RECOGNITION AND ENFORCEMENT OF

ARBITRAL AWARDS AND SETTLEMENT IN

INTERNATIONAL ARBITRATION: CORPORATE
ATTITUDES AND PRACTICES

----------------------------------

The American Review of International Arbitration, Vol. 19, (2008)

It has been reproduced here by permission of the authors, Loukas Mistelis & Crina Baltag.
 ARTICLES

SPECIAL SECTION

RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS

AND SETTLEMENT IN INTERNATIONAL ARBITRATION:
CORPORATE ATTITUDES AND PRACTICES

Loukas Mistelis & Crina Baltag∗

Table of Contents
I. INTRODUCTION: THE CONTEXT OF THE 2008 SURVEY ................................320
II. THE 2008 SURVEY: ATTITUDES AND PRACTICES ........................................322
A. EXECUTIVE SUMMARY ..........................................................................323
B. AN OVERVIEW OF INTERNATIONAL ARBITRATION ...............................326
C. THE OUTCOME OF INTERNATIONAL ARBITRATION ..............................331
D. SETTLEMENT IN INTERNATIONAL ARBITRATION ..................................332
1. Settlement before an arbitral award ................................................333
2. Settlement after receiving an arbitral award ...................................339
E. COMPLIANCE WITH ARBITRAL AWARDS...............................................343
F. RECOGNITION AND ENFORCEMENT OF
ARBITRAL AWARDS ..............................................................................344
1. Difficulties in recognizing and enforcing arbitral awards ..............345
2. The place of enforcement ...............................................................347
3. Time and recovery rate in the enforcement proceedings ................350
4. Resisting recognition and enforcement proceedings ......................352

∗ Loukas Mistelis, LLB (Hons, Athens), MLE (magna cum laude), Dr. Iuris (summa
cum laude) (Hanover), MCIArb, Advocate, is the Clive M. Schmitthoff Professor of
Transnational Commercial Law and Arbitration, and Director of the School of International
Arbitration, Centre for Commercial Law Studies, Queen Mary University of London.
Crina Mihaela Baltag, LLB (Bucharest), Master in International Business (Bucharest),
LL.M. (Stockholm), PhD Candidate, PricewaterhouseCoopers Research Fellow in
International Arbitration at the School of International Arbitration, Centre for Commercial
Law Studies, Queen Mary University of London.
Several interviews have been conducted by Dr. Stavros Brekoulakis, LLB (Athens),
LL.M. (London), PhD (London), Lecturer in International Dispute Resolution, School of
International Arbitration, Centre for Commercial Law Studies, Queen Mary University of
London.
The authors wish to express their gratitude to Gerry Lagerberg, Camilla Doyle and
Marie-Alice Hofmaier of PricewaterhouseCoopers LLP and to Professor Julian D.M. Lew,
QC for their comments and criticism on the earlier drafts of this report. The authors also
wish to acknowledge the generosity of PricewaterhouseCoopers for funding the research
for the 2008 Survey, as well as for the 2006 Survey
319
320 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

G. STATES, STATE ENTERPRISES AND RECOGNITION

AND ENFORCEMENT OF ARBITRAL AWARDS ........................................354
H. THE ARBITRATION INSTITUTIONS .........................................................362
III. THE 2008 SURVEY: METHODOLOGY ...........................................................367
A. LIMITATIONS .........................................................................................367
B. METHODOLOGY.....................................................................................368
IV. INTERNATIONAL ARBITRATION AND THE
IMPORTANCE OF EMPIRICAL SURVEYS ........................................................373

I. INTRODUCTION: THE CONTEXT OF THE 2008 SURVEY

It has been increasingly accepted, and also empirically proven, in the last ten
years that corporations trust and use international arbitration and other alternative
dispute resolution processes. While the recognition and establishment of
arbitration as a leading method of the settlement of disputes is undisputed, what
has been debated in recent years is the efficient use of the system of arbitration.
The growth of arbitration has been driven by flaws in the national legal systems
and the distrust and suspicion associated with litigation in a foreign country, as
well as by the desire to minimize costs and delays in the resolution of a dispute.
More importantly, arbitration is a neutral system particularly suitable for cross-
border and cross-cultural disputes. However, the shift to arbitration and alternative
dispute resolution (“ADR”) mechanisms was not only determined by legal or
efficiency factors, but also by such factors as the desire to preserve a working
business relationship with the other party and to avoid the negative publicity and
aura emanating from court proceedings.
In 2006, the School of International Arbitration at Queen Mary University of
London conducted ground-breaking research on major corporations and their
perceptions and views towards international arbitration.1 This was the first survey
of its kind and on such a scale targeting major corporations, as the end-users of
international arbitration; it has opened the door for further research into the
practices of corporations in international dispute resolution processes.2 The 2006

