The View from an International Arbitration Customer: In Dire Need of Early Resolution



In-house lawyers live in a world where every day the practice of law directly interfaces with the operation of a business. Within this world, the focus is not just on winning but on advancing the overall commercial needs and objectives. If the company prevails in a dispute but the commercial goals are not advanced – and advanced in a timely fashion – then we have still fallen short in the eyes of the business. The same lesson applies to our outside counsel and to the institutions who oversee the arbitration process. As a consequence, we believe that international arbitration institutions and professionals should be more mindful of the goals and objectives of businesses that are the customers of dispute resolution services.

Any business lawyer knows that even the most complex disputes usually boil down to one or two critical issues that, once decided, will either determine the lion’s share of the dispute or encourage the parties to settle. And yet, the experience of many companies, including our own, is that tribunals in international commercial arbitrations, whether out of a concern for due process or other reasons, are rarely willing to grant such relief in the early stages of a proceeding when doing so would have the greatest impact and benefit for the parties(1). We believe there is no denying the gap that exists today between the time generally taken in arbitration to reach decisions and the needs and objectives of businesses to assess exposure quickly and resolve disputes expeditiously.

General Electric is a large transnational company spanning the breadth of industrial activities and financial services. Although the company’s corporate headquarters are in the United States, it has business division headquarters and operations in many different countries. It takes steps wherever possible to avoid disputes or settle them early, but recognises that a cost of doing business is that some disputes will not settle and will require binding adjudication. That is to say, across the company and in the aggregate, we have our fair share of international arbitration experience.

In October 2006, we informally surveyed our litigation colleagues in the company on the subject of early disposition of issues and gathered some “war stories” of instances in which an early decision on a critical issue would have made a significant difference in the business’ general satisfaction with the international arbitration process. We will avoid creating any suspense and give away the ending to our story now: our colleagues were unanimously – and enthusiastically – in favour of measures that would encourage early resolution of issues in international arbitration and they have asked us to endorse any efforts in this direction. They were quick to point out also that their feelings are widely shared by in-house lawyers from other companies with whom they routinely interact, i.e. that this is not just a GE view but the view of the business community more generally, particularly those businesses that are intent on managing conflicts in a measured and sensible way.

From the business perspective, there is clearly room for improvement in international arbitration, and addressing the need for earlier resolution may be the lowest of the low hanging fruit. Yet it is a high priority for businesses, the true customers of international arbitration.

We provide below a summary of the primary objectives businesses seek when choosing dispute resolution processes in their contracts, our recognition of the advantages of international arbitration in many circumstances, and then we provide some experiences from our different business units that highlight frustration with current practice and the importance of the topic for businesses. We note that the presently available means of obtaining early resolution of issues – whether through greater party control or the availability of partial awards – are illusory and in any event have not achieved the desired results. We conclude by noting that a procedure for the early resolution of issues would offer a significant step forward, but only if arbitrators and arbitration institutions are willing to ensure that such a procedure is dutifully applied. We believe this would lead to increased satisfaction among the consumers of dispute resolution services.


There are no great surprises in what motivates the business community when choosing an appropriate forum and procedure for resolving disputes. The overriding objectives generally advanced are fairness, efficiency (including speed and cost) and certainty in the enforcement of contractual rights and protections. These are complementary objectives, and to focus on one at the expense of the others leads to a result inconsistent with the expectations of the business world and denies basic commercial needs. Too often the practice of international arbitration has done just that, by focusing on perceived concepts of due process to the detriment of efficiency, resolution and certainty.

This is unfortunate, as fairness is no longer the main feature to distinguish international arbitration from court litigation in many countries. Indeed, in many international transactions, choices will exist between competing public and private adjudication systems, each of which satisfy fairness concerns. Therefore, let us revisit for a moment the other key objectives:

Efficiency: Time and Cost

There is no need to explain why businesses like speed, are impatient with delay, and abhor unnecessary cost. The duration of a financial dispute can have direct economic consequences for a business, whether in terms of delay in the collection of amounts owed, or the setting of financial reserves that must be posted under accounting rules and which impair the reporting of profits until the final resolution of the dispute. And time has a direct and negative impact on the cost of adjudication, as businesses know from experience that the longer it takes to resolve a dispute, the more effort and resources that will inevitably be expended on it.(2)

