48:55

It's thought to be informal, but it's getting more and more formal. Okay. The real reason I.

49:03

The durable reasons are number one, you may not be able to agree on a forum  

49:09

and you may very much worry about being sued in your other party's courts. That makes sense. So  

49:17

rather than choose England, no, which may not even take your case, they may say we're inconvenient.  

49:24

Yeah. Or inconvenience. Yeah. Mm-hmm, absolutely choose arbitration.

49:29

And secondly, you know, you can choose your own, you can choose at least one of your arbitrators.  

49:39

Typically, each party chooses an arbitrator and either those two  

49:44

arbitrators or the institution mm-hmm or the parties themselves choose the chair  

49:51

of a tripartite tribunal. So, when you go into a court you get the judge, you.

49:59

With the experience they have or don't have, yeah.  Don't have correct exactly the expertise they have  

50:04

or they don't have with the intelligence they, they have, or they don't have mm-hmm so a lot of  

50:10

time and effort are spent by parties and their council in selecting and arbitrator  

50:18

because they want an arbitrator who is, I won’t say biased because we don't want to say that.

50:26

As is often said, is, is predisposed.  Yeah to, I mean, at the, or to understand  

50:33

like what it, cause that's another thing, if you’re talking about really complex issues   with your IP or engineering or anything of that nature, you don't want someone that's  

50:42

learning the stuff, you want someone with an engineering background or a patent background. You also want someone you think will be sympathetic to you. Of course,  

50:49

of course. And you know, you know, so, so you want that and, and you want an arbitrator who you think  

50:58

will. A a clear capacity to influence the chair. Is he or she well spoken? Mm-hmm is  

51:07

he or she persuasive? Does he or she good at constructing arguments?

51:15

Does he or she exemplify or exude sincerity and earnestness mm-hmm it's really very interesting.  

51:24

It is. I think parties do. That they’re going to be able to put on that panel,  

51:30

someone of their choosing and the only reason they can't   is if there's a conflict of interest. Yes. And therefore, there will be disclosures required.

51:41

Right. Right. And I mean, I do find it to be initially arbitration seems   to be less contentious when you start.  And then when you start fighting over,  

51:49

okay. There's limited discovery and then you, and then it goes into whoa, then everyone starts fighting. No, it's as adversarial. Yeah. It's every bit is adversarial.

51:58

I spent this morning tr seeking to resolve a nasty discovery dispute. And it's a nightmare.  

52:08

Yeah. There are council who will fight about everything who will not give an inch   who will demand documents that they themselves would not.. Yeah, so  

52:19

yeah. Yeah. So, and, and it becomes, and then it's world Wari there as well.

52:24

And it becomes, I agree with your arbitration can be fairly expensive as well. It can be   very expensive because lawyers charge of the same rates. Yes. And they may,  

52:33

they may have fewer hours, but maybe they won't right. Fill fewer hours. We,  

52:38

we really, we really don't know. Yeah. So, they’re two different worlds and I teach.

52:44

I teach both subjects and I sit as an arbitrator.  I don't sit as a judge mm-hmm, but I, I sit  

52:51

as an arbitrator. So, I'm constantly thinking about the comparisons between the two mm-hmm  

52:57

which is why it was very good that you invited me to draw some distinctions where they're apt. Yes,  

53:04

definitely. So, and I want to thank you so much for coming. It's been so informative and I'm sure our guests love having you here and hearing all these good  

53:11

points and, and you know, someone with a great experience on this issue. And it is I think, a very important it's a very important topic. I know it's maybe not the,  

53:20

usually the substance or the meat of a contract per se, but if you'll be surprised at the end, at  the end of the day, it could be so important.

53:28

Yeah. And I'll just goes by saying sometimes the, the litigation or arbitration department of a firm, a large firm regret that. Transaction  

53:41

lawyers don’t know their colleagues didn’t think about any of this. Yes. I've been on  

53:47

the litigation slide going. Yeah, I wish this contract said that yeah. And they call this.

53:53

So, they call the choice of law and choice of forum. Sometimes they call them 11th hour  

53:59

issues. And you know what that means. I know what that means. a lot of crying sometimes, but yes,  

54:06

you know, so but in general, no, I do. It's very, very important. That's why I thought to do a,  

54:12

you know, a podcast on it and business owners and lawyers. I hope it was what you wanted. Absolutely.  And thank you so much for coming. I appreciate  

54:20

it very much. It was absolutely a pleasure. Thank you. Thank you. And   we want to say thank everyone for joining us. If you'd like to see this podcast,  

54:28

it would be available to download and review. And so will Mr. Berman's credentials and information, if you ever would like to contact him or,  

54:35

or use him for anything as you can see is very knowledgeable.   And probably very helpful. It sounds like as, and a good arbitrator. So, we want to thank everybody and  

54:44

stay tuned for our next episode. Or we actually going to have part two where we're going to bringing on. I think it's Carolyn Lamb also as one of the experts here to talk about her  

54:52

experience in litigation as well in the subject matter. So, thank everybody and   everyone have a great weekend, and everyone stay safe. Thank you. Bye-bye. Thank you, Mr. Bermann