1
Loukas Mistelis, International Arbitration: Corporate Attitudes and Practices 2006,
15 AM. REV. INT’L ARB. 525 (2004) (published in June 2006). See also TOWARDS A
SCIENCE OF INTERNATIONAL ARBITRATION: COLLECTED EMPIRICAL RESEARCH
(Christopher Drahozal & Richard Naimark eds., 2005). The book focuses on the
application of quantitative empirical research to the study of international arbitration. The
text presents, together with commentary, existing empirical studies on the subject, in
addition to several studies published for the first time.
2
There are also a number of surveys conducted by or on behalf of law firms. See,
e.g., the 2008 Lovells Survey: The Shrinking World, available at http://www.lovells.com/
NR/rdonlyres/DA3B6810-910E-43D2-B8E9-4E4230C99871/0/LovellsTheShrinkingWorld
DRReportSpring2008.pdf (last visited Aug 28, 2009). However, this study surveyed only
European corporations. See also the 2008 Litigation Trends Survey of Fulbright & Jaworski
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 321

Study3 was also the first and largest global, independently conducted, empirical
survey on international arbitration, involving 143 corporations, through their
corporate counsel (general counsel or head of legal department), from various
industries and regions of the world. The Study was directed towards general
attitudes and practices of corporations in international commercial arbitration and
did not discuss in detail arbitration procedure or the recognition and enforcement
proceedings in international arbitration.
The key messages of the 2006 Survey point toward a preference on the part of
large corporations for international arbitration and institutional arbitration, in
particular. The aim of the 2006 Survey was to reveal the real preference,
perceptions and experience of major corporations in international arbitration, by
testing the anecdotal evidence present in the arbitration field. Back in 2006,
corporate counsel appreciated the advantages of the arbitration procedure
(procedural flexibility, enforceability of awards, privacy of the process and
selection of arbitrators), but also criticized the disadvantages of the arbitration
proceedings (delays and increased costs). Ninety-five percent of the participating
corporations in the 2006 Survey indicated at that time that they would continue to
use international arbitration, as the advantages of this procedure clearly outweigh
any disadvantages.
Following the success of the 2006 Survey, the School of International
Arbitration conducted a second survey into the attitudes and practices of
corporations in international arbitration. The 2008 Survey on “International
Arbitration: Corporate Attitudes and Practices on Recognition and Enforcement of
Arbitral Awards” reiterates several of the issues raised by the 2006 Survey, but
focuses on two main topics: settlement in international arbitration and the
recognition and enforcement of arbitral awards. There are important messages
coming from the 2008 Survey for all those involved in international trade and
investment. For the arbitration community, the overall message is that confidence
in international trade and investment depends on the reliability of trans-national
dispute resolution. This is the reason why the international arbitration process and,
in particular, the recognition and enforcement proceedings must be seen to be
effective.4

LLP. available at http://www.fulbright.com/litigationtrends29 (last visited Aug 28 2009),

and the wider ADR survey by Herbert Smith LLP available at http://www.herbertsmith.
com/NR/rdonlyres/FA4F7B4B-8246-404A-82CE-EF0019375CA7/5093/6398ADRreport
D4.pdf (last visited Aug 28 2009).
3
The terms “Study” and “Survey” are used interchangeably.
4
See also the summary in Loukas Mistelis & Crina Mihaela Baltag, Trends and
Challenges in International Arbitration: Two Surveys of Inhouse Counsel of Major
Corporations, 2(5) WORLD ARB. & MED. REP. 83 (2008).
322 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

II. THE 2008 SURVEY: ATTITUDES AND PRACTICES

The 2006 Survey revealed that one of the main advantages of international
arbitration is the world-wide recognition and enforcement of arbitral awards. The
recognition and enforcement of arbitral awards is indeed a last resort and it is
always desirable that only a minority of successful parties should have to
experience enforcement proceedings before national courts. Nevertheless, the
existence of an effective enforcement mechanism has motivated the choice by
corporations of international arbitration as their preferred dispute resolution
mechanism for international disputes. It is often argued that the success in
enforcing arbitral awards derives from the 1958 New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.5
The 2008 Survey looks at the attitudes and practices of major corporations,
most of which operate globally, towards the outcomes in international arbitrations,
focusing particularly on settlements and the recognition and enforcement of
awards. The findings of the 2008 Study indicate that international arbitration
remains the preferred dispute resolution mechanism for transnational disputes.
The 2008 Study reinforces the results of the 2006 Survey, as it demonstrates that
international arbitration is effective in practice. In the majority of cases, the parties
settle their disputes, either before or after the arbitral award, and, if a settlement is
not reached, there is a high degree of voluntary compliance with arbitral awards.
Only a minority of cases proceed through to enforcement, but when they do, the
process usually works effectively. The conclusion is that most transnational
disputes are resolved satisfactorily at some stage within the existing processes.
The 2008 Survey also confirmed that exceptions do exist. However, problems