Thus, when businesses pay for private adjudication, they rightly expect speed and efficiency from the process, just as they expect these qualities from other service providers. And that is where business expectations too often run into harsh conflict with international arbitration, as, realistically, it is difficult to comfortably predict an arbitration of any commercial complexity ending in fewer than two or three years.(3) Although there are still courts in the world in which the resolution of a dispute can take considerably longer, there are also many that do not and where litigation is conducted with reasonable efficiency. In the business world, a time frame of two to three years is simply too long, particularly for a private process paid for by the parties, in which any right to appeal is largely given up.

Resolution and Certainty of Contractual Rights

Successful businesses revolve around good planning, and business leaders value resolution because it allows them to plan against known outcomes rather than operating under a cloud of uncertainty. In our world, decisions are made on a daily basis of where, how, and what types of transactions to pursue and accept, and every international contract is assessed by its likely benefit measured against the risk and associated cost. Litigation, by contrast, whether in court or in arbitration, entails significant uncertainty, and this uncertainty is anathema to most businesses. If the meaning of a contractual term can remain in doubt for years pending adjudication, then the assessment and rationale for making such contracts is also called into question, and this is not conducive to good business. While business leaders also expect a fair resolution, taking excessive time can often be just as damaging as a wrong decision. Win, lose or draw, businesses want – and need – to be able to address and plan against the fallout of a decision, in terms of the financial ramifications, the manner in which they conduct business or negotiate agreements, their relationship with the opponent, and their relationship with other parties where similar issues may be presented.

These are among the key values and needs faced by the in-house lawyer. When a dispute arises, the first questions posed are likely to be efficiency and certainty: how long will the arbitration take, how much will it cost, and what will the likely outcome of the key issues be. Not surprisingly, the answers in-house lawyers feel compelled to give – based on our own experiences and those of our colleagues at other companies – often disappoint business leaders. It is no surprise to us that frustration with international arbitration is leading some well-known companies to favour dispute resolution in the courts. While there are many instances in which litigation will offer a superior alternative for any number of good reasons (not always related to complaints about arbitration), such a draconian step may be unnecessarily throwing the baby out with the bath water when improvement remains possible.


In the increasingly globalised world, which the US journalist Thomas Friedman has termed as being so interconnected that it is “flat”, international arbitration continues to be a viable and important partner for businesses expanding internationally, particularly in novel markets and emerging countries. Notwithstanding the defects, there are still good reasons that can make it preferable to litigation in many circumstances, and we do not deny them here. The international enforceability of awards is one such advantage, and the neutrality of process in comparison with the courts of less developed legal systems is another. And, although it is easy to complain about how long arbitrations take to conclude, there are still countries where lawsuits may take a decade or longer to resolve. Finally, even an imperfect international arbitration may have its value simply because it is often easier to deal with the devil you know than the devil you do not.

Having said that, neutrality is becoming less of a factor as businesses become increasingly globalised. Not only are transnational companies necessarily more comfortable with other legal systems, they have also come to establish a presence in countries other than their headquarters location, thereby diminishing concerns about an opponent’s perceived “home town” advantage.

Moreover, arbitrators and arbitration institutions should not (and, we are confident, do not) content themselves with comparisons to undeveloped legal systems or other forms of adjudication that suffer from greater or different problems. As demonstrated through the examples below, whatever other advantages arbitration may offer, it is not fulfilling one of the basic needs of its business customers: the need for early resolution. One of the most potent advantages of arbitration is that its institutions and constituencies have the power to change the manner in which it is conducted in order to meet the needs of the parties, and thereby to close the gap in customer expectations. We are confident that the international arbitration constituencies possess the ability to adapt to new challenges, so that experiences like the ones described below can be avoided.


As noted at the outset, we recently surveyed our litigation colleagues within GE about their experiences in international arbitration. The examples below were among the stories we collected, all involving relatively large amounts in dispute or important business issues and conducted before tribunals consisting of prominent and well-regarded international arbitrators from many different legal backgrounds. We submit that it will be self-explanatory why our colleagues so quickly and easily reached the conclusion that a provision for resolving issues early should be a high priority for international arbitration.

