Round-Table Discussions among Lawyers with Experience Practicing as Arbitrators

The Japan Commercial Arbitration Association held round-table discussions among lawyers with experience practicing as arbitrators in international commercial arbitration. This is an English translation of the transcript of such discussions, in which those lawyers talk about the required qualifications and skills of a reliable international commercial arbitrator. We hope you would improve understanding of the Japanese lawyers' skill and ability to control the proceedings as arbitrators in international commercial arbitrations.

 

Participants in the discussion are the following lawyers.

Moderator:

Mr. Hiroyuki Tezuka, Attorney at law admitted in Japan and New York

 

Participants:

Mr. Hideki Idei, Attorney at law admitted in Japan and New York

Mr. Yoshihiro Takatori, Attorney at law admitted in Japan and New York

Mr. Junya Naito, Attorney at law admitted in Japan and New York

Mr. Shinji Kusakabe, Attorney at law admitted in Japan and New York

 

1.            The differences and similarities between international arbitration practices and Japanese litigation practices

 

(i)                  What we learned from international arbitrators

 

 

Tezuka:

   The theme of today’s discussion, which is being held among lawyers with experience practicing as arbitrators, is “What are the required qualifications of a reliable international commercial arbitrator?”  I would like the participants to discuss, among other matters, the arbitrator’s skill and ability to control the proceedings required, in order to move arbitral proceedings toward settlement or arbitral award.

 

   I assume that the arbitration practitioners participating in today’s discussion, including myself, are slightly different from senior arbitration practitioners, who used to be judges and acted as arbitrators in many Japanese arbitration cases exercising the prevailing style in former days (a decade or so ago), or arbitration experts, who belong to academic circles specializing in arbitration law or substantive and procedural law from the civil law field. The lawyers in today’s discussion are people who have built their careers by practicing in numerous Japanese litigations as counsel, as well as arbitration cases as arbitration counsel, and are now gradually building their practice experience as arbitrators.

 

   In light of your accumulated practicing experience both in Japanese litigations and arbitration cases, I would like to start this discussion by hearing your opinions regarding “What are the differences and similarities between international arbitration practices and Japanese litigation practices.”

 

   Firstly, I would like to hear about “What we learned from international arbitrators” from Mr. Idei.

 

 

Idei:

   Let me highlight a couple of points I learned from the practice of international commercial arbitration, starting as counsel and recently as arbitrator.

 

   One of the central characteristics of the international commercial arbitration practice is that the arbitrators prudently plan each stage of the arbitral process in advance of the proceedings.  They schedule when to hold hearings, by when the parties’ assertions should be concluded, and when an award is expected to be rendered.  Scheduling is important largely because the costs of arbitration tend to increase with the length of the proceedings.

 

   Another feature I have noted during my practice is that in international commercial arbitrations, oral proceedings seem to be the norm, although that can depend on which jurisdiction the arbitrators are from.  A hearing starts with opening arguments and ends with closing arguments.  Even though the counsel prepare briefs, their arguments are presented to the arbitral tribunal orally.

 

 

Tezuka:

   Thank you.

 

   Mr. Naito?

 

 

Naito:

   From my experience as both an arbitrator and as counsel in several international arbitral proceedings, I have found that the proceedings are well planned and organized. Under the practice of international arbitration there are, to some extent, default rules in terms of what should be done at each step of the proceedings.  Therefore, the proceedings move forward in a well-organized and structured way.  This is what I have learned as arbitrator as well as counsel.  In contrast, litigation is more open-ended, which differs substantially from international arbitration.

 

   I have also learned that arbitrators with broad experience possess impressive skills, especially those who have experience as the tribunal chairperson.  They make decisions and issue orders on procedural issues arising from time to time in a dignified manner, while diligently listening to both parties’ arguments very efficiently.  I strongly feel that globally renowned arbitrators conduct arbitration proceedings in a fair and reasonable manner, which is why they are highly respected and repeatedly appointed.

 

 

Tezuka:

   Mr. Kusakabe?

 

 

Kusakabe:

   When I served as counsel before a tribunal comprised of experienced foreign arbitrators, I felt that the foreign arbitrators very tactfully tried to structure the proceedings so as to minimize the possibility for complaints by the parties later on.

 

   In particular, they sought to give the parties and their counsel sufficient opportunities to state their cases, especially in hearing sessions.

 

   However, this does not mean that the foreign arbitrators allowed for unlimited submissions of documents.  While the foreign arbitrators fully guaranteed opportunities for oral pleadings in hearing sessions, they also set submission deadlines and limited the number of submissions for briefs and documentary evidence so that the proceedings would be conducted in an efficient and orderly manner.

 

 

Tezuka:

   Mr. Takatori?

 

 

Takatori:

   I would like to point out two features of international commercial arbitrations that have left a significant impression on me: the first is “flexibility” in proceedings and responses, and the second is “speed.”  Through my experience, these 2 points were notable to me; as I also act as a co-convener of the Japan Chapter of Chartered Institute of Arbitrators (“CIArb”) and participate in CIArb’s activities as an institute which trains what you call “international arbitrators,” through such activities as well as my experience serving as a member of an arbitral tribunal with international arbitrators have given me these impressions.

 

   As a CIArb member, I took arbitrator training courses including  advanced arbitrator training  course and fellowship training course and found that the instructors in the fellowship courses had abundant practical know-how and experience, which was demonstrated by the speed in which they conducted proceedings and made decisions.  I was particularly impressed by the speed in which they determined what kinds of decisions should be made, what communications should be conveyed and what documents or materials should be produced and retained when a conflict issue or the like occurred, for example.

 

   Also regarding flexibility, compared to litigations, there are excellent international arbitrators who lead the proceedings in very flexible styles. For example, they enable efficient proceedings by clarifying disputed issues even during witness examinations when they find unclear points during such examinations and believe it can facilitate the process.

 

 

Tezuka:

   Thank you.

 

   May I add a few things.  Firstly, based on my experience, I think that many international arbitrators are quite accustomed to issuing written procedural orders, frequently one after another, during various stages of the proceedings.

 

   Although an arbitrator can also provide instructions and directions orally, written procedural orders can have their own added benefits.  Supporters of written procedural orders, such as some ICC arbitrators, say that they prefer issuing written procedural orders since it results in higher arbitrators’ fees.  Although I do not know whether that is true or not, I nonetheless think that the issuance of duly drafted procedural orders has the advantage of making it easier for the parties to understand each phase of the proceedings.

 

   Further, let me comment on an ICC arbitration case in which a very famous Belgian arbitrator acted as the chairman and I acted as one of the party-appointed arbitrators.  Before that case, I had thought that procedural matters would be decided through joint deliberation among the three arbitrators.  However, the chairman employed a style pursuant to where he would decide matters one after another under the chairman’s name and its associated authority, whenever he thought that the co-arbitrators would naturally have no objection thereto.

 

   If these decisions were taken somewhat incongruously, then he would have been deemed as slightly over-stepping his authority.  However, he issued decisions one after another that made us think that if he had consulted with us, we would also have decided in the same way; accordingly, I believe that the chairman was applying his knowledge from past experiences to make these informed decisions.

 

   Finally, let me talk about the mock arbitration jointly organized by the Japan Association of Arbitrators (JAA), JCAA, and other associations the other day.  By watching Prof. Doug Jones from Australia, who acted as chairman of the arbitral tribunal, I got the impression that he had his own, considerably-established style, with which he came up with ideas one after another for various situations where we should use this and that wording and act this and that way.

 

   In that sense, even though his ad hoc decisions were appropriate, in the end, I was extremely impressed that he chose the best-suited words from amongst the words used in multiple cases in the past and, what was more, he used them in such a manner as would enable making a transcript, if any, an easy task.

 

 

 

(ii)                The advantage of court practice experience in Japan

 

 

Tezuka:

   Next, as the second subject, please provide your opinion, if any, on “The advantage of court practice experience in Japan.”

 

 

Idei:

   Arbitration has a common basis with adjudication in that both make decisions by establishing the facts by evidence and applying the law to the facts so established.  Procedural justice, such as equal treatment of the parties and fairness of proceedings, is also common to both arbitrations and court proceedings.  As such, courtroom experience is useful in the arbitration practice as well.  The practice of fact finding and applying laws based upon the arguments and evidence presented by the parties in an arbitration is familiar to us through our court practice experience.