5
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done
in New York June 10, 1958, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.S. 38. The
Convention enjoys wide acceptance with currently 144 contracting parties that have
ratified it. More details are available at www.uncitral.org. Despite the great popularity of
the Convention, there are relatively few books published on the topic in English. A few
publications can be referred to in the context of this article: THE NEW YORK CONVENTION
OF 1958: A COLLECTION OF REPORTS AND MATERIALS, delivered at the ASA Conference
held in Zürich on February 2, 1996 (Mark Blessing ed., 1996); MARTIN PLATTE,
ENFORCEMENT OF INTERNATIONAL ARBITRATION AWARDS – THE NEW YORK CONVENTION
OF 1958 (2001); ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL
ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE, (Emmanuel Gaillard &
Domenico Di Pietro eds., 2008); NEW YORK CONVENTION, (Giorgio Gaja ed., 1978-
1996); ARBITRABILITY – INTERNATIONAL AND COMPARATIVE PERSPECTIVES, (Loukas
Mistelis & Stavros Brekoulakis eds., 2009); ENFORCING ARBITRAL AWARDS UNDER THE
NEW YORK CONVENTION – EXPERIENCE AND PROSPECTS (United Nations eds., 1999);
ALBERT JAN VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958 –
TOWARDS A UNIFORM JUDICIAL INTERPRETATION, (1981); ALBERT JAN VAN DEN BERG,
CONSOLIDATED COMMENTARY ON NEW YORK CONVENTION, Part of ICCA YEARBOOK but
also available at www.kluwerarbitration.com, since 1976.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 323

with enforcement are more often due to the circumstances of an award-debtor than
the international arbitration or enforcement processes.
The 2008 Study was conducted during a six-month period and summarizes
data from 82 questionnaires and 47 interviews.6 The findings of the 2008 Survey
will first be subject to an overall examination, in the Executive Summary section.
The next two sections will deal with an overview of international arbitration,
followed by a discussion on the outcomes of the arbitration process. Sections D
and E will focus on settlement and voluntary compliance with arbitral awards,
while Section F – the substantive part of the 2008 Survey – will analyze the
recognition and enforcement proceedings in international arbitration. Sections G
and H summarize the findings on arbitrations involving states and the views of the
arbitration institutions respectively.

A. Executive Summary

The 2008 Survey underpins the findings of the first Survey, reasserting that
international arbitration remains the preferred dispute resolution mechanism for
the resolution of cross-border disputes. Moreover, international arbitration proves
to be an effective mechanism, with only few cases proceeding to enforcement.

Overview of International Arbitration

1. There is significant support for arbitration, and for other forms of ADR.
Eighty-eight percent of the participating corporations have used arbitration in
recent years. Certain industries such as construction; energy, oil & gas; and
shipping use international arbitration as a default resolution mechanism.
2. Corporate counsel are satisfied with international arbitration. Eighty-six
percent of corporate counsel said they are satisfied with international arbitration.
The enforceability of arbitral awards, the flexibility of the procedure and the depth
of expertise of arbitrators are the major advantages of arbitration. On the other
hand, the length of time and the costs of international arbitration remain major
disadvantages.

The Outcome of International Arbitration

3. The overwhelming majority of arbitration cases are successfully resolved.

Twenty-seven percent of cases are settled before an arbitral award is rendered
and 7% are settled after an award is rendered. Forty-seven percent of cases end
in voluntary compliance with an arbitral award, while only 11% of cases
proceed to recognition and enforcement procedures. Overall, 92% of arbitration
disputes are successfully resolved at some stage through the arbitration
proceedings.

6
A requirement for participation in the second survey was that the respondents had
participated in arbitration in the last ten years. Accordingly, a number of questionnaires
were disqualified.
324 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Settlement in International Arbitration

a. Settlement before an arbitral award

4. Settlement most frequently occurs before the first hearing. Forty-three

percent of settlements involving the participating corporations were reached
before the first (usually procedural) hearing in the arbitration proceedings.
5. Strong desire to preserve business relationships. Several reasons justify
settlement of arbitration cases. In 27% of cases, corporations settled disputes in
order to preserve their business relationships. Other factors influencing settlement
were a weak position in the case and a desire not to spend excessive time and
incur costs before the dispute was resolved.

