International Arbitration Series – Part 2: Strategic Frameworks

Anatomy of an International Construction/Energy Arbitration – The Importance of Creating a Strategic Framework

In Part 1 of our series, we looked at what it is about international arbitration that makes it an attractive alternative to national court litigation for international businesses.

In this Part 2, Kevin Joyce and Alex Slade cover the importance of creating a strategic framework around which international arbitrations should be based.

What is a strategic framework?

A strategic framework is a high-level conceptual plan for a case that outlines the party’s long-term goals, objectives and priorities and its legal team’s execution strategy, timeframe and resources for achieving them.

The framework covers everything, from determining what a successful outcome looks like and understanding your case’s strengths and weaknesses, to really understanding your opponent, their likely strategy and the political, jurisdictional and cultural factors that so often influence the ultimate result in international construction and energy disputes.

Why create a strategic framework?

A well-crafted strategic framework is crucial for navigating the complexities of cross-border disputes. It provides a detailed roadmap for the entire dispute resolution process, outlining the approach, tactics and steps to be taken to ensure the arbitration is managed systematically and in a way that maximizes a party’s prospects of success. Importantly, the framework should be dynamic and adaptable, allowing legal teams to respond effectively to developments throughout the arbitration process.

The essential components of an effective strategic framework

(a) The endgame vision – last things first

The framework should contain a clear and cohesive vision of a party’s endgame, as every move the party makes during the arbitral process needs to be made with this in mind.

The importance of looking to the endgame cannot be overemphasized. Like in chess, the endgame is the stage of an international arbitration when most of the ‘pieces have been captured’, and the focus shifts to the ‘king and pawns’. In short, a party’s ability to think ahead, plan their moves and anticipate those of their opponent can make the critical difference between a win and a loss.

Setting this vision requires a deep understanding of the relative importance of and interaction between the substantive issues in dispute and the commercial, procedural, political, jurisdictional and cultural factors that influence the result.

(b) Early case assessment

In many cases, a key factor in resolving successfully a complex construction or energy dispute is having an early appreciation of the merits of the substantive case and how the overall strategy needs to be tailored to that case. This involves front loading investment in the case and requires:

– Factual and technical investigation: a thorough review of the facts, technical issues, documents and other evidence relevant to the case

– Legal analysis: a detailed analysis of the contract(s), applicable law and development of a case strategy outlining the approach to be taken in respect of each of the key legal issues

– Cost-benefit analysis: a detailed analysis of the advantages and disadvantages of the arbitration, as well as each of its constituent steps, relative to the costs involved; potentially including an analysis of the ability of the respondent party to pay an award, and an assessment of where its assets are located

– Strategic positioning: development of a strategy that positions the case favourably, considering the facts, legal issues and the party’s broader strategic goals

– Settlement considerations: evaluation of the potential for commercial settlement and development of an outline strategy for a negotiated resolution, if appropriate

(c) The procedural plan

The key components of an effective procedural plan for arbitration include:

– Legal framework and jurisdictional issues:

• Ensuring the arbitration clause in the contract is valid and enforceable
• Understanding the chosen arbitration rules, substantive law governing the contract and the procedural laws governing the arbitration
• Understanding the jurisdiction of the tribunal, including any potential challenges that might be made to that jurisdiction
• Understanding the legal requirements (and opportunities) in any jurisdictions where an award may be enforced, to ensure that steps and decisions taken in the arbitration are made with an understanding of their impact (if any) on the enforceability of an award in the jurisdiction(s) where assets may be available

– Selection of the tribunal:

• Identifying the qualities and expertise required of the arbitrators (e.g. industry knowledge, qualifications, experience and background)
• Understanding and complying with the procedure for appointing the tribunal and raising or dealing with any challenges to their appointment

– Case management, timetables and interim measures:

• Developing a clear procedural strategy, including the scope and sequence of written submissions, discovery, evidence and hearings
• Establishing a realistic timetable for the arbitration process, including key milestones
• Considering the need for interim relief or conservatory measures if required to protect assets or preserve the status quo

– Evidence gathering and discovery:

• Identifying, collecting and organising all relevant documents and ensuring compliance with the required standards of disclosure, including navigating any applicable privacy laws or regulatory issues
• Identifying key witnesses, planning the preparation of their statements and preparation for cross-examination
• Instructing experts as needed (e.g. delay, quantum, technical, financial etc.) to provide reports and testimony at trial

– Strategic communication and submissions:

• Considering the approach to clear, concise and persuasive pleadings and memorials – focusing on the narrative, key legal arguments and supporting evidence
• Understanding cultural differences in communication styles and legal argumentation, particularly in written submissions and oral presentations and considering the implications of different types of legal system (e.g. civil law v common law)
• Preparing for responsive submissions – strategically addressing the opposing party’s claims and defences in a way that strengthens your own case and weakens theirs

– Preparation for the hearing:

• Developing a detailed plan for the arbitration hearing, including the order of witnesses, cross-examination tactics and the presentation of evidence
• Preparing witnesses for direct and cross-examination, ensuring they are comfortable and effective in providing their testimony
• Conducting mock hearings to stimulate the arbitration process, refine arguments and prepare for potential lines of challenge / questioning
• Preparing pre-hearing briefs or skeleton arguments, outlining the key facts, legal arguments and evidence the party intends to present, helping the tribunal focus on the most critical issues
• Planning for the possibility of remote hearings and ensuring all technical aspects (e.g. videoconferencing, presentation of digital evidence etc.) are in place

– The hearing and advocacy:

• Developing a plan for opening statements, the presentation of evidence and cross-examination
• Deciding on the style of advocacy (e.g. aggressive or conciliatory) based on the tribunal’s preferences, background and the nature of the case
• Planning for rebuttal of the opposing party’s arguments and evidence and dealing with any questions from the tribunal
• Developing a compelling closing argument that reinforces the key points of a party’s case and persuades the tribunal as to the merits

– Post-hearing strategy:

• Anticipating and preparing for the different possible outcomes from the arbitration and developing contingency plans for each scenario (e.g. public or regulator announcements, financial considerations etc.)
• Planning for enforcement of the award in relevant jurisdictions and identifying potential challenges that might be brought or made by the opposing party

– Costs management:

• Developing a detailed budget that includes all potential expenses, such as legal fees, arbitrator fees, expert witness fees, document management costs and administrative and travel expenses
• Agreeing or effectively influencing the tribunal’s directions on key procedural matters early in the process such as decisions on preliminary issues, bifurcated hearings (e.g. liability and quantum) and limits on document production and length of submissions
• Leveraging technology, such as conducting virtual hearings and using electronic document management systems

(d) The potential for resolution by alternative means

Settling an international construction or energy dispute can be complex due to the multifaceted nature of the projects, the diversity of legal systems involved and significant financial, political and reputational stakes. However, settlement can be a more efficient and cost-effective alternative to prolonged arbitration, so a party’s strategic framework needs to consider the interests, pressures and motivations that might act as a catalyst to a settlement that appeals to both sides. More on this in Part 3 of our series.

Conclusion

It is rare for a party to want to arbitrate for arbitration’s sake. The process is almost always simply a means to an end, and it is vital to keep this at the forefront of the legal team’s mind in developing an effective strategic framework for the resolution of an international construction or energy dispute.

Having a well-planned framework in place at the outset and updating it regularly as developments occur throughout the process will help maximise a party’s chances of success in arbitration – or resolving the dispute by alternative means, if that better suits their objectives.

Posted by: Kevin Joyce and Alexander Slade