 

 

Kusakabe:

   In Japanese litigation practice, when making factual allegations and legal arguments, counsel representing the parties are conscious of how they and the court should identify the points in dispute and narrow them down to those that are truly important to resolving the dispute.  I believe that this approach is also very useful in arbitration proceedings.

 

   In particular, when the governing law is Japanese law, I can tell at a fairly early stage of the arbitration proceedings which factual issues are truly important because I am well versed in the law, and this enables me to conduct proceedings more efficiently.  Even if the governing law is a foreign law, I am still able to conduct proceedings effectively, by trying to discern which factual issues are truly important under the foreign laws.

 

   I also feel that my litigation experience is extremely useful when conducting witness examinations in arbitration proceedings.  A chaotic situation may arise where someone makes an irregular statement or gives an answer which is irrelevant to a question.  Under those circumstances, my litigation experience is quite useful in enabling me to steer the examinations in the right direction.

 

 

Takatori:

   As a Japanese litigation lawyer in a foreign law firm, I am finding that, contrary to what other Japanese lawyers may believe, foreigners and foreign lawyers often have the wrong idea about the Japanese litigation practice and its procedures.

 

   That is to say, many foreign lawyers, for example U.S. lawyers, have a preconceived notion that Japanese litigation is almost entirely without oral discussion, and is instead conducted primarily through the exchange of documents. The stereotypical image of Japanese litigation is that it is very ceremonial, and lawyers such as myself, who actually handle Japanese litigations sometimes have to correct these misconceptions.

 

   In actuality, there are various opportunities in Japanese litigation for counsel to engage in oral and active discussions whether to persuade judges or to straighten out critical issues. Such oral discussions can be held in non-public preparatory sessions, as well as at public hearings.  Thereforein reality, Japanese litigation is much more active than  the stereotypical image held by foreign lawyers.

 

   The fact that Japanese litigation proceedings involve oral sessions and non-public preparatory sessions, provides Japanese litigation attorneys with an advantage in arbitration hearings.  I think these are very similar points with arbitration and very helpful in developing skills to straighten out issues orally, and techniques to persuade the other party and the person who judges the matter.

 

 

Naito:

   For my part, I would like to point out some differences between Japanese litigation and international arbitration.  Some arbitrators are more interested in court precedents and authorities under applicable laws, rather than organizing the factual and legal issues in the form of requirements and effects as required under the practice of litigation in Japan, although this may be due to the difference between common law and civil law.  Therefore, it is not easy for arbitrators to persuade each other merely through the use of logic.

 

   As for witness testimonies, most witness examinations in hearings I have experienced were mainly cross-examinations, where the witness statement was examined from start to finish.  I feel that cross-examinations using this “impeachment” style, which we conduct in Japanese courts, is not common in international arbitrations.

 

   Oftentimes, I have experienced situations where, during cross-examinations, arbitrators ask the examining counsel, “Where are you leading us?”  It seems that the arbitrators cannot stand it unless they clearly know the target of the examination.  It may be a matter of degree, but I have felt that this differs from the conduct of judges in Japan.

 

 

Tezuka:

   Thank you.

 

   May I add a few things.  I often speak at various international conferences, not only regarding Japanese arbitration practices but also regarding litigations. On these occasions, I would speak about how Japanese litigation has considerably changed over the past 10 to 15 years; that is, it has become quicker and more efficient.

 

   Specifically, I would speak about how litigations in courts have become considerably quicker throughout Japan by adopting two tools: clarification of disputed issues and intensive witness examination.  After all, by duly taking proceedings to clarify disputed issues, which involves less formal discussions such as preparatory proceedings, the court can narrow down the issues to those that truly need to be resolved.  Thereafter, the court will conduct intensive witness examination, in which not all the statements need to be made orally, but can instead take the form of witness statements to be submitted in advance.

 

   Also, I would comment that whereas intensive witness examination is also used in international arbitration, clarification of issues in Japan has some unique advantages.  Specifically, from the perspective of the parties, they can avoid doing a huge amount of work in vain regarding issues in which the judge has little interest.  That is because, in a sense, to clarify disputed issues in a proceeding, the judge reads the records carefully, and, as the case may be, will also duly examine relevant legal theories by himself/herself, and then ask for clarification from the parties.

 

   As far as I am concerned, I feel that international arbitration proceedings have become somehow similar to litigation, as exemplified by the issue of electronic document disclosure.  There is a criticism to the effect that arbitration, which originally was quicker and less expensive than litigation, has become increasingly costly.  Especially, from the perspective of parties or their counsel from emerging Asian countries who are not yet very familiar with arbitration at an international level, arbitration sometimes appears to be no easy matter since it would take much more time and money.

 

   However, from my perspective, I would hope that the efficient and swift proceedings, which Japanese courts have achieved by duly improving their system and practices, would be utilized in establishing what we could call Asian-style arbitration, if possible.  Specifically, for those cases where any of the parties to an arbitration is a person from a country that does not have an affinity with the current international arbitration standards, especially towards some of the more onerous standards that can give a sense of incongruity, I believe it may be good to establish a form of unique standards by utilizing what we could call “efficient and not very onerous arbitral proceedings” based on the style that has been developed by Japanese arbitrators from their litigation practices.

 

 

 

2.               Item-by-item discussion

(i)                  What are the required communication abilities and skills?

 

 

Tezuka:

   Next, we would like to move onto an “item-by-item discussion.”  The first item is “What are the required communication abilities and skills” of an arbitrator?  If there are any matters which you prioritize when trying to develop communications, especially with foreign arbitrators or foreign counsel, I would like to hear your opinions on such matters.

 

   By dividing the situation into, say, two stages, i.e., the preparatory proceeding stage and the hearing stage, let’s start with the preparatory proceeding stage.  Mr. Takatori?

 

 

Takatori:

   Efficient communication is, of course, based on understanding each idea or thoughts.  In the case of international arbitration, especially when seeking mutual understanding with foreign arbitrators or foreign counsel, we often face situations where the parties and tribunal members come from a mix of different civil law and common law jurisdictions, leading to a clash in legal cultures.

 

   Sometimes the way of thinking or understanding how to proceed in practice is significantly different. For example, this can be seen in the way different parties think as to whether or not to conduct discovery; if conducting discovery, the scope thereof; how to shift to mediation or how to lead to an amicable settlement; and whether or not the person to engage in discussion of an amicable settlement negotiation or mediator can be the same as the one who judges the arbitration.

 

   As there is a fundamental difference in legal culture, background of legal education, etc., it is often attributed as the source of opposition or difference between civil law and the common law jurisdictions. Additionally, in fact, there is naturally a difference in feelings that arise regarding the way of thinking about discovery or regarding the scope of attorney-client privilege when a multi-national arbitration panel is formed.  On the other hand, merits of international arbitration can be found in the very existence of such differences and we need to understand the background of each arbitrator on the panel, and the different ways in which the parties’ counsel think in order to appreciate those merits.  Such understanding is essential to proceed with efficient and beneficial communication, especially during discussions on procedures and progress, including discovery etc., and in preparatory sessions.

 

 

Naito:

   Each arbitrator has his or her own distinct background, and each has their own method to manage the proceedings.  Therefore, it is highly beneficial for the arbitrators to communicate with one another as much as possible through telephone calls and e-mails at the outset, in order to understand each other’s methods and perspectives.

 

   Although I myself have not experienced this, I often hear of cases where the atmosphere in the three-arbitrator panel becomes so confrontational that the panel disagrees on every issue that arises.  I believe that the key to avoiding this is reasonableness, regardless of whether the arbitrator’s background is civil law or common law.  Based on my experience thus far, if you are able to create an understanding among the other arbitrators that you are able to hold discussions reasonably and to persuade the other arbitrators using reason, there will be greater accord within the tribunal.  Therefore, either when we are appointed as an arbitrator or when we appoint the arbitrator, I always think that, with respect to communication, I should exercise caution about being able to think reasonably, and I should appoint such a reasonable person as arbitrator.

 

 

Idei:

   There are several methods for communicating with the parties’ counsel as well as among the fellow arbitrators: face-to-face, telephone, in writing (in these days most written communications are done by e-mail), etc.  In order to avoid misunderstandings with non-Japanese counterparts, I often mix oral and written communications, such as making oral communication based on a prepared memo or following up by e-mail after a telephone conference.

 

   Deliberation among fellow arbitrators is probably the most important and the most difficult.  It will also depend on whether you take charge in drafting an award or not.  In cases where my fellow arbitrator provides a draft award, I take care that I make a responsible comment so that the discussion will be a focused one that does not stray.

