Michael McIlwrath Associate General Counsel – Litigation GE Oil & Gas Brunel 24 May 2013 Party Perceptions in International Arbitration Where are the disconnects?

2 / September 8, 2015 Disconnect number 1 party orientations towards the conflict and each other

3 / September 8, 2015 Dispute over equipment failure

4 / September 8, 2015 Two causation theories: 1. Claimant’s expert: manufacturing and installation defects 2. Respondent’s expert: excessive water in gas causing high vibrations in equipment left unchecked by customer

5 / September 8, 2015 “Claim valuation blindness” Source: M. Mcilwrath, Selective Perception and Bad Faith Allegations in Commercial Settlement Discussions, Alternatives (CPR Institute), October 2004

6 / September 8, 2015 Consequences of disconnect 1 in subsequent arbitration Perception/accusations of bad faith Party positions more entrenched/extreme through preparation for proceedings Duration and distance of international cases reduces reality checks often available in state courts International arbitral tribunals typically reluctant to give parties early views of their case Losing party will blame loss on arbitrators (incompetence, bias)

7 / September 8, 2015 Disconnect 2 – party perceptions of the arbitral process: the culture of litigators vs business managers

8 / September 8, 2015 Satisfaction with arbitration? “86% of Corporate Counsel reported they are satisfied with international arbitration” PWC/Queen Mary University Survey, International Arbitration: Corporate Attitudes and Practices 2008 “Well, they must not have have been talking to us…” Massimo Mantovani, GC, ENI Group, Milan (IDN podcast)

9 / September 8, 2015 Questions to international litigators and business people: 1.For a dispute of medium complexity and value of $5-10 million, how long should an arbitration take, ideally ? 2. What if it were an expedited or fast track arbitration?

10 / September 8, 2015 Conceptually, arbitration should meet party expectations of timing “If you are marketing a product as an arbitrator, it is essential that you have different products. Product 1: you buy into it, and I give you an answer in 14 days. But I have two more products, which are called six months and ‘long as a piece of string’. You just sign up for A, B or C.” -- Australian arbitrator/mediator John Wade

11 / September 8, 2015 timing: views of lawyers (audio) Two arbitration specialists, English and Italian: Arbitration? “Should take 9 months to one year.” Expedited? “Six months” German arbitration lawyer: Arbitration? “International arbitration, if conducted very efficiently, could be within 6 months after the Terms of Reference have been signed, but average is probably 2 years.” Expedited? “A fast track arbitration should last maximum 3 months.” Senior in-house counsel (Siemens, Germany): Arbitration: “Medium arbitration should not take more than 2 years.” Expedited: “And 6 to 9 months for expedited arbitration.”

12 / September 8, 2015 timing: views of GE litigators (audio)

13 / September 8, 2015 timing: the voice of business (audio) Three business leaders in Doha, Qatar: 1.Arbitration? “It takes a long time… maybe, could take a couple of months” Expedited? “1 week or 2 weeks.” 2. Arbitration? “2-3 months for medium complexity arbitration, and 1month for expedited arbitration.” 3. Arbitration? “For medium arbitration… a couple of months and 3 to 4 weeks for expedited arbitration.” US executive, global business Arbitration? “Should take only 30 days.” Expedited? “15 days.”

14 / September 8, 2015 timing: the voice of business (audio) Michael Wheeler, Associate Dean, Harvard Business School: Arbitration? “If you are talking about a construction example, I think you want to do it in days.” “In ‘days’? From the filing of an arbitration request to an outcome?” “Yes, in days. If you’re trying to put up a skyscraper, I don’t think people want to be sitting around with the whole project stopped because you don’t know where you stand.” General Manager, international business (>$200M/year): Question: “What would you say if I told you your arbitration of a dispute involving $3-5MM might take three years to complete?” Response: “I’d say that’s absolutely crazy. Why would you file for arbitration at that point? It makes no sense to me.”

15 / September 8, 2015 Consequences of disconnect 2 Dissatisfaction of business managers with arbitral process, even if lawyers are happy Negative impact on arbitrators’ reputation, even if proceedings went smoothly

16 / September 8, 2015 Can we address the disconnects? 1.Parties: enhanced awareness of likely outcome, duration, cost: Early Case Assessments (ECA). (“Is the deal I can get today better than what I’ll get and spend in two years of arbitration?”) 2.Arbitrators: pre-appointment interviews and early case management conferences to set expectations. (“How long should this arbitration take?”) 3.Institutions: mediation as part of arbitral process

17 / September 8, 2015 end