b. Settlement after receiving an arbitral award

6. Corporations often achieve settlement after an arbitral award is rendered.

Forty percent of corporations negotiated a settlement after the arbitral award was
rendered; this usually entailed a discount in return for prompt payment. Almost
one in five of the interviewed corporations realized value from the claim or award
by selling or assigning it.
7. Corporations settle after the award to save time and costs. Fifty-six percent
of those corporate counsel who had negotiated a settlement after an award
indicated that they did so in order to avoid the time and costs involved in
embarking on recognition, enforcement and execution proceedings in a foreign
jurisdiction. For 19% of the participating corporations, maintaining a relationship
with the non-prevailing party was an important driver of a settlement.
8. Corporations receive at least half the value of an award. Nineteen percent
of the participating corporations were content to settle their claims for between
50% and 75% of the amount awarded by a tribunal, while 35% of respondents
achieved settlements of more than 76% of the value of the award.

Compliance with Arbitral Awards

9. There is a high degree of compliance with arbitral awards. Eighty-four

percent of corporate counsel indicated that, in most (i.e. more than 76%) of their
arbitration proceedings, the non-prevailing party voluntarily complies with the
arbitral award. According to the interviews, voluntary compliance reaches more
than 90%, even 100%, especially in re-insurance, pharmaceuticals, shipping,
aeronautics and oil and gas industries.

Recognition and Enforcement of Arbitral Awards

10. Most corporations are able to enforce arbitral awards within one year
and usually recover more than 75% of the value of the award. Fifty-seven percent
of the participating corporations who had experienced recognition and
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 325

enforcement proceedings said that it took less than one year for arbitral awards to
be recognized and enforced. Forty-four percent of those corporations had
recovered the full value of the award from enforcement and execution
proceedings, and 84% of those corporations had received more than 75% of the
value of an award following the enforcement and execution proceedings.
11. Lack of assets is the most common problem. Most participating
corporations revealed no major difficulties when seeking recognition and
enforcement of their arbitral awards. When difficulties were encountered, they
usually related to the circumstances of an award debtor, typically a lack of assets
or the inability to identify relevant assets. The place of enforcement and its
domestic procedures may also represent problems. Seventeen percent of the
corporations indicated that they have experienced various degrees of hostility
from a country where enforcement of a foreign arbitral award was sought; such
hostility did not always result in non-enforcement.
12. Corporations choose the place of enforcement based on the availability of
assets of the award debtor. Not surprisingly, the most commonly cited reason for
choosing the place of enforcement was that it was where the non-prevailing party
had sufficient assets. Other major factors taken into consideration when deciding
upon the place of enforcement included the local recognition and enforcement
mechanism and the applicability of the 1958 New York Convention.
13. Local enforcement and execution proceedings are the reasons
corporations encounter complications. Fifty-six percent of those respondents who
experienced problems at the place of enforcement had problems with the actual
logistics of enforcement or execution proceedings. Many corporate counsel cited
countries in Africa and Central America, as well as China, India and Russia, as
states that they perceived as hostile to enforcement of foreign arbitral awards.
However, those perceptions were not matched by actual experiences of hostility.
There is concern about this perceived hostility, as some of the countries cited are
fast-growing economies that are expected to experience significant growth and
attract large amounts of inward investment in the coming years.

States, State Enterprises and Recognition and Enforcement of Arbitral Awards

14. Corporations are the main users of international arbitration. Seventy-four

percent of the arbitration proceedings involved private corporations only; twenty-
one percent of the disputes involved a state enterprise; only 5% of the disputes
were against states. The conclusion is that arbitration against states and state
enterprises still accounts for only a small proportion of the total arbitration
market.
15. Less than one quarter of enforcement proceeding relate to arbitral awards
rendered against states or state entities. Nineteen percent of the respondents
indicated that they had sought recognition and enforcement of arbitral awards
against states and state enterprises. Over half of those respondents had
experienced no significant difficulties in enforcing awards against states or state
enterprises. Of the minority of participating corporations that had experienced
326 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

difficulties in enforcing awards against states or state enterprises, the main

problems had been in identifying or obtaining access to relevant assets. In
particular, there had been difficulties in linking assets to a particular state
enterprise or to the state itself.

The Arbitration Institutions

16. Corporations prefer institutional arbitration as opposed to ad hoc

arbitration. Eighty-six percent of the awards were rendered by arbitration
institutions rather than through ad hoc arbitrations. Sixty-seven percent of the
arbitrations involving states or state-owned enterprises were conducted through
institutional arbitration rather than through ad hoc arbitration. The ICC, AAA-
ICDR and LCIA are the institutions most used by corporations; the popularity of
regional arbitration centers is increasing.
17. Arbitration institutions do not have a system of monitoring arbitral
awards. Only 29% of arbitration institutions keep track of their arbitral awards.
While most arbitration institutions interviewed expressed views on the
enforcement of awards, most of the comments were based on anecdotal evidence.