 

 

Kusakabe:

   When communicating with foreign arbitrators and foreign counsel, I believe that it is important to recognize in advance the fundamental differences between civil law and common law systems, and in particular, the material differences in dispute resolution methods, especially in litigation, between countries.  Especially noticeable are the differences in the methods of pleading (for example, some cultures place significant value on documents, while others will more readily accept oral presentations), methods for examining witnesses, and procedures for discovery and settlement discussions.  Issues relating to these differences do actually arise in arbitration proceedings, and reveal big differences in dispute resolution methods between countries.

 

   To communicate with foreigners involved in arbitration proceedings, I think that it is very important to understand the methods which foreigners consider standard and familiar, and to think flexibly on the best way to advance the proceedings that one is engaged in, even though the foreigners' methods may be different from those with which one is familiar.

 

 

Tezuka:

   Thank you.

 

   May I add a few things.  I think it best to engage in face-to-face discussions whenever possible, especially at an early stage, i.e., to have an opportunity to get together to discuss in person.

 

   Of course, in some cases, we would have telephone conferences; e.g., if some of the arbitrators or counsel are particularly busy, or if it is difficult to justify the cost for traveling long distances.  However, in principle, I think it is quite important to make it a basic rule to pass my preferences to other arbitrators or counsel, i.e., my belief that a face-to-face discussion would eventually contribute to smooth proceedings.

 

   Naturally, I would also meet and discuss with fellow arbitrators, for example by having a meeting limited to arbitrators, once or twice before having a telephone conference where the parties concerned are also in attendance.  I think it is better to share various ideas first among fellow arbitrators rather than leaping straight into a telephone conference with the parties and having to discern your co-arbitrators’ opinions on the spot.

 

 

Takatori:

   I would like to share some of my recent experiences communicating with foreign arbitrators for example, on specific occasions, such as deliberation to discuss issues and possible awards, as well as communication  in the hearing.  When a multinational arbitral panel is formed, especially when I join as a Japanese arbitrator, the Japanese law is often set as the governing law.

 

   In such cases, my expected role as the Japanese arbitrator is to be the person wholly responsible for understanding the Japanese law, and conveying this understanding and the interpretation of Japanese judicial precedents to the rest of the tribunal.  I shoulder the responsibility of explaining to my fellow arbitrators what the Japanese law says as well as what the Japanese judicial precedent says and how it should be interpreted.

 

   In such situations, of course, I need to be capable of properly explaining such interpretations, applications, etc. of the Japanese law based on the experience and knowledge I have cultivated up to now as Japanese lawyer. However, with regard to interpreting Japanese law, reading Japanese judicial precedents, etc., there can be in fact sometimes different ways of thinking between Japanese lawyers and practitioners, on one part, and a foreign experienced lawyer acting as a foreign arbitrator on the other part, regardless of whether the foreign lawyer has a common law background or civil law background.  Specifically, for example, the traditional interpretation of the Japanese law or how to read the Japanese precedents, etc., accepted as common sense by us, Japanese lawyers and practitioners, may be interpreted or read in different ways by foreign lawyers.

 

   In such situations, it is of course necessary to properly explain the interpretation and application of Japanese law as it is accepted in Japanese practice, in a persuasive manner.  However, it is also important to acknowledge that the law and judicial precedents can be read in other ways from your way of thinking logically.  Recently, I have begun to feel that it is very important to proceed with discussions to understand how the Japanese laws and precedents are read by the other party and the foreign arbitrators by listening sincerely to how they read and understand Japanese laws or Japanese precedents and by what logic they use to understand them.

 

 

Tezuka:

   Thank you.

 

   Including the point raised just now on the issue of communication in hearings, please give your opinions, if any.

 

   As for me, I think it is important to understand from the outset that arbitral proceedings as viewed by arbitrators and counsel can be considerably different depending on the person.  Let me give an example using the IBA (International Bar Association) Rules on the Taking of Evidence in International Arbitration:  In an ICC arbitration case in which I currently act as counsel, all the parties, including arbitrators and the other party’s counsel, have assumed that the proceedings should naturally be administered pursuant to these new IBA rules.  Although the arbitral tribunal included the adoption of these rules in the procedural order, this was a case where all the players participating expected and were ready to adopt these rules from the beginning, evenbefore the adoption was reduced to writing.

 

   Accordingly, various procedural matters are now being processed based on these IBA rules, i.e., by taking the form of express reference to these rules, which I think are, in practice, a sort of current standard for international arbitration.

 

   On the other hand, there are also cases where counsel for either party or both parties, or even some of the arbitrators are not familiar with the IBA Rules on the Taking of Evidence.  In these cases, it is not good to impose the IBA rules by saying that these rules are a sort of standard rules and accordingly should be adopted.  That is because adopting rules which you see and adopt for the first time would, I guess, make the proceedings rather difficult to be processed, compared to a case using well-known rules, which we could expect to proceed efficiently pursuant to those rules.  Although adopting the IBA rules might be reasonable and fair in many cases, I think it would be rather unfair to adopt them in all circumstances, especially when one of the parties is unfamiliar with them.

 

   Accordingly, I assume it is important to think about how much affinity a party has with a certain set of specific standards, or, how much affinity and knowledge a party has regarding Japanese-style proceedings.  That is because I assume that if we propose conducting the clarification of issues in a proceeding involving people who have not practiced Japanese-style proceedings at all, then some of these people may consider it to be slightly problematic, in terms of impartiality, to allow the arbitrators to take initiative and sort points at issue into important ones and unimportant ones.

 

   In that sense, I think the first thing we should try to do is to understand the arbitration model assumed by the players and explore proceedings that would be just as modern and efficient, to the extent possible, but also would concurrently conform to the assumed arbitration model to a certain extent and would fall within its scope.

 

   Any other opinions?  Mr. Naito, please.

 

 

Naito:

   With respect to hearings, English is a big problem.  There is a general pattern to the procedures in a hearing: the opening statement, the examination of factual witnesses, the examination of experts and the closing statement.  These procedures are carried out consecutively and orally.  Therefore, whether arbitrator or counsel, it is necessary to be able to properly and accurately convey your ideas and make decisions extemporaneously. 

 

   In most cases, I, as counsel, work with foreign lawyers as co-counsel, and therefore might not have experienced those challenging instances where your communication abilities are constantly tested.  Moreover, because there are few opportunities to acquire such ability through practice, I strongly believe that it is important to train for such situations, and I think JAA sometimes holds practice sessions.

 

   The number of young people with good English-language skills is increasing, which I feel is promising.  Of course, I am not saying that English is everything, but I think that we must accept the fact that English has become the default language in international arbitration.

 

 

(ii)                What abilities of control are required of an arbitrator in order to operate proceedings smoothly?

 

 

Tezuka:

   Thank you.

 

Then we would like to get on to the second item for “item-by-item discussion,” i.e., “What abilities of control are required of an arbitrator in order to operate proceedings smoothly?”  Since I assume there are various issues, I would like to set a scenario, by stating certain issues, for instance, and then ask you to respond with the points you would deem as important including the exemplified point, rather than seek your views for each item at issue.

 

The first point is what abilities and skills are required, that is, what is needed in order to manage the proceedings efficiently.  The other point is what kinds of methods have you adopted in practice, in order to control the proceedings smoothly.  Specifically, I would like you to talk about the specific ideas and methods you’ve devised and have been using, if any, for each stage of the proceedings to control the proceedings.  Further, I would also like you to talk about how you would approach the parties in a case where the brief or evidence required to render an arbitral award are insufficient.  I assume there are various issues within these scenarios that can be addressed.

 

   Mr. Idei, please go ahead.

 

 

Idei:

   One thing I always bear in mind is the importance of swift and efficient proceedings.  Swiftness directly determines the length of proceedings, from filing of arbitration to rendering an award.  Efficiency is reflected in the cost of arbitration.

 

   Swiftness is one of the main reasons why the parties chose arbitration.  Unlike litigation, the cost of arbitration including arbitrators’ fees directly resound on the parties.  As such, arbitrators are requested to make an effort to proceed swiftly and efficiently.

 

   Strict scheduling is the key, without which arbitration proceedings sometimes become unfocused and endless.  I request that the parties’ submissions be made by certain dates and beyond such timing no further submissions are allowed absent special cause.  In doing so, it is important to give the parties adequate warning beforehand and give certain grace periods.  Likewise, as Mr. Tezuka mentioned, arbitrators should let the parties know how the arbitrator would like to handle the arbitration proceedings.  I incorporate these at the outset of the proceedings, in most cases at the first pre-hearing conference.

