New York is one of the world\u2019s preferred seats for international commercial arbitration, offering a sophisticated legal framework, experienced arbitrators, and a supportive court system. Chinese parties involved in cross-border commercial disputes frequently encounter New York as the chosen seat of arbitration, making it essential to understand how arbitration in New York works.

The Legal Framework for Arbitration in New York

International arbitration seated in New York is governed by the Federal Arbitration Act, which incorporates the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The FAA provides a comprehensive legal framework supporting the enforceability of arbitration agreements, the conduct of arbitral proceedings, and the recognition and enforcement of arbitral awards. New York State law also contains provisions supporting international arbitration through the New York Convention.

The major arbitral institutions operating in New York include the International Chamber of Commerce International Court of Arbitration, the American Arbitration Association International Centre for Dispute Resolution, and the New York International Arbitration Center. Each institution has its own rules governing the appointment of arbitrators, the conduct of proceedings, and the calculation of costs.

The Arbitration Process

An international arbitration in New York typically begins with the claimant filing a request for arbitration with the chosen institution. The respondent files an answer, and the parties participate in the constitution of the tribunal. The tribunal then holds a procedural conference to establish the procedural timetable, address any jurisdictional objections, and set the parameters for document production.

The document production phase in US seated arbitration is generally more limited than US court discovery but more extensive than in many civil law jurisdictions. The ICC and AAA rules follow the IBA Rules on the Taking of Evidence in International Arbitration, which provide a balanced approach to document production. The evidentiary hearing is the centrepiece of the arbitration, where the parties present their witnesses and arguments to the tribunal.

Enforcement of Awards

One of the principal advantages of international arbitration is the enforceability of awards under the New York Convention. An award rendered in New York can be enforced in over 170 countries that are party to the Convention. The grounds for refusing enforcement are limited and narrowly construed.

Conclusion

New York provides a robust and supportive environment for international commercial arbitration. Steven Davis at Herrick, Feinstein in New York advises Chinese clients on international arbitration proceedings.

Selecting Arbitrators

The selection of arbitrators is one of the most important decisions in any international arbitration. Chinese parties should consider arbitrators with relevant legal expertise, familiarity with the governing law, experience with disputes involving Chinese parties, and availability to devote sufficient time to the proceeding. The institution's rules typically provide a process for each party to appoint one arbitrator and for the two party appointed arbitrators to select the presiding arbitrator, or for the institution to appoint all three arbitrators.

Procedural Efficiency in Arbitration

International arbitration offers procedural flexibility that can reduce the time and cost of resolving disputes compared to court litigation. The parties and the tribunal can tailor the procedural timetable to the specific needs of the case, including the scope of document production, the format of the evidentiary hearing, and the schedule for written submissions. Chinese parties should work with their legal team to develop a procedural strategy that balances efficiency with the need for a full and fair hearing.

Post Award Considerations

After the tribunal issues its award, the prevailing party may need to enforce the award in the jurisdiction where the losing party has assets. The New York Convention provides a streamlined enforcement mechanism in over 170 countries, but enforcement requires compliance with the procedural requirements of the enforcing court. Chinese parties should consider enforcement prospects when selecting the seat of arbitration and ensure that the award will be enforceable in the relevant jurisdictions.

Costs of International Arbitration

International arbitration can be expensive, with costs including the fees of the arbitral institution, the fees of the arbitrators, the fees of the parties legal representatives, the costs of expert witnesses, and the administrative expenses of the hearing. The total cost of a significant international arbitration can range from several hundred thousand dollars to several million dollars, depending on the complexity of the case and the amount in dispute.

Chinese parties should discuss cost estimates with their legal team at the outset of the arbitration and should consider cost management strategies including limiting the scope of document production, using a single expert where possible instead of multiple experts, and exploring settlement opportunities throughout the proceeding. The tribunal has discretion to allocate the costs of the arbitration between the parties, and the losing party is typically ordered to bear a significant portion of the prevailing party's costs.

Preparing Witnesses for Arbitration Hearings

Witness preparation is an important component of successful international arbitration. Chinese witnesses who are not familiar with the arbitration process may benefit from preparation sessions with counsel before the hearing. The preparation should cover the format of the hearing, the role of the tribunal, the process for giving testimony, and the types of questions that the witness may be asked during direct examination and cross examination.

Fact witnesses testify about their personal knowledge of the events giving rise to the dispute. Expert witnesses provide opinion evidence on technical or specialized subjects within their area of expertise. Both types of witnesses should be thoroughly prepared to present their evidence clearly and credibly to the tribunal. Chinese parties should ensure that interpretation services are available if any witnesses require assistance communicating in English.

Confidentiality in Arbitration Proceedings

One of the advantages of international arbitration over court litigation is the confidentiality of the proceedings. Arbitral hearings are private, the awards are generally not published without the consent of the parties, and the parties may agree to additional confidentiality protections through the terms of the arbitration agreement or procedural orders of the tribunal. Chinese parties who are concerned about the public disclosure of sensitive business information may prefer arbitration over court proceedings for this reason.

The confidential nature of arbitration also extends to the documents produced during the proceeding, the testimony given at the hearing, and the final award. However, confidentiality is not absolute and the parties should confirm the applicable confidentiality framework by reviewing the institutional rules and the arbitration agreement. Some institutional rules contain express confidentiality provisions while others leave the matter to the discretion of the tribunal.

Preparing for the Evidentiary Hearing

The evidentiary hearing is the centrepiece of the arbitration process where the parties present their witnesses and arguments to the tribunal. Preparation for the hearing typically involves preparing direct examination outlines for each witness, preparing cross examination plans for the opposing party witnesses, preparing the hearing bundles that contain the key documents, and preparing opening statements and closing arguments. Chinese parties should allocate sufficient time and resources to hearing preparation to ensure that their case is presented effectively to the tribunal.

This article provides general information on the legal framework described. Every situation is different and specific professional advice should be obtained before making decisions based on the content of this article. The author welcomes inquiries from Chinese clients seeking guidance on their specific circumstances and looks forward to assisting with their legal needs in this practice area.