B. An Overview of International Arbitration

The 2008 Study confirms the support for international arbitration and other
forms of ADR, as an alternative to transnational litigation.7 We asked corporate
counsel several general questions regarding dispute resolution mechanisms used in
the last ten years, with the focus on the arbitration process. Alongside the views of
corporate counsel, we are presenting the views of the arbitration institutions
participating in this Survey.

There is significant support for arbitration and other forms of ADR, as

opposed to litigation.

Corporate counsel indicated that inclusion of arbitration clauses in their

contracts depends on various factors: the complexity and the international nature
of the transaction, the counter-party, the likely place of enforcement of an
eventual award, the applicable law, etc. However, a significant number of
corporations prefer arbitration because it is a private and independent system,
largely free from external interference.
Eighty-eight percent of corporate counsel have used arbitration at least once in
the last ten years. When asked what type of dispute resolution mechanisms they
had used to resolve their international disputes, 44% of the participating
corporations indicated they mostly (but not exclusively) used international

7
The 2006 and 2008 Surveys considered arbitration as separate from ADR. ADR
refers to other alternative dispute resolution methods, such as conciliation, mediation,
expert determination, etc.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 327

arbitration, while 41% mostly (but not exclusively) used transnational litigation.
Fifteen percent of counsel said they used mediation or other ADR mechanisms
(for example, conciliation or dispute resolution boards) as the main method. (See
Figure 1.) These percentages show a strong preference for arbitration, with a
slightly higher percentage opting for transnational litigation, compared to the
findings of the 2006 Survey. Several corporate counsel indicated during the
interviews that they frequently include multi-tired dispute resolution clauses in
their contracts. Often, these clauses provide for the resolution of disputes by
mediation and, in the event this mechanism fails, by arbitration.

Does your organization have experience with

the following dispute resolution mechanisms
with regard to international disputes?

15%

Transnational litigation
41%
International arbitration

Mediation and other

ADR mechanisms
44%

Figure 1. Dispute resolution mechanisms used by corporations

In fact 88% of the participating corporations have used arbitration in recent

years. (See Figure 2.) As revealed during the interviews, in certain industries, for
example, construction; shipping; and energy, oil and gas, international arbitration
is the default dispute resolution mechanism. A corporate counsel disclosed during
the interview that his company usually employs arbitration for disputes exceeding
a certain value (usually over U.S. $3 million).
328 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

THE USE OF INTERNATIONAL ARBITRATION

12%

Yes, at least once

No

88%

Figure 2. The use of international arbitration

A significant number of corporations based in Japan, the U.K. and the U.S.
favor mediation and other ADR procedures: more than 30% of the U.K. and U.S.-
based corporations said they used ADR. Over 10% of the South American
corporations employed ADR mechanisms, which indicates that alternatives to
traditional court proceedings are being used in countries where such mechanisms
are relatively new.
Forty-nine percent of the construction companies participating in the Survey
have mostly used arbitration, while 13% have used another form of ADR. In the
industrial manufacturing sector, the percentage for ADR is slightly higher, as 19%
of the corporations have mostly used alternative methods for resolving their
disputes. Forty-four percent of industrial manufacturing corporations have used
arbitration in most of their disputes. In the energy, gas and oil industry, 50% of
the participating corporations have used arbitration for most of their disputes,
while 15% have employed ADR. The retail and insurance industries tend to favor
alternative dispute resolution methods, with 28% and 33% using them
respectively. The retail industry is the largest user of international arbitration, as
69% of its corporations have employed arbitration for settling most of their
disputes.

The participating corporations are satisfied with international arbitration

If in 2006 we asked corporations about the perceived advantages and

disadvantages of arbitration, in this second Study we asked them about their
experience: Whether they are satisfied or not with international arbitration as a
dispute resolution mechanism. Sixty-eight percent of the respondents indicated
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 329