 

   Strict scheduling means not only that the deadlines are clearly set but also that the homework, i.e., what must be done by such deadlines, is clearly defined.  I often confirm in writing what should be done by the parties by certain dates through an arbitrator’s instruction memorandum delivered to the parties immediately after a hearing or pre-hearing conference.

 

   In terms of swiftness and efficiency, I believe arbitrators sometimes should intervene timely in the parties’ exchanges of submissions in order to keep the assertions in perspective. In other words, tribunal should hold a grip over the process.

 

 

Tezuka:

   Mr. Takatori, please go ahead.

 

 

Takatori:

   For efficient and smooth proceedings and the required ability to control proceedings, generally speaking, I think appearance is extremely important..

 

   This is because, when a potential party, especially a company, is deciding whether or not to use arbitration or whether or not to execute an arbitration agreement, they are often concerned about whether or not arbitration procedures really proceed fairly. There are many companies, in particular Japanese companies, which have had some bad experiences, where a procedure did not appear to be fair, and consequently and unfortunately do not choose arbitration.

 

   Of course the final arbitral award itself results in one side winning and the other side losing and therefore the possibility of either side being dissatisfied is fairly high. However, at least regarding the proceeding, it is very important to appear fair and to convince both sides that the process is fair.

 

   In that sense, either party may become dissatisfied if the procedure appears unfair. Examples of such procedures include: to what extent attorney-client privilege is accepted as an exception of discovery; how to decide when there is communication with an in-house lawyer whether such communication can be part of either party’s evidence; how to set time spent for witness examination and the number of witnesses; and how many days each party can have to reply after receiving the other party’s brief in actual scheduling.  The appearance including fairness should always be properly maintained.

 

   If the actual arbitration proceeding appears unfair, the use of arbitrations for dispute resolution may decrease. Therefore, setting aside substance of judgment, if there is a solid appearance that a proceeding and the communication to control the proceeding are fair and the actual procedure is led in a fair manner, then parties may continue to utilize arbitration.

 

 

Kusakabe:

   As for the skills required to conduct arbitration proceedings smoothly, I generally believe that it is important for arbitrators to be fully aware that they should take initiative in relation to procedural aspects.  Although parties and their counsel generally seem willing to cooperate to achieve prompt and effective proceedings, I ultimately think that it is the arbitrators who are primarily responsible for achieving that..

 

   In terms of what I actually do when conducting arbitration proceedings, with such awareness in mind, of course, I will prepare a written agenda for every session, including hearings and preparatory meetings, and distribute those agendas to the parties; although I suppose almost all arbitrators will do this too.

 

   Apart from an agenda to be distributed to the parties, I also prepare a detailed written agenda in advance of each session describing what I should say during the session, in order to ensure that I do not fail to mention anything that should be raised in the session.  In many cases, my personal detailed agenda is nearly three times the length of the agenda to be distributed to the parties.

 

   There is no doubt that proceedings do not always progress as planned, and are influenced in part by what the parties and their counsel argue.  I try to anticipate all potential situations as much as possible, and write in my agenda a way of dealing with each of them: for example, if someone says this, I will say that; if things go this way, I will think in that way.

 

   After a session ends, as Mr. Idei said earlier, I will prepare a notice based on my detailed agenda at hand, and send it to the parties within a few days.  Of course, I do not include in the notice everything written in my personal agenda.  Rather, I mainly write what the parties should do after the session.  In addition, I will also write down matters agreed to by the parties in relation to points that may later become a cause of dispute or, in some cases, become reasons for setting aside or refusing to enforce the arbitral award, so that a party dissatisfied with the arbitral award will have little chance of raising complaints at a later stage.

 

 

Naito:

   In addition, my basic policy is that because the parties agree on entrusting the dispute resolution to the arbitral tribunal, I would like to have the parties negotiate and agree on procedural matters, for example, scheduling and document production, without the involvement of the tribunal.  The tribunal will intervene only when the parties are unable to reach an agreement.  Personally, I prefer to follow this policy as much as possible.

 

   Of course, in order to avoid chaos, the tribunal sets deadlines and tells the parties that the tribunal will decide if an agreement is not reached by the deadline.

 

   Another point, which I think is the most difficult to manage, is how to balance speed and efficiency with the function of arbitration as the final process to rule on the merits of a case.  The issue comes up when there are insufficient briefs or evidence necessary to issue an arbitral award.  I have faced this problem in some actual cases.

 

   Arbitration differs from litigation, but I believe that arbitration should have the function of finding the truth as well.  It is always difficult to maintain a balance between the initiative of the parties and the official authority of the arbitral tribunal.  All I can say is that this balance must be considered on a case-by-case basis, but it is a very important issue.

 

 

Tezuka:

   Thank you.

 

   May I say a few things.  What I think is fundamentally important is, firstly to think about the progression of the entire proceedings in order to render a timely and well organized arbitral award—which is the ultimate goal.  And for achieving that purpose, the hearings should also be conducted as promptly as possible but at the same time be a well-organized with sufficient preparations.  For that purpose, there is the pre-hearing meeting.  Accordingly, what is most important is placing each procedure in the entire context of the proceedings and planning ahead,not only one move ahead but several moves ahead at each stage.

 

   On the issue of having the participants set aside time in their schedule, for example, in the case where the jurisdiction of the arbitral tribunal is disputed and you draft an order regarding arbitral jurisdiction, it would be too late, if you seek to take the next step and ask what date would be convenient to hold a pre-hearing meeting only after you have rendered the order on the jurisdiction of the arbitral tribunal, since fellow arbitrators and counsel are extremely busy.

 

   Accordingly, I give the highest priority to time management and avoid wasting time or allowing idle time.  Today, for your reference, I have handed out an example timetable of the proceedings in a case in which I recently acted as the sole arbitrator at JCAA.

 

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[Translation]

 

Example Timetable of Proceedings in a JCAA Arbitration Case

 

Year 201X

 

Mar. 31                   Request for arbitration

Apr. 6                      Notice of request for arbitration

Jun. 8                      Appointment of the sole arbitrator

Jun. 9                      Order regarding language (Japanese) to be used in arbitral proceedings

Jun. 10                    Notice regarding written submissions and hearing on the jurisdiction of the arbitral tribunal

Jun. 14                    Deadline for submission of parties’ opinions on fixing June 23 as the deadline for submission of rebuttal arguments on the jurisdiction of arbitral tribunal, and parties’ opinions on whether it is necessary to hold a hearing regarding the jurisdiction of the arbitral tribunal and schedule (six dates and times were proposed)

Jun. 30                    Deadline for the respondent to submit rebuttal arguments

Jul. 5                       Notice of attendees at the hearing (assistant to the arbitrator)

Jul. 8                       Hearing regarding the jurisdiction of the arbitral tribunal (one-and-a-half hours)

Jul. 22                     Order regarding the jurisdiction of the arbitral tribunal

Jul. 27                     Notice of pre-hearing meeting (on procedural issues)

Aug. 4                     Pre-hearing meeting (on procedural issues) (two hours)

 

Proposed agenda for discussion during the pre-hearing meeting:

 

1.                             Timing and methods of (i) clarifying disputed issues regarding assertions that are not on the merits of the case but on the legal interest of requesting a declaratory arbitral award, and (ii) the arbitral tribunal rendering an award;

2.                             Schedule and method of submitting pre-hearing briefs;

3.                             Schedule and method of submitting documentary evidence, witness statements, and expert reports (if any);

4.                             Requirements, procedures, and methods regarding request to produce documents (see Article 37 Paragraphs 4 and 5 of the Japan Commercial Arbitration Association Commercial Arbitration Rules (the “Rules”));

5.                             Whether it is necessary to hold a hearing for clarifying disputed issues on the merits and schedule;

6.                             Whether it is necessary to apply to the court for assistance in taking evidence;

7.                             Number, schedule, and place of hearing(s) (please note that pursuant to Article 34, Paragraph 1 of the Rules, if a hearing lasts more than one (1) day, it shall be held on consecutive days, to the extent possible);

8.                             Whether it is necessary to have opening statements and/or closing statements, and time allocation (maximum time allowed to each party);