Justice delayed is justice denied: Business settlements reached out of frustration with the arbitration process

The failure of arbitral tribunals to decide issues early in the proceedings can often lead the parties to settle their dispute, not because they believe their case is strong or weak but because they have become frustrated with the arbitration process and require resolution for business and financial reasons. We have two recent examples that illustrate this problem and why a mechanism for the early resolution of issues would help avoid such frustration.

An example from a South American Project dispute

One of our litigation specialists not long ago was involved in a series of disputes relating to a large construction project in South America, which generated separate claims before the same tribunal for substantial sums. Both parties had a need for prompt resolution. The claims were of sufficient size that one of the parties had to report on them in its financial statements, creating pressure on its finances and stock price; the other party simply needed financial closure with its lenders, which could not be done with unresolved claims still pending.

Although the claims and counterclaims presented complex factual issues, there were certain central issues and defences that could (and should) have been addressed early in the proceedings. For example:

♦ The parties had differing interpretations of key contract provisions. An early interpretation of these provisions would have eliminated the need for complex evidence, briefing and hearings on numerous factual matters, and avoided the need for the parties to present time-consuming and costly alternative hypotheses and supporting evidence.

♦ The admissibility of a certain type of evidence was a major issue. Had the tribunal ruled in the early stage of the arbitration that the evidence was not admissible, this would have avoided the need to present voluminous and contentious evidence of this nature in the parties’ briefing, argument and hearings.

The efficiency implications of an early resolution of these issues were obvious. At a minimum, it would have led to a more streamlined and timely resolution of the entire arbitration. More likely, the resolution of key points by the tribunal would have given the parties the certainty they needed in order to settle the entire dispute based upon a rational assessment of their likely exposure. Instead of resolving key matters early, however, the tribunal postponed addressing them, and, as a result, quickly became buried in a morass of documentary evidence, witness testimony, thousands of exhibits, and hundreds of pages of submissions, all of which cost the parties many millions of dollars. Ironically, leaving the legal and evidentiary issues for decision in the award did not facilitate the tribunal’s ability to fairly resolve the dispute. Instead, what had now become the sheer mass and complexity of the claims understandably paralysed the tribunal, which seemed to be getting progressively farther away from reaching any type of decision. In more than three years of proceedings, the tribunal managed to issue a partial award on only one of five claims.

The parties, having spent millions of dollars with no end in sight, and needing closure for financial reasons, ultimately settled, not because the arbitration had helped them resolve their issues, but because they concluded that the process was incapable of providing any meaningful resolution within the reasonable expectations of their companies and their shareholders.

An example from a European Project dispute

A European division of one of GE’s infrastructure businesses reported an analogous situation with a large construction arbitration between an owner and contractor consortia (four parties) under the auspices of a major international arbitration institution, this time in continental Europe. As with the example above in South America, with multiple claims and counterclaims there was no denying the factual complexity of the dispute but, again, there were common issues that could have been decided at the outset, simplifying the proceedings. Instead, the beginning phase of this arbitration lasted three years, during which only two procedural hearings were held, and evidentiary hearings were not contemplated for at least another year.

All four parties, the direst of enemies during the proceedings, found common frustration with the lack of resolution in arbitration and chose to settle.(4) In the eyes of the business managers involved on both sides, the settlement was a consequence of the failure of the arbitral process to provide a timely and cost-effective resolution to their dispute. At the time of the settlement, the project (a power plant) had been in operation for two years, and the parties – all large companies engaged in developing other projects – needed resolution in order to move on to other opportunities.

Single-issue Disputes that take many years to Conclude: An example from an Arbitration over whether the Contract was a Licensing Agreement or Sale of Technology

Perhaps the most common complaint we have registered internally about international arbitration involves the relatively straightforward disputes that could easily have been resolved or settled if the key issue or issues had been addressed head-on at the beginning. The company’s experience is that, unlike the judges of many different court systems, arbitral tribunals are willing to allow issues deserving of a quick death to remain alive, often painfully so, for many years.