that they are fairly satisfied, while 18% are very satisfied with international
arbitration, making a solid satisfaction rate of 86%. Only 5% of corporate counsel
are fairly or very disappointed with arbitration. (See Figure 3.) During the
interviews it was revealed that dissatisfaction is generated by the increased costs
of arbitration and delay of proceedings. However, the majority of disappointed
counsel continue to use arbitration, alone or in conjunction with other ADR
mechanisms, as it provides major benefits that compensate for most of the
problems of costs and time. One of these major benefits was indicated as being the
enforceability of arbitral awards (the second major advantage of arbitration, as
identified by the first Study), along with the flexibility of the procedure and the
ability to select experienced arbitrators. There had been two corporate counsel
who disclosed during the interviews that they often use arbitration because it
represents a better solution in contrast with the local courts, but not because the
arbitration mechanism in itself is efficient. One corporate counsel indicated that
the fact that arbitrators, unlike judges who deal with several disputes every day,
are dedicated to the case is one of the major advantages of arbitration. At the
interview stage, a European corporate counsel revealed his profound
dissatisfaction with the arbitration process in general. In his opinion, arbitration is
a dispute resolution mechanism that favors only the major corporations, because
small companies do not have access to information about international arbitration
procedure and the arbitrators. The same corporate counsel indicated that he sees
arbitration as an opaque process, although his corporation is a regular user of
arbitration.

If you have used arbitration in the last ten years

are you satisfied with arbitration as a dispute
resolution mechanism?

No, very disappointed 1%

No, rather disappointed 4%
Undecided 9%
Yes, fairly satisfied 68%
Yes, very satisfied 18%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 3. Degree of satisfaction with international arbitration

Eighty-six percent of the construction companies participating in the 2008

Survey are very or fairly satisfied with arbitration. In the industrial manufacturing
sector, the percentage is slightly lower, with only 67% of very or fairly satisfied
330 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

respondents. However, none of the industrial manufacturing corporations reported

dissatisfaction with the arbitration process, but rather an uncertainty as to whether
the process is satisfactory or not (33%). Eighty-seven percent of the energy, oil
and gas companies are very or fairly satisfied with international arbitration, while
in the retail and insurance industries, the satisfaction rate is 100%.

Institutional Response:

Seventy-six percent of the arbitration institutions participating in the Study

indicated that corporations are very or fairly satisfied with arbitration. A strong
indication for this degree of satisfaction is the large number of cases submitted
with their institution every year, as will be shown below. Nevertheless, this
percentage is lower than the level of satisfaction reflected by the corporations
themselves.

International arbitration cases arise most frequently from commercial

transactions

Most of the disputes involving participating corporations arose from

commercial transactions (38%), followed by construction disputes (14%),
shipping disputes (11%), joint venture agreement disputes (9%), intellectual
property disputes (6%) and insurance disputes (5%). (See Figure 4.) While these
results reflect, in part, the profile of the participants, commercial agreements are
clearly the main source of disputes in international arbitration.

WHAT IS THE NATURE OF THE INTERNATIONAL DISPUTES YOU ARE

INVOLVED IN?

Other 1%

Shipping Disputes 11%

Insurance Disputes 5%

Financial Transaction Disputes 5%

Joint Venture Agreements Disputes 9%

Intellectual Property Disputes 6%

Consumer Law Disputes 2%

Employment Disputes 4%

Construction Disputes 14%

Foreign Direct Investment Disputes 5%

Commercial Transaction Disputes 38%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Figure 4. The nature of the disputes involving the participating corporations

2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 331

Institutional Response:

This result is consistent with the statistics of the interviewed arbitration

institutions: the majority of institutional arbitration cases deal with commercial
transactions disputes, followed by construction, intellectual property and joint
venture agreements disputes.

Conclusions

Global corporations have a significant number of international disputes which

are usually resolved by international arbitration. Often, corporations employ other
dispute resolution mechanisms, such as transnational litigation or alternative
dispute resolution. This preference is determined by various factors, but the most
important seem to be the nature of the business relationship with the counter-party
and the place where the dispute is to be resolved. Corporations are generally
reluctant when it comes to litigating in countries where the court system is less
developed or the political situation is not stable. As revealed by this Study, the
majority of the disputes arise out of commercial transactions, construction and
shipping contracts.

C. The Outcome of International Arbitration

Although an arbitration process can lead to an enforced arbitral award, the

2008 Study reveals that voluntary compliance with an award and settlement
are common outcomes of arbitration proceedings

In the study of the attitude of corporations towards the recognition and

enforcement of arbitral awards, the participating corporations were asked about
the outcome of the arbitration proceedings they had been involved in.
Forty-seven percent of the corporate counsel indicated that the arbitration
proceedings they were involved in ended with an arbitral award rendered by the
tribunal followed by voluntary compliance with the award by the opposing party.
However, many disputes were settled during the proceedings. Twenty-seven
percent of counsel reported achieving a settlement before receiving an arbitral
award, while a further 7% reported settlements followed by arbitral awards by
consent. Only 11% of the participating corporations had to seek recognition and
enforcement of their awards. (See Figure 5.)
The data suggest that 92% of arbitration disputes are successfully resolved at
some stage through the arbitration proceedings, while 81% of the disputes are
effectively resolved through arbitration, without the intervention of national courts.
As the figures indicate, settlement is part of the arbitration process, with 34%
of disputes successfully settled during the arbitration. This result might lead to the
conclusion that arbitration is one of the factors favoring settlement. During the
interviews, several corporate counsel suggested that they settled most of their
disputes while arbitrating, and not when involved in proceedings in front of
national courts.
332 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Has your organization experienced the following

outcomes of arbitration?