9.                             Whether it is necessary to have examination of witnesses and/or experts, number (maximum) of witnesses and/or experts, and procedures relating to the examination of witnesses (including prior submission of witness statements or expert reports, time allocation (maximum time allowed to each party), language to be used, use of video conference system, and handling of witnesses to be subsequently examined);

10.                           Whether it is necessary to have interpreters, recording, or stenography at hearings; and

11.                           Whether it is necessary to have post-hearing briefs, and schedule.

 

 

Year 201X

 

Aug. 10                   Clarification of matters to be confirmed regarding the legal interest of requesting a declaratory arbitral award

Sep. 3                      Deadline for the claimant’s written submissions

Sep. 27                    Deadline for the respondent’s written submissions

Sep. 28                    Clarification of the obligation of consultation at the time of termination of the contract (court precedents and academic authorities to be submitted, if any)

Oct. 5                      Deadline for submitting court precedents and academic authorities

Oct. 13                    Notice of proceedings of hearings (order and time allocation of witness examination(s), whether or not to call legal experts whose expert reports were submitted)

Oct. 15                    Notice of proceedings of hearings (2) (change to the proceeding schedule)

Oct. 18                    The first hearing (10:00 to 17:00)

Oct. 20                    The second hearing (10:00 to 12:00)

Nov. 2                     Written record of witness examination(s)

Dec. 24                   Notice of the conclusion of the examination proceedings and the time of the arbitral award

Dec. 28                   Conclusion of the examination proceedings

 

 

The next year

 

Feb. 1                      Time limit for the final arbitral award/issuance of final arbitral award

 

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   In the subject case, the request for arbitration was submitted at the end of March 201[ ], and the appointment of the arbitrator was conducted in early June.  Firstly, since no language had been expressly agreed on, I decided that Japanese should be the language used in the arbitral proceeding on the day immediately following the day of my appointment, by taking into account various circumstances.  Then, because there was a dispute on arbitral jurisdiction, the following day, I issued a notice which requested that the parties concerned submit additional assertions, if any, regarding the issue of the jurisdiction of the arbitral tribunal by a certain date, and also submit opinions, if any, regarding procedural issues such as whether I should hold a hearing regarding the jurisdiction of the arbitral tribunal by a certain date.

 

   As you can see from the example timetable, the notice requested that the parties to reply no later than four days after the date of notice, as to whether it was necessary to hold a hearing, and, if necessary, which of the six sets of proposed dates and times shown in the notice would be convenient to the parties.  Although there were only four days given to the parties, I thought it was reasonable to assume that they would still be able to reply within that period since it was a simple logistical question.

 

   Further, I pushed ahead with proceedings by employing the following attitude: although I would tentatively decide a deadline, I would say that if the deadline is too tight for either party, I would like that party to inform me of that fact together with its reason.  Specifically, I would tell the parties that although I intend to request that the party submit arguments relating to the jurisdiction of the arbitral tribunal no later than two weeks after the notice date, if it would be inconvenient, e.g., if the deadline is too tight, the party would have the opportunity to express its opinion.

 

   As you can see from the example timetable, I then set the deadline for submitting further written rebuttal arguments by the other party at a date which is a further two weeks after the deadline for reply mentioned above.  And then, around 10 days after the submission of the further written rebuttal arguments, I held a hearing regarding the arbitral jurisdiction.  You can see from the example timetable that I held a hearing regarding arbitral jurisdiction on July 8, and then made a decision regarding arbitral jurisdiction on July 22, that is, only two weeks after the hearing.

 

   At the time of the hearing regarding arbitral jurisdiction, I proposed that although the arbitral tribunal actually had not yet determined which of the two decisions to make: (a) that it has arbitral jurisdiction or (b) that it does not have arbitral jurisdiction; we should decide when to hold a pre-hearing meeting by assuming a decision ruling that it has arbitral jurisdiction since in that case, we would have to hold a meeting.  Because the hearing regarding arbitral jurisdiction was an occasion in which counsel of both parties were present, I asked them to leave some dates open for the pre-hearing meeting by looking into a pocket diary and specifying the dates on the spot..

 

   The pre-hearing meeting was held around two weeks after the decision regarding arbitral jurisdiction was rendered.  Before the pre-hearing meeting was held, I handed out a proposal of agenda for discussion, explaining that since I was considering certain matters for discussion, the parties should submit matters to be added or other comments, if any, before the hearing.  As you can see from the proposed agenda for discussion, it also contains several matters which neither parties’ counsel would elaborate on in the subject case.  However, they could also be referenced or utilized in other cases.

 

   In the subject case, the points at issue included the issue regarding, so to speak, legal interest in obtaining declaratory relief, i.e., the need to obtain declaration of non-existence of obligations.  Accordingly, we also discussed such matters as when to arrange points at issue regarding existence or non-existence of the interest in declaratory relief and when to render decisions thereon.  Further, I also asked the parties about the brief to be submitted before the hearing, i.e., by what deadline, in what schedule, and in what order would the parties submit them.  Furthermore, I also asked the parties about the schedule for submitting documentary evidence, witness statements, and expert reports, if any, or whether they intended to file a request for production of a documents.

 

   In addition, I asked the parties about whether it would be necessary to separately schedule a hearing date for clarifying disputed issues regarding the merits, and whether we should expect to arrange examination of witness at court.  Further, regarding the dates of hearings, I proposed that discussion be needed if they had any opinions regarding the number of hearings, scheduled dates, place, and so on.  I also asked about whether we would adopt oral proceedings as the main method of proceedings; whether we should expect to have an opening argument, closing argument, or the like; and whether we would conduct examination using the video conference system, etc.

 

   Further, it is important to confirm whether interpreters, recording, or stenography would be necessary.  Whereas JCAA would take the trouble of arranging these matters to a certain extent, for a case at the ICC, I think it would be necessary to discuss who will arrange them and how, and tentatively how the costs can be shared.

 

   In addition, I also included in the agenda for discussion when to submit the post-hearing brief, i.e., how many days are allowed before its submission.

 

   What is more, in this kind of pre-hearing meeting, we would always discuss matters of this sort as much as possible, i.e., the issue which I raised just before; specifically the issue of what to do in a case where the parties’ assertions or evidence required to render an arbitral award are insufficient.  I also included this matter in the agenda for discussion because if insufficiency of particular items are found after the hearing is completed, the parties, as well as the arbitrator, will be at somewhat of a loss.

 

   Accordingly, as you can see from the example timetable, I asked for clarification twice.  For one thing, since there were several points at issue regarding legal interest in obtaining declaratory relief, I asked the parties concerned about their thoughts regarding those legal issues.  Also, since the subject case was related to termination of a continuous contract, which imposed an obligation of consultation in the case of its termination, I asked the parties concerned to submit court precedents or literature, if any, which they wanted the arbitral tribunal to take into account, by a certain date, regarding the issue of whether the contract cannot be terminated unless the consultation obligation has been fully performed or whether it is not always impossible to terminate a contract even if the consultation obligation has not been fully performed.

 

   If anything, I think that it would not be impossible for a court to research relevant past court precedents on its own and render a judgment straight away based on the court precedents that the parties concerned have never seen.  However, especially in an international arbitration, I would take the position of requesting that the parties submit court precedents or academic authorities if they have any, since I think it is not ideal for the arbitral tribunal to research these things independently and render surprising arbitral awards by stating that it did so since legal issues are not subject to burden of proof.  Actually, I myself researched relevant court precedents or academic authorities by deciding what might be related to the subject case.  Therefore, I made the request because I was not willing to render an award without relevant court precedents or academic authorities being submitted by the parties and available for reference by the arbitrator.

 

   Finally, I wanted to share with you one of the tools which I adopted, an assistant to arbitrator.  ICC calls this person a “Administrative Secretaries.”  As long as the parties concerned are not oppose to it, I would include a relatively young 4th year or 5th year associate lawyer who intends to become a specialized arbitration lawyer, as an assistant in an arbitration case, and I would have him/her accompany me on the days of hearings.  I would have him/her, for example, research matters such as past court precedents previously mentioned, or otherwise assist me, in the hope that such experience would also provide him/her with valuable lessons.

 

   As a matter of fact, the time spent for the above research cannot be billed.  Accordingly, I would arrange that knowing that it financially does not pay.  However, I think that arbitral proceedings would be enhanced if the future trend is that this sort of research would be accepted by the parties and would be duly included in the arbitrator’s fee.  For the time being, however, I would like to try to enhance the proceedings by having research conducted that way, as far as there are no objections, even if it cannot be billed and results in some small financial loss.