In one example, a European manufacturing division of GE was involved in an arbitration under the auspices of a major international institution. The dispute was whether there had been a breach of contract, and specifically whether certain restrictions remained in force after the agreement had expired. The only issues for determination by the tribunal were whether the contract was a sale of technology agreement or a licensing agreement (the latter meaning restrictions survived expiration of the contract) and, if a licence, whether its restrictions on sales were legally enforceable in the first place. While the proceedings were pending, both parties remained in doubt as to the right of one of them to offer the technology as its own, which led to significant uncertainty in both of the businesses, no small amount of confusion among prospective customers in several countries, and nettlesome merger and acquisition problems for each party when, at different times during the arbitration, both the claimant and respondent decided to sell the respective business units, each with undecided claims to the use of technology in certain markets.

Although the disputed matters appeared straightforward and amenable to resolution within a relatively short period of time, the arbitration took over four years. A single evidentiary hearing was held, more than a year before the conclusion of the proceedings, and it lasted less than a morning. When the arbitration institution eventually pushed to conclude the proceedings, the tribunal hurriedly issued a solomonic award of a third of what the claimant sought. The award could equally have been for zero or 10 or 100 per cent under the same reasoning, since it made no mention of actual damages – not surprisingly since, even after four years, the tribunal had not yet taken any evidence on the quantum of damages.(5) Furthermore, by the time the tribunal issued its award, the core dispute over rights to commercialise the technology had become moot as during the lapse of time all relevant patents had expired.(6)

We could cite other examples, but these are sufficient to illustrate the important – in some cases, critical – role that the early resolution of key issues can play in ensuring an effective and timely arbitration process.


A common defence of arbitration is that, if there is delay, it is due to the parties wanting to make additional arguments or submissions, dragging their feet during the proceedings, or failing to identify and agree on issues that should be decided early. Although we do not deny some blame being properly allocated to parties for allowing their counsel to belt-and-suspender(7) every argument with still further arguments, we do not think the parties are the primary culprits responsible for the delays.

The view that the parties can impose greater efficiency rests on a faulty premise, which is that it is easily within their power to exercise more control over the procedure once a dispute arises, including by strictly enforcing time limits. This is not, in our submission, a valid premise in most disputes. It ignores that the parties are unlikely to be in good relations, at least with respect to the subject matter in dispute, and in some instances one of them (or their lawyers) may have an interest in delaying the determination of issues, not in expediting them – to delay payment of damages or to create financial pressure on the opposing party through delay and undue expense. Leaving the question of the timing of an arbitration to the parties inevitably puts at least one of them in the unenviable position of having to insist on a shorter period of time than the tribunal would like to have.

Furthermore, parties invariably find they are forced to make belt-and-suspender type arguments, or at least arguments in the alternative, precisely because key issues have been left open. Without direction from the tribunal in the form of rulings on key issues or otherwise, the parties are left to guess what issues or evidence the tribunal will ultimately find useful or persuasive. While some amount of guessing as to what the decision-maker views as important will always take place, early resolution of key issues can and will lead to a streamlining of arguments and evidence. The parties themselves generally cannot arrange for the proceeding to be conducted this way because they, of course, have disagreements about the key issues and do not know how the tribunal will come out on these issues – only the tribunal can answer those questions.

It is true that many arbitration rules and dispute resolution clauses will require the tribunal to issue the award within a certain time. It is equally true that it is not uncommon for tribunals to ask the parties or the institutions to extend that period. They unfailingly state more time as being necessary because of something the parties have done or in order to consider arguments they have made, or to allow them to make more arguments beyond the stated period. In reality, however, the parties (or at least one of them) will nearly always grant such a request for fear of repercussion or lack of a thoughtful decision if they do not. From the party perspective, when a tribunal asks for more time, it is implicitly admitting that it has failed in its mission to discipline the process, even if the reason for the extension may be for legitimate concerns of which the parties may not be aware (such as the lack of consensus or availability of all members of the tribunal) and the arbitrators truly believe they have requested and obtained extensions only in the parties’ interest and with their consent.

