published by the llinois Institute for Continuing Legal Education

© 2001 by Stephen E. Smith

III. Drafting the International Arbitration Agreement

D. [23.6] Confidentiality, Costs and Fees and Currency of Award

Often overlooked in drafting an arbitration clause or submission agreement, these items are of critical importance. Confidentiality, in and of itself, is the very reason that some parties choose arbitration rather than resort to court; a choice that has been held by some courts to enforce arbitral awards attacked on due process grounds. Courts have reasoned that the parties chose arbitration for its speed, etc. and in doing so contracted away certain of the rights they would otherwise have had in court.


E. [23.7] Damages, Consequential or Punitive

While punitive damage awards by arbitral tribunals have been upheld in the United States (Mostrobuono v. Shearson Lehman Hutton, Inc., et. al., 514 U.S. 52, 131 L.Ed.2d 76, 115 S.Ct. 1212, (1995)), there is considerable reluctance to the imposition of such awards in continental countries. In those nations, there is a doctrine allowing for "moral damages" under certain circumstances. It is wiser, however, for the parties to provide in the contract for the sorts of damages that the panel will be allowed to impose, i.e., compensatory, consequential and/or punitive, so the award will not be subject to attack as lying outside the scope of the power given to the arbitrators in the clause or submission agreement.


F. [23.8] Discovery

In virtually every matter in which they are involved, common law lawyers accept the discovery process as a given. The opposite is true in continental countries, however, where discovery in noncriminal actions is unknown and lawyers often must ask the court to pose a question to a witness at the trial. While there has been movement in harmonizing these differences in international arbitration, (e.g. the International Bar Association (IBA) pamphlet, Rules of Evidence (1986)), it is best to provide for discovery or to waive it explicitly in the clause or submission agreement.