 

 

Idei:

   Mr. Tezuka has just shown us how he organized and gone through the actual proceedings, which is informative.

 

   He also mentioned using an assistant in the proceeding.  I think this is a useful practice and I would like to try to use this practice when opportunity arises.

 

   One question.  This example of arbitration, despite involving a jurisdictional issue, seems to have been completed within relatively short period.  At what stage did you plan ahead looking at the timing of rendering an award, and how did you share such plan with the parties?

 

 

Tezuka:

   Yes.  Regarding arbitral jurisdiction, the opposing party was to some extent arguing that arbitration could not be conducted since the contract had already been terminated.  Accordingly, although it was not a highly complicated issue, I drafted the order by attaching due reasons that would be acceptable and satisfactory to convince the opposing party in regard to my decision.

 

   Accordingly, although I had to issue an order which was much more than one or two-page and was relatively detailed, I convinced the opposing party and no recourse, such as an appeal to a court pursuant to the provision of the Arbitration Act, was filed.

 

   Once this matter was decided, we then have all the other matters decided together in the previously mentioned pre-hearing meeting including the dates of hearings, as well as all the details such as in which way and by when, and by which party and in what order evidence will be submitted.

 

   Then if, by looking at the results of hearings, there were no additional matters to be examined, the examination proceedings would be able to be concluded at once, in principle.  In the subject case, the hearing was held in late October, and the date of the arbitral award was on or before February 1; accordingly, I felt that the final award was rendered relatively swiftly.

 

 

Idei:

   May I add one thing in connection with efficient proceedings.  Recently the arbitration, especially transnational commercial arbitration, tends to become as heavy as litigation.  That concerns me.  It may deprive the arbitration of its great advantages.

 

   I would like to stress swiftness and efficiency, as mentioned earlier, with a caveat that the parties are given adequate opportunities to assert their positions.  I would restrict the number of times the parties may submit briefs within a reasonable limit after consulting with the parties.  I would ask the briefs should be literally brief.  I would ask the parties to avoid producing voluminous documents without due regard to the relevance.  I would occasionally candidly point out that the evidence a party is going to produce does not seem to help the tribunal.  One method I sometimes employ is that I will have the parties disclose the materials (or exchange copies) they have among each other and select only the disputed portions to be submitted to the tribunal.  Also, I would ask the parties to clarify the relevance of produced evidence with the facts to be proven in order to save arbitrators’ time.

 

 

Takatori:

   Regarding arbitration’s tendency of getting similar to a litigation, which Mr. Idei has just mentioned, I agree.

 

   On the other hand, regarding arbitration, there are some examples on facilitating flexibility as arbitration.  I experienced in JAMS arbitration in California as a counsel, not as an arbitrator, that the arbitrator was present at the depositions in discovery process, although there were more or less special circumstances.  Accordingly, the arbitrator virtually made an evaluation on the merit of the case at that time simultaneously.

 

   Although this is not practice adopted often, this actually worked very efficiently and shortened the term of the arbitration procedure on this case and helped the arbitrator to grasp the issues of the case and his evaluation as well.  Eventually, the case ended with an amicable settlement and the practice shortened the term to reach the conclusion.  I feel that this was exactly a case where the arbitration process agreed by the parties and such arbitrator’s efficient handling worked very efficiently and flexibly to reach the amicable settlement, conducting practical combination of deposition and witness examination where the arbitrator was present.

 

   As such good example, I am trying to take a lead on arbitration procedure flexibly and efficiently depending upon the situation

 

 

(iii)               How to think about settlement during arbitral proceedings

 

 

Tezuka:

   Thank you.

 

   Then we would like to get on to the third item “How to think about settlement during arbitral proceedings.”  There is the issue of method and timing to confirm the parties’ intention to enter settlement talks, and the issue of whether to disclose the arbitrator’s evaluation of the case formed thus far in confirming the parties’ intention to do so.  If you would disclose your evaluation of the case, to what extent and for what reason?  Or, if you would not, why?  I would like you to talk about these matters.

 

   Mr. Kusakabe?

 

 

Kusakabe:

   Generally speaking, the method and timing of confirming the parties' intentions to enter into settlement discussions varies from case to case.  In my experience, when everyone meets for the first time, which is at a preparatory meeting in most cases, I will very briefly mention that I can support settlement discussions if both parties request me to do so.  I mention this at an early stage simply to let the parties know that it is not impossible for the arbitral tribunal to do so under the system, because there may be cases where the parties and their counsel are not necessarily familiar with arbitration procedures, and do not anticipate that the arbitral tribunal will be able to facilitate settlement discussions if requested by the parties.

 

   However, if the question is whether and when I will suggest an opportunity for settlement discussions after considering whether it is really better for the parties to enter into a settlement, it is possible that I will do so when both parties have presented their respective allegations and arguments and the true points in dispute have been made clear through the proceedings, or when the time is ripe for rendering an arbitral award after the completion of witness examinations.  I think that this is similar to Japanese litigation practice, and depending on the case, I may do so on either or both of those occasions.

 

   However, even if I suggest settlement discussions, I will only suggest general ideas or approaches, and will inform the parties that they should let me know if they have an interest in settlement, rather than approach the parties with advice that the case should be resolved through settlement.  Unless both parties specifically make such a request, I will not further recommend settlement.

 

   As for whether or not an arbitrator should disclose his or her evaluation on the merits of a case during settlement discussions as mentioned earlier, I am very careful about doing so.  For example, it is inconceivable for me in any case to say to a party "you will lose if you continue in this way".

 

 

Naito:

   As an arbitrator, I generally do not attempt to make a settlement between the parties.  My view is that you cannot lead the parties to a reasonable settlement without expressing the tribunal’s evaluation of the disputed issues to the parties.

 

   Such evaluation of the tribunal cannot be formed unless proceedings get to a certain stage, whether it is when the issues have been framed or when witnesses have been examined.  However, according to my experience, the party that feels it is going to lose the case at a certain stage will push for a settlement by itself, because such party can infer the evaluation of the tribunal.  In that case, the parties will settle without the involvement of the tribunal.

 

   If the tribunal takes the initiative to settle the dispute, as if it was a mediator, then I believe the tribunal needs to disclose its evaluation of the disputed issues, which would contradict its role as a judgment-making body.

 

   If the parties tell the arbitrator that they want a settlement and thus want the arbitrator to act as an intermediary, then I think that I would accept such a role, but so far, I have never recommended settlement when I acted in the arbitral tribunal.  Rather, as counsel, I have had the unpleasant experience of being almost forced to make a settlement by the arbitrator.  Therefore, when acting as an arbitrator, I do not talk about a settlement unless the parties expressly request settlement negotiations.

 

 

Takatori:

   I have 2 points.  First, as I mentioned at the beginning, there are often discussions on whether a person who leads a mediation toward an amicable settlement and a person who actually judges and writes an arbitral award when parties don’t reach an amicable settlement should be separated; and discussions deriving from differences in legal culture; between the common law and the civil law culture; differences in each parties’ legal culture and attitudes; and so on.[作成者1] 

 

   Second, there is an issue of appearance. As Mr. Naito has mentioned, no party should feel that they are being treated unfairly.  Arbitration is different from compulsory litigation, where judgment will be rendered by a state or sovereign power.  Because parties agree to refer a case to arbitrators in an arbitration proceeding, that is, because a case is judged or settled based on agreement made on a private basis, the outward appearance that the arbitration is fair is very important.

 

   Therefore, in order to take the lead and proceed with the arbitration without making any party feel that it is being treated unfairly, arbitrators should disclose their evaluation or observation of the merit of the case very carefully, even when they are involved in a procedure to reach an amicable settlement.  In the case of judicial proceedings provided by a public power, there are some judges who hold ex parte meetings in Japanese courts. In the case of arbitration, however, usually arbitrators shouldn’t hold such ex parte meetings at which one party is not present, and should pay large attention to fair appearance.  Besides this, I think arbitrators should be very sensitive to how they lead to an amicable settlement, mediation or arbitration especially when parties have basically different attitudes toward how to proceed with those processes.

 

 

Idei:

   When proposing a settlement discussion, arbitrators should be cautious about how such proposal is taken by the parties, especially when foreign parties are involved.  There used to be a critic that Japanese arbitrators tend to mediate settlements.  A recommendation of, or even suggestion of, settlement may sometimes be seen as deviating from the arbitrator’s norm.  With such background, we should be mindful of the strict rule adopted in the Arbitration Act, that the parties’ consents are required to enter settlement talks, as compared with the rule under the Civil Procedure Code, that a judge may at any stage of the proceedings try settlement.