As for partial awards, our experience – shared by our colleagues – has been that tribunals are generally unwilling to determine critical issues in the early stages of proceedings when it would make most sense to dispense with them. In fact, we have seen arbitrations go on for years despite resting on a single issue – such as whether the contract existed or how a certain clause of the contract should be read – that was purely a legal question that the arbitrators probably could have decided on the basis of the initial pleadings and some early supplemental briefing.

At least one prominent institution discourages the granting of partial or interim awards on the traditional theory that it is the better practice for a tribunal to consider all issues and render a single final award. This no doubt explains the reluctance of some tribunals to do so. In our experience (and that of other in-house and external counsel with whom we routinely compare notes), this approach ignores the demand among the corporate community for efficient, effective and timely resolution of disputes.


We believe our experiences are typical, as we have shared them with in-house counsel of other large companies, and we know we are not alone in our frustration. We see the result to be the following, not all of which are uniformly negative from a company perspective, but which may be disheartening for the international arbitration community:

Movement towards Courts and away from International Arbitration

Although we do not doubt that international arbitration is here to stay, we believe that the lack of corporate satisfaction means it will not grow as much or as quickly as its potential would otherwise allow. We know from our interactions with in-house counsel at other companies that many have developed, or are developing, a real reluctance to resolve disputes through international arbitration where it can be avoided. At least one Fortune 50 company has already banned international arbitration in its contracts. Some segments within GE likewise have begun to insist on dispute resolution before the courts wherever possible. While it is not always the timing of the arbitration process, but also other concerns which may sometimes favour litigation over arbitration – such as the ability to join third parties or to quickly seize or freeze assets in dispute – frustration with the length and expense of the arbitration process is increasingly cited as the rationale for favouring court resolution (or at least for no longer favouring arbitration).

Preference for Regional Arbitration Centres

Where regional arbitral bodies have developed a strong reputation for rapid dispute resolution, parties will increasingly move their business there, instead of relying on the well-known international institutions. Many of these institutions are young, dynamic, and “get it” from the business perspective. They have access to reputable arbitrators and will actively move proceedings along.

UNCITRAL and other forms of Ad hoc Arbitration

We believe that ad hoc arbitration has acquired a reputation in many places of being more efficient than institutional arbitration. This may be due to a misperception of the role or costs of institutions, or the inclination of some arbitrators to leverage the institution’s role as a means to extend the time of the proceedings. Whatever the cause, the reputation of institutions for efficient conduct of disputes unfortunately will largely be determined by their most recent bad example. If it can take years to conclude an arbitration with only a single issue in dispute, parties will not see any value to the (usually minor) costs added by the institution. When litigation may not be an option for a particular contract, parties may be content with ad hoc arbitration.

Some Silver linings in the search for Alternative Solutions: Increasing the Use of Mediation and Reducing Dependency on law Firms

The ability of the business world to engineer its own solutions to vexing problems cannot be underestimated. Just as parties to an arbitration may be more inclined to settle once they become steeped in a never-ending process, businesses that have been through an international arbitration may be generally more willing to accept mediation as an alternative form of resolving disputes. Mediation’s benefits are widely known in some quarters, and concern about the cost and duration of arbitration may be helping extend its reach. Similarly, the slow pace of international arbitration can make it easier for companies to “in-source” arbitration work instead of relying on international law firms, thereby mitigating the cost of the lengthy procedures.


Having discussed the issue with our GE litigation colleagues, we believe that rule and practice changes authorising and promoting the early disposition of key issues would be a highly positive step for international arbitration. Of course, arbitration institutions will have to do more than simply enact or modify their rules; they will have to ensure that the reform becomes effective by developing a culture that encourages key issues to be identified and addressed as early in the process as possible. Here are some ideas that we think would be helpful and appreciated by the business community:

1. Arbitration Rules (a) authorising and encouraging tribunals to identify at the outset of the proceedings any legal or factual issues amenable to early disposition that will narrow/focus the issues in dispute, and to establish procedures for resolving those issues; and (b) authorising and encouraging tribunals to stage cases to consider first those issues that may dispose of the need to consider later issues (i.e. phasing liability and damages).