100%
80%
60% 47%
40% 27%
20% 7% 11% 6% 2%
0%
Settlement Settlement with Arbitral awards Arbitral awards Arbitral award Settlement
without arbitral arbitral award by and voluntarily and subsequent followed by followed by
award consent compliance with recognition and litigation litigation
the arbitral enforcement
award proceeding

Figure 5. The outcomes of the arbitration proceedings

Fifty-two percent of the construction corporations indicated that the

arbitration proceedings they were involved in ended with an arbitral award
followed by voluntary compliance, while 32% of their disputes resulted in a
settlement before an award. Eighty-five percent of the disputes involving
construction companies were successfully resolved during the arbitration process,
with no intervention from national courts. Similar percentages have been indicated
by the participating industrial manufacturing corporations. Fifty-four percent of
these companies indicated as the outcome, arbitral awards followed by voluntary
compliance with the awards. In the energy, oil and gas industry, a smaller
percentage was assigned to this outcome of the arbitral proceedings. The energy,
oil and gas companies revealed that in only 39% of cases did the arbitration
proceedings end in an award that was honored by the opposing party. Thirty-one
percent of the arbitration proceedings involving energy, oil and gas corporations
ended in a settlement agreement. In the retail industry, 53% of the disputes ended
in an arbitral award and voluntary compliance, while 36% ended in a settlement
agreement. Ninety percent of the disputes involving retail corporations were
resolved without the intervention of national courts. In the insurance sector, 67%
of the disputes ended in a settlement without an arbitral award being issued by the
tribunal.

D. Settlement in International Arbitration

Disputes occur between parties for various reasons: different commercial

expectations, legal or cultural backgrounds and approaches, or even political
situations. Some of these disputes end up adjudicated by international litigation or
arbitration or, in some instances, by other forms of alternative dispute resolution
procedures. However, an impressive number of disputes are resolved by
negotiations between the parties: either before being submitted to an authority –
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 333

courts, arbitrators, mediators, etc. – or during or after the resolution proceedings.

Apparently, various reasons motivate parties to reach settlement. Some realize
they have a weak case and in the event of court or arbitration proceedings would
be likely to lose the case. Others believe that making concessions and settling the
dispute in a manner that would benefit both parties would help preserve the
business relationship. This is usually the case when parties have been doing
business together for a considerable period of time or when the market does not
allow strong competition that would enable the other party to choose, for example,
a different supplier. There are certain companies that have a dispute resolution
policy favoring settlement rather than litigation or other dispute resolution
procedures, with a view towards saving costs and time. One might add the cultural
background of the parties involved in the dispute as a determinant factor in
reaching settlement. Some cultures – for example the Scandinavian ones – tend to
have a more conciliatory attitude. Some corporations prefer to settle a dispute to
preserve their reputation and to avoid any kind of negative publicity or
consequences affecting other business relationships. This is because litigation is
not private and confidential, while arbitration, even though private, is not always
confidential. There were corporate counsel who indicated during the interviews
that settlement is also initiated when the opposing party does not have sufficient
assets to cover the value of an eventual arbitral award, such that, they said,
starting arbitration against these companies would only add more losses to the
existing ones.
In the end, irrespective of the reasons why corporations prefer to settle, the
reality is that settlement negotiations are a constant presence in international
arbitration, regardless of the moment when the settlement occurs.
Although the 2008 Study mainly focuses on recognition and enforcement of
arbitral awards, we asked the participating corporations to share with us their
experience with settlement before, during and after the arbitral proceedings. The
reason we undertook this exercise resides in the fact that settlement of disputes
during arbitration proceedings may be confirmed in arbitral awards or might
actually put an end to the arbitration proceedings without an arbitral award being
issued. Settlement post-award might signify the absence of recognition and
enforcement proceedings.
We first tested settlement before an arbitral award, and then we asked
corporations whether they settled after the delivery of an award.

1. Settlement Before an Arbitral Award

The 2008 Survey revealed that settlement negotiations before the delivery of
an award are quite common. We tried to ascertain who takes the initiative to settle
the dispute – the parties, the lawyers, or even the arbitrators – and when this
settlement is reached. We asked the corporations what triggers the settlement
negotiations and also what is the position of the participating corporations in the
dispute when agreeing to settle.
334 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Settlement negotiations are typically initiated by one of the parties.