 

   Generally speaking, there are two typical timings of settlement: one is immediately before the oral hearing (witness examination) and the other is after the hearing.  In case of settlement talks after the hearing, arbitrators often share their evaluation of the case with the parties.  Sometimes, the arbitrator has made up their mind or even has already drafted an award.

 

   Timing and manner of settlement will depend on the situation of each arbitration case.  Also, how and to what extent the arbitrators should disclose their evaluation of the case will depend on the situation of each case and the parties’ requests.

 

 

Tezuka:

   May I add a few things.  Firstly, I myself have never recommended a settlement as an arbitrator, and I think that even from now on too, I generally won’t.  I don’t employ an approach where I am the first person to bring up the idea and ask the parties questions such as whether they would like to settle the dispute, in principle, except where both parties make such requests on their own.  One of the reasons is the legislative intention of the provisions in the Arbitration Act as mentioned by Mr. Idei.  And the biggest reason is that, especially in the case of an international commercial arbitration, when either party comes from a common law jurisdiction, the suggestion of settlement in itself may possibly give rise to negative reactions.

 

   As a matter of fact, at the beginning of October, as I recall, IBA’s annual general assembly was held in Dublin, and I attended as a speaker in the session regarding what we could call the switching between ADR and arbitration, that is, whether it is possible for an arbitrator to change its hat once and become mediator, and then change its hat again and revert to being the arbitrator.

 

   As expected, attendants from common law jurisdictions expressed extremely strong responses indicating that such switching is impermissible, and they debated that if the arbitrator listens to either party’s assertion in that way once, that is, as a kind of mediator, and then if his/her position reverts to that of the arbitrator who forms an award, there will be a risk of setting aside the arbitral award and, additionally, a risk of refusal of enforcement, depending on the country.

 

   In the case where arbitration is conducted in Japan, the setting aside risk may be relatively small.  However, in a case where the arbitral award is expected to be enforced overseas, if an arbitrator listens to either party’s assertions once as a mediator and then reverts back to an arbitrator and renders an arbitral award, I am afraid there remains an issue of whether the enforcement of the award is at risk of being refused by an overseas court, although I assume that the Arbitration Act itself envisages the possibility of the reversion back to an arbitrator.

 

   Another thing which I would like to talk about is an example of what I, in acting as counsel, did not want the arbitrator to do.  Specifically, it is when the arbitrator is a person who you could say is relatively fond of arranging settlements, or if stated in another way a person who did not feel like drafting an arbitral award.  In one particular arbitration, at the last stage of arbitration, the arbitrator stated that he thought it may be good for the parties to consider settling, and asked both parties on the spot how they felt about that.

 

   In that case, if one party starts saying that it would like to settle the dispute by any means, the other party then can be seen as the party who refused the settlement, can’t it?  In that sense, if an arbitral award is issued where there is, to some degree, bias against the latter party—that would give rise to a feeling of extreme inequality and unfairness.

 

   Accordingly, if you want to ask whether the parties would like to settle the dispute, you should not ask them to answer that question when both parties are in front of you, but should rather have them think about it in a separate room and only report to you whether or not both of them agreed on it, after explaining to them that if both parties desire to settle the dispute, you would start thinking about arranging a settlement.  That is because I think it is not ideal to ask the parties about settlement in such a manner that would enable the arbitrator to glean which of the parties refused the settlement.  And I think there are various methods to enter settlement talks.

 

   Anyway, speaking of whether to disclose the arbitrator’s evaluation of the case formed this far, although disclosure to a certain extent would facilitate the settlement, I myself do not support arranging settlements that way in an international arbitration, because if you go far down that road and if the settlement eventually falls through and an arbitral award is granted, there arises a risk that enforcement of the award will be refused.

 

   Mr. Idei, please go ahead.

 

 

Idei:

   Mr. Tezuka mentioned the risk of setting aside an arbitration award.  Does it apply when a settlement discussion falls apart and eventually the arbitration award is rendered?

 

 

Tezuka:

   Yes, it does.

 

 

Idei:

   Like Mr. Tezuka, I rarely take the initiative to suggest a settlement in arbitration proceedings, especially in international arbitration.  As mentioned earlier, mere suggestion of a settlement may sometimes be taken as incongruous by the parties.  We Japanese litigation practitioners tend to take it granted that a judge presiding over the case can also mediate a settlement, but for foreign practitioners, especially those from common law jurisdictions, it is not normal.  We should take into account such difference in legal cultures.

 

 

Tezuka:

   May I add one thing.  In a case in which I was involved as counsel, the arbitration was held in Japan, and I represented an overseas client.  Since it was a considerably large case, and the factual situation was complicated, it was suggested that the parties enter into settlement discussions.  At that time, since the client, an American, did not want the arbitral tribunal to play a leading role in the settlement, in principle, we decided to retain a fairly famous mediation specialist with an office in San Francisco as a professional meditator and hold settlement discussions for only one day.

 

   This person had an office in San Francisco but said that he also had an office in Maui.  He suggested that we should hold settlement discussions in Maui since in general it would be slightly cheaper there.  To be sure, if you decided to visit Maui with a large team including business people, and after discussing for two or three days, came back without reaching a settlement, then you would probably be criticized at your company, and you would want to avoid that.  You would be asked “What did you go to Maui for?”  Furthermore, if you hold discussions until late in the day, and find, by looking outside, everyone else is swimming at the beach, then you would wonder “What am I doing?  How can I conclude the discussions faster?”  Given this, holding discussions for a case, which you originally should be able to settle, in a place like Maui, may increase the possibility of a settlement being reached, may it not?

 

   In that particular case, I could not go to Maui, but we held talks in San Francisco.  Since the mediator was extremely skillful, the proceedings in the arbitration had already been processed to a certain extent, including examination of evidence.  And it had been decided that upon the meditator’s request, the parties would submit, within one month, a shorter brief, for example, about 10 pages or less, and evidence, which would also be limited to a small volume of only the most important evidence.  There, each party made a presentation by using PowerPoint within a time limit of, say, 30 minutes or one hour, and then the mediator called them to come to a separate room, individually.

 

   I had worked with him twice for separate cases.  He employed the same style in both cases: he would suddenly request that you select your three most important assertions from amongst your assertions.  Being suddenly requested to do so, you would manage to raise three assertions, but if these three assertions are raised, the forth and subsequent assertions would be essentially neglected.  In that way, he would limit the disputed issues.

 

   Then, he would say to you that among your assertions, the arbitrator would perhaps not accept certain things, or he would say in an extremely negatively way that you would not be able to win the arbitration so easily.  I assume that he probably did the same thing to the other party, too, by attacking its weak points from totally different perspectives.

 

   Finally, he would say that if the parties cannot reach a settlement by any means, he would propose to conduct a limited arbitration; specifically, if you could win on all of the three points at issue previously raised by you, then you would gain a certain (but not full) amount, but if you would lose on all of the three points at issue, you would only gain a certain limited amount; since this would not be zero nor 100, it would be as if you had tried settlement where a certain ceiling and floor were tentatively fixed, and he would ask whether you would like to settle the dispute in that way.

 

   Although the parties would not accept this Russian-roulette style mediation, I assume that they would gradually understand how the arbitrator evaluates their respective claims by going through the above processes.

 

 

Idei:

   The range?

 

 

Tezuka:

   Yes, the range.  By going over said processes, the parties did arrive at an agreement in a day, even though the case was actually an extremely large case.

 

   Accordingly, I think that the ideal form of arb-med in Japan would be as follows: the specialized mediator would not have to engage in a mediation session many times but only one time if there is a highly specialized mediator involved.  It would cost around one or two million yen per mediation session.  Although it is expensive, it would still be cheaper than in the case where arbitration becomes protracted.  If we can choose that style, I assume that the issue of what to do about settlement in an international arbitration case would be naturally resolved.

 

   Meanwhile, I think that in the case of truly domestic arbitrations, including arbitrations conducted at bar associations, it would be good to take initiative to arrange settlement, by considering the parties’ expectations.

 

   Do you have any special comments?

 

 

Idei:

   I have one question to Mr. Takatori.  Do you usually handle settlements with both parties present, instead of using a caucus method?