2. Arbitration Institutions using their monitoring role and authority to ensure that tribunals are being proactive in managing the arbitration to make it faster and as reasonably streamlined as possible, including (a) considering the merits of the dispute at an early stage and directing the parties on the evidence that the arbitrators care about and feel they need to resolve the dispute; (b) actively pushing cases along toward resolution instead of allowing arbitrators to put parties in a difficult position by asking “is it OK for us to take more time”; and (c) actively discouraging arbitrators from all legal backgrounds (common law and civil law) from the view that they should let everything in and decide later what is important or relevant.

3. Parties, Counsel and Institutions taking care that the arbitrators they name will genuinely have adequate time to devote to resolution of the arbitration over the next 6–12 months, and have a reputation for resolving disputes expeditiously.


Arbitration has slipped from its promise of a better, more efficient, dispute resolution process. As noted at the outset, businesses treat the ability to reach rapid and accurate decisions as a basic competency, and it is a competency we believe the international arbitration process is capable of delivering, but which needs to be implemented more often and more effectively.

Fortunately, there is nothing inconsistent between acting fairly, acting efficiently, and providing certainty of contract terms. If a balance of these values can be achieved, then business – our client and the arbitral institution’s customer – will have achieved its fundamental objectives.

No matter how good one becomes at any particular practice, there is always room for improvement, with rewards going to those who offer better products and services than their competitors. Given the competition among providers of international dispute resolution services, we have little doubt that the first to improve the formula, by demonstrating a service that better meets the needs and objectives of the international business community, will also attract considerably more of that business. That is the way the business world works.

(Authors: Michael McIlwrath is senior counsel for litigation for GE Oil & Gas, a division of the General Electric Company headquartered in Florence, Italy. Roland Schroeder is senior litigation counsel at the Corporate headquarters of the General Electric Company in Connecticut, United States. A draft of this article was initially presented at an IAI Paris conference on the early disposition of issues in international arbitration.)

(1) Our focus in this article is limited to the practice of international commercial arbitration, although we believe the views expressed are equally relevant to domestic arbitration practice in many countries.

(2) Ironically, in a recent dispute of one of our businesses, the contract’s dispute resolution clause required the tribunal to render an award within nine months from the chairman’s appointment, roughly the same time (actually a little longer) than the rules of the arbitration institution named in the clause. In a decision that clearly irritated both parties, the institution determined that this was equivalent to imposing a “fast track” arbitration requirement and, as a result, doubled the advance on fees. Such was the parties’ irritation with the institution that it exceeded their enmity towards each other, and they agreed to a momentary ceasefire in order to amend their contract to provide for an ad hoc arbitration. The experience suggested the institution had little respect for its own rule requiring arbitrations to be concluded in a shorter period, nor an awareness of the real cost of disputes, which generally increases as proceedings get longer. (Notwithstanding complex and heated proceedings, the ad hoc tribunal presented the parties with an award 10 months after the chairman accepted his appointment, at a pre-established arbitration fee that was half what the institution was requiring.)

(3) Some institutions have published claims of purportedly shorter periods of the average time to render an award. We have not seen any of the underlying data in order to know what types of disputes this includes. Certainly, a short time frame for the completion of proceedings is inconsistent with the general experiences of large companies that have been involved in international arbitration.

(4) Following settlement, the chairman of the tribunal sent a letter to the arbitration institution claiming that the substantial lapse of time was evidence of substantial work having been performed by the arbitrators, and claimed for full payment of the advance on fees paid by the parties. The parties objected and the institution, to its credit, rejected the chairman’s request.

(5) Enforcement of the award was stalled in the courts for another three years even though no challenge had been lodged at the place of arbitration. Both parties recognised that this delay was created by the fact the award was so hastily and incompletely drafted that its enforcement presented novel legal issues that could only be decided by an appeals court (in a pro-arbitration jurisdiction).

(6) Another GE business was recently involved in an arbitration where the tribunal, after substantial submissions and evidentiary hearings over a two-year period, issued a final award that did not address the core dispute between the parties over a matter of contract interpretation that was essential for their future business dealings. This led to a subsequent arbitration, before a different tribunal, over what was essentially the same dispute.

(7) “Belt and braces” in UK English. (Ed.)