Alaska Lawyer Navigates the Maze of International Arbitration
When you land in Paris on a rainy morning surrounded by four banker boxes and your garment bag, you will probably think as I did: I should have shipped these boxes to the arbitration venue. The ICC Hearing Centre in Paris was chosen as the venue for an arbitration hearing after discovering that - for counsel and witnesses traveling from Anchorage, Phoenix, London, Milan, Frankfurt, Calgary, Kirkuk, and Baghdad - the normal venue of Geneva created numerous travel difficulties.
But first, let us back up for a moment. How does an Anchorage litigation firm become involved in international arbitration? Random chance and happenstance. After the death of Saddam Hussein and the installation of a new government in Iraq, bids were solicited for the construction of oilfield infrastructure. A Canadian company founded by Iraqi émigrés submitted the winning bid and began the planning and procurement of materials for construction. The intermittent instability of the region resulted in multiple disputes between the branch of the Iraqi government that issued the contract and the Canadian company. After many years of informal attempts to resolve the disputes, the parties resorted to the arbitration clause in the contract. Enter the International Chamber of Commerce (“ICC”).
The ICC was created in 1919 to facilitate international commerce. Established in 1923, the ICC’s International Court of Arbitration pioneered international arbitration through the twentieth century, securing a worldwide reputation as one of the most efficient means of resolving international commercial disputes, bolstering international recognition for the quality of its services and its ability to effectively integrate all cultures and legal traditions. In the typical international commercial dispute, the parties would be of different nationalities and diverse linguistic, legal, and cultural backgrounds. Unsurprisingly, the ICC is closely associated with the United Nations as a signatory of the UN Global Compact. It has even been granted “Observer Status” at the United Nations General Assembly.
It is not surprising that companies from varying areas of the world would prefer arbitration in a neutral setting to conceding to one another a home-court advantage in a formal court of law. Here, both parties to the arbitration chose to be represented by firms located in other countries. The Canadian company (“Claimant”), chose to employ the Anchorage law firm Jones Law Group. The project issuing company wholly owned by the Ministry of Oil of the Republic of Iraq (“Respondent”), chose to employ the international firm Cleary Gottlieb Steen & Hamilton. This varied group of participants began the arbitration, in English thankfully, and in accordance with the ICC Rules of Arbitration.
As with most arbitration proceedings, the ICC arbitration process differs significantly from the procedure of the United States judicial system. As a result of the vast differences in legal traditions between Claimant and Respondent, the ICC arbitration process allows for flexibility in tailoring the proceedings to the individual characteristics of the dispute and parties. The first step under the ICC arbitration standard procedure begins with a claimant filing a request for arbitration and an initial filing fee of $3,000.00. The respondent is then granted thirty days to submit an answer to the request, which may include counterclaims. After receiving the request for arbitration, the Secretary General of the ICC is charged with setting a provisional advance on costs to cover the arbitrators’ fees and expenses until a more formal estimation of costs is established. Finally, following the respondent’s submission of an answer, both parties must agree to the arbitration location, or if this is not possible, allow the ICC to select the location. The same process dictates the parties’ negotiation of the number of arbitrators, though there is a presumption in favor of a single arbitrator.
After establishing the parameters of where and how the arbitration will take place, the ICC transmits the answer and response to the selected arbitrators otherwise known as the arbitral tribunal (“tribunal”). With input from the parties, the tribunal holds a case management conference and sets a procedural timetable and deadlines for document exchange and briefings. The tribunal and the parties have vast latitude in determining whether to set an arbitration hearing or to argue the case solely by legal briefing. Following the closing of the proceedings, be they legal briefs, oral argument, or some combination of the two, the tribunal deliberates and then drafts an award. Once a draft award is completed, the tribunal submits the draft to the ICC for scrutiny and approval. If the award is approved, the tribunal finalizes the award and notifies the parties. By submitting to arbitration, every award is legally binding on the parties and all other forms of recourse by either party are waived.
But do not worry about the workload of the tribunal as it should never be said that the arbitrators of the ICC are underpaid. In the case at hand, arbitration was initially requested in April of 2015. The formal award was issued in April of 2018. Claimant sought damages in excess of $30 million while the Respondent counterclaimed in excess of $110 million. Accordingly, the cost fixed by the tribunal to hear the case was $760,000 to be paid in equal shares by both parties. The contract required that the language of the arbitration would be English, and the applicable law would be that of Iraq. Claimant selected one arbitrator, Respondent chose one arbitrator, and the ICC nominated a third arbitrator to act as president of the tribunal.