 

 

Takatori:

   Basically, I hold meetings with both parties present.  Even if a type of ex parte meeting is necessary and appropriate, of course, I receive both parties’ consent on such type of meeting and, for example, if I am allowed, I would disclose the substance of the discussion there to the other party.  I think arbitrators should obtain the parties’ consent on the procedure itself.

 

   In the case of Japanese litigations, some judges, for example,  may do a telephone call to meet only one party while the other party doesn’t know it, but in the case of arbitration, I think that doing such ex-parte call is not acceptable.

 

 

Idei:

   Thank you.  That was informative.

 

 

Takatori:

   One more point, there is a problem on resources of mediation, as Mr. Tezuka has just mentioned.   This is a very important issue and is inextricably linked to how to promote arbitration practice in Japan.

 

   This is because Japanese companies usually want to preserve a chance or possibility of an amicable settlement, when it chooses having arbitration agreement or litigation for dispute resolution.  I think the spectrum of choices of arbitration narrows if choice of arbitration decreases the chance for amicable settlements.

 

   On the other hand, under the present conditions in Japan where judges work in fact very efficiently as mediators , there are little resources of mediators, as Mr. Tezuka has just mentioned and, in other words, independent mediators who can take a lead on mediation outside arbitration are very few.  If the case goes to an arbitral award, in which a conclusion is 0 or 100, and even if one party wants to negotiate for an amicable settlement, such negotiation for an amicable settlement cannot be held unless the other party give its consent to settlement negotiation.  Therefore, I have been thinking that repletion of mediation and mediator is essential when we promote arbitration.

 

 

Tezuka:

   For example, what would you say to this sort of arrangement: the lawyers participating in today’s discussion or lawyers who are willing to reinforce mediation in order to popularize arbitration will form a sort of pool of candidate mediators and if there is a case for which you act as an arbitrator and which you think is fit for settlement, but there would be various problems raised if you try to arrange settlement yourself and the settlement discussion falls apart, then wouldn’t it be good that you could ask one of the candidates in the pool to do that.

 

   In this scenario, there would be various issues such as: to what extent the arbitral tribunal may inform the mediator of the course of progress of proceedings made by that time; or whether this task should be conducted by the parties concerned.  Still, I think that there should be the choice of Japanese-style mediation, and accordingly, it might be good that we would figure out measures, including forming the pool, to avoid a situation where once an arbitration has actually started, it would appear as if we can no longer choose to mediate a settlement.

 

 

(iv)               Key points in rendering an arbitral award

 

 

Tezuka:

   Finally, we would like to get on to the forth item “key points in rendering an arbitral award.”  I would like for you to talk about the matters to which you would pay your utmost attention in rendering an arbitral award, or the efforts which you would make in order to convince the parties of your arbitral award.

 

 

Idei:

   In award drafting, I try to keep it brief, including the “reasons” part of the award, avoiding discussing in too detail why I made such and such fact finding based on such and such evidence.  This is because the time I spend on drafting the award will be directly reflected upon the amount of arbitrators’ fees which should be borne by the parties.  I do not believe that the parties are persuaded by the length or depth of the reasoning developed in the award.  To make the award brief and concise is different from rough judgment, of course.  Careful deliberation should never be compromised.

 

   Also, in order to save arbitrators’ time as much as possible, I sometimes ask the parties’ cooperation in drafting the award, such as having the parties provide electronic files of the submissions, exhibits, and charts, which can be attached to or incorporated in the award.

 

 

Naito:

   I rather try to diligently and carefully write the reasons for the award.  As I mentioned earlier, because the arbitral tribunal is asked to make a reasonable judgment, I always take care to respond to the allegations, in particularly those of the losing party.

 

   However, of course, there are issues of costs.  I always ask the parties to keep written briefs short and to submit necessary and sufficient evidence.

 

   Ultimately, it is a matter of balancing.  For example, there is a case where the tribunal tried to have the party prepare a table to be referred to in the arbitral award, but because of its incorrectness, the tribunal had to reexamine and prepare the table from scratch.

 

   I try to write an arbitral award which is simple, concise and reasonable at the same time.  My impression is that at the end of the day the arbitral award itself is not that much different from the arbitral award to which Mr. Idei referred.

 

 

Kusakabe:

   I believe that I must write arbitral awards satisfactorily, so that the losing party will consider that the conclusion in the award cannot be avoided.  I often draft awards that substantially state the reasons for the judgment, which is probably due to my nature.  However, I will not write too much on the outline of the case, as is generally the case for Japanese court rulings.

 

   It would be normal for a losing party who is dissatisfied with the contents of an arbitral award to want to request for the award to be set aside or to refuse enforcement of the award, by saying something unrelated to the award’s contents.  Therefore, it is absolutely essential that an arbitral award is so persuasive that no party will make such groundless requests.

 

   Of course, given the cost issues stated earlier, it would be improper to spend an enormous amount of time, as that will impose an economic burden on the parties.

 

 

Takatori:

   I always think of preventing my arbitral award from being set aside by a court and preventing enforcement of my arbitral award from being refused by a court, as Mr. Kusakabe has just mentioned.  This is, of course, the minimum requirement, but I feel like a father, worrying about whether my child can grow up in a foreign country, especially when I render an arbitral award on a cross-border dispute.

 

   The point is whether arbitration is led with foresight to such extent.  This is true from the first procedure; for example, the following matters are important: whether the decision on jurisdiction is properly made; whether judgment is rendered properly with due process on scope of a claim; whether it is properly written; whether a procedure is followed in which a losing party is properly provided with a chance to defend; and whether the fact that such a procedure has been followed is evident.

 

   These points include the reasoning of individual issues, and there is risk of an arbitral award being set aside, refusal of enforcement of an arbitral award or risk of other complaints, including a complaint of violation of due process, if there are any complaints arising on reasoning or procedure.  The fact that an arbitral award is set aside or  award enforcement refused may be dishonorable to the arbitrator or may downgrade the arbitrator’s reputation or credibility in the market. More importantly, however,, in the case of arbitration, parties pay money and refer their case to arbitrators in order to find the truth properly under the arbitrator’s responsibility. Such arbitrator should be responsible for rendering satisfactory decisions or awards that should not be a mere judgment, but also a judgment that can be enforced and hence the purpose for which the case was referred realized.  As such, it is very important to issue awards which will not be set aside or enforcement of which will not be refused in the sense of concluding all matters properly of which the parties have referred to the arbitration, but never in the sense of watching out for higher ruling authorities, nor in the sense of judging passively to prevent an arbitral award from being set aside.

 

   Compared to litigations, some criticize some judges in lower courts or district courts as being public servants who write judgment merely watching out for higher ruling authorities to prevent judgments from being set aside by upper level courts or appeal courts, but we should not debate on the same plane as this.  It is very important to issue awards which will not be set aside and enforcement of which will not be refused because you should at least perform worthwhile and valuable work, and not because you are mindful of the reaction from higher ruling authorities in decisions.

 

 

Tezuka:

   May I make a few comments.  I, the same as Mr. Takatori, think it is extremely important that as long as we render an arbitral award, the award should not be set aside and its enforcement should not be refused.  Accordingly, I think that securing this point is one of the most important matters, including securing appropriate formalities and also guaranteeing the right to defense during the course of proceedings up to rendering the arbitral award, among other things.

 

   Another thing is that in order to convince the losing party, I think it is better in the long run to fully describe in the reasoning of the award the fact finding and so on. regarding the points at issue which the losing party pursued.  In this connection, I think it should be accepted that the length of the description in the explanation of the award differs among issues, that is, that it should be accepted that descriptions of certain issues are compact and simple, while descriptions of the other issues are detailed and thorough.

 

   Since fact finding is an evaluation of evidence to a certain degree, even if we describe in the award that we found certain facts, there may be a possibility that the parties say that they still are not convinced, although I wonder about the extent to which the parties may say that.  Even if we state what the arbitral tribunal thinks are the very reasons for its award in a case where there is a dispute regarding the governing law, or the interpretation/substance of law, there may be a possibility that the parties cannot be convinced if we appear as if we only considered the logical interpretation of laws independently of other matters to be considered; in other words, they cannot be satisfied unless we also state that there are judicial precedents supporting certain interpretation/substance of law, or that there is academic authority supporting certain interpretation/substance of law.

 

   Taking that into account, I think that asking the parties concerned to submit court precedents or academic authorities, if any, regarding specific issues in advance, as I previously mentioned, would help increase specific items which we can refer to in the reasoning of the award.

 

   That is the end of the discussion today.

 

   Thank you so much for contributing to this very informative discussion.