The tribunal set deadlines for a total of four separate briefings with the final two briefs being simultaneous submissions of the parties. This was one of the most distinctive, and occasionally frustrating, procedural decisions. Simultaneous submission of briefs occasionally resulted in arguments that were miles apart from the points raised by the opposing party – two ships passing in the night. It remains unclear as to how helpful this style of submission was to the tribunal.
However, an interesting byproduct was created from the simultaneous submission of briefs and the final submission of all documents, witness statements, expert reports, and legal references. After the last briefing was submitted, no additional information or documents could be discussed at the arbitration hearing. This intersection of rules resulted in a bit of unavoidable gamesmanship, as the last brief submitted was a simultaneous submission with no opportunity to respond. Inevitably both Claimant and Respondent submitted rebuttal expert reports in the last submission that the opposing party had no opportunity to counter or address.
It is noteworthy that the arbitration hearing itself was not used to enter testimony or enter evidence into the record as opposed to a standard courtroom proceeding in the United States. Instead, the arbitration hearing was used, primarily by the tribunal, to assess the credibility of previously submitted witness statements and expert reports, as well as to allow opening and closing arguments by counsel. The witnesses sat in the center of horseshoe-shaped hearing room, surrounded by three arbitrators, two attorneys from Jones Law Group, three attorneys from Cleary Gottlieb, an observing attorney from the Iraqi Ministry of Oil, numerous client representatives, three expert witnesses, two interpreters, an ICC secretary, and an ICC transcriptionist. It was in the center of this arena that each witness sought to persuade the tribunal that the prior testimony was truthful. Some witnesses were successful and some were decidedly not, both to the benefit and detriment of each party.
After three years of preparation, the tribunal limited the total time allowed for direct examination of each witness to twenty minutes, and allowed seventy minutes for cross-examination. Experts were limited to a presentation of thirty minutes with one hundred minutes reserved for cross-examination. But the procedural rules imposed by the tribunal on the parties were not extended to the arbitrators themselves. The tribunal reserved, and exercised, the right to ask unlimited questions of any witness, expert, or attorney.
To prevent the parties from exceeding the scope of the previously disclosed documents and statements, Claimant and Respondent were each required to provide a “hearing bundle” (hard copy of all documents ever submitted) to the tribunal. Both the tribunal and the parties also used each party’s hearing bundle exhaustively as a “quick” reference for clarification, verification, and impeachment. Claimant’s hearing bundle consisted of four fully-packed banker boxes, weighing approximately sixty pounds. One of the unforeseen challenges of the venue was protecting sixty pounds of paper from the Paris rain.
At the close of the hearing, the tribunal requested additional post-hearing briefing to apply all facts and arguments to the relevant portions of the contract law of Iraq. Because Iraqi laws are not written in English, each party worked from the same translation, which likely prevented the numerous issues which would have arisen in the event each party provided its own translation of the original Arabic. Translating Arabic legal language into English made for unintended interpretations, as did the influence of Iraqi culture on the construction of the relevant statutes. It is undeniable that certain aspects of Iraqi law are unique and distinct from the standard language found in the principles of United States contract law and any direct translation will lose some of the original meanings.
For example, the parties exhaustively briefed Iraqi Civil Code, Article 155 which states, “(1) In contracts, intentions and meanings must be implied and words and forms (constructions) must be disregarded. (2) Basically words imply the reality; but if the truth is impossible they will imply the metaphor.” Additionally, Article 156 states, “The truth is left out (disregarded) where custom indicates otherwise.” The annotation to Article 156 clarifies “For example: a man who asked his servant to fire the lamp did not mean to burn the lamp; what he actually meant was to light a candle which is within the lamp; the usage being in that area to say fire the lamp; so the true meaning of fire is left out (disregarded) because usage indicates that fire means sparking the light of the candle within the lamp.” As you can imagine, the above language leant itself extremely well to more than one interpretation in the briefing.
Even among other arbitration cases, this case was unique in that several essential documents were missing, multiple witnesses had died or disappeared, and there were multiple occasions when a witness refused to answer a particular question or clearly gave a false and prepared answer. For a contract period that extended from 2005 to 2010 and was marked by war, corruption, and changing authorities, it is foreseeable that nuggets of truth will forever remain hidden. In making its final award, the tribunal was tasked with reconstructing the facts and timeline, but was denied the sufficient tools to do so. It truly should be credited with all accolades for being able to make sense of the case at all. After the final accounting in the eighty-five page decision, Claimant prevailed and was awarded one third of its requested relief.