Ninety-one percent of the participating corporations indicated that in the

majority of their disputes settlement negotiations are initiated by one of the
parties. Only 9% of the corporations stated that in a large number of cases their
counsel or their outside lawyers were the ones suggesting that the parties settle the
dispute. (See Figure 6.)
Although these results are not surprising, it is interesting to observe that both
in-house and outside counsel do prefer in some instances to resolve the dispute by
negotiations. None of the participating corporations participating in our online
questionnaire indicated any direct contribution by the arbitrators or the arbitration
institution in resolving the dispute. However, during the interviews, some
corporate counsel revealed that there were instances when the actual conduct of
the arbitrators during the proceedings had a major influence over the settlement of
the dispute, such as when there were indications of the likely outcome of the
arbitration, or when the parties were encouraged to settle the dispute.

WHO INITIATES THE SETTLEMENT NEGOTIATIONS?

The arbitral institution,

0%
if involved
The conduct of the
0%
arbitral tribunal
The recommendation of
0%
the arbitral tribunal

Either in-house or 9%
outside counsel

One of the parties 91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 6. The initiative to enter into settlement negotiations

Settlement most often occurs before the first hearing or before the hearing on
the merits

The Study revealed that, out of the total number of cases which settle during
the arbitration proceedings, almost three-quarters of them occur before the hearing
on the merits of the case. Participants reported that 43% of the disputes were
settled before the first hearing in the arbitration proceedings. (See Figure 7.) The
first hearing is often a procedural one, where parties and arbitrators set the
framework and the agenda: timetables, rules regarding evidence, and issues in
dispute to be determined by arbitrators.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 335

A significant percentage of disputes (31%) are settled between the first

hearing and the hearing on the merits. This might be influenced by the fact that
parties usually exchange at least one substantial written submission after the first
hearing and present their written evidence. In these instances, parties form an
image of their chances to win or lose the case and this might be an essential factor
in trying to find a convenient solution.

AT WHAT STAGE OF THE PROCEEDINGS HAVE YOU

MOST OFTEN SETTLED?

Before the award was

26%
made

Before the hearing on

31%
the merits

Before the first hearing 43%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 7. The time when settlement occurs pre-award

The position of parties in the dispute is not a determinant factor in reaching

settlement

It is often believed that a party acting as respondent in the arbitration

proceedings would try to settle the dispute, rather than face an arbitral award
compelling damages or performance of the contract. The 2008 Survey proved that
this is anecdotal evidence.
When asked about their position while settling the dispute, only 39% of
corporate counsel indicated they were acting as respondents, while a significant
33% acted as claimants. Twenty-eight percent of the corporations were claimants
and counter-respondents or respondents and counter-claimants. (See Figure 8.)
We can conclude that the position from which parties are negotiating the
settlement is not a decisive factor. The fact that a party is respondent in the
proceedings does not mean that it is in a weak position which may have
considerable influence on its willingness to reach a convenient agreement rather
than proceed to an award.
336 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

WHEN
WHEN REACHING
REACHING THE SETTLEMENT,WHAT
THE SETTLEMENT, WHATWAS
WAS YOUR
YOUR
POSITION IN
POSITION IN THE
THEDISPUTE
DISPUTE?
?

Respondent and
14%
Counter-Claimant

Claimant and Counter-

14%
Respondent

Respondent 39%

Claimant 33%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Figure 8. The position of the participating corporations when reaching a

settlement

Desire to preserve business relationships is a strong driver for pre-award

settlement

There are several likely reasons that favor parties negotiating the settlement of
their disputes. There is an anecdotal perception placing the weak or rather
unsuccessful position of the parties in the dispute as the determinant factor.
The 2008 Study revealed that reaching settlement in the arbitration
proceedings is mainly determined by the strong desire of the parties to preserve
their business relationship. The data gathered by the online questionnaire revealed
that 27% of the participating corporations reach a settlement in order to safeguard
their business relationship. The incentive to settle in order to preserve business
relationships was particularly evident where parties had been doing business
together for a considerable period of time or where the market did not offer a wide
range of alternative solutions.
Two other major reasons have motivated corporations to reach a settlement
during the arbitration proceedings: avoiding unnecessary costs (23%) and delay
(17%). The weak position of the parties in a dispute is indeed one of the factors
triggering the settlement, but it is not the decisive one (21%). (See Figure 9.)
Concerns over the likely place of enforcement or the lack of assets of the opposing
party were not cited as a major influence on the decision to settle.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 337

WHAT WAS THE REASON FOR REACHING SETTLEMENT

RATHER THAN PROCEEDING TO AN ARBITRAL AWARD?

Other 2%

Preservation of the good relationship

with the other party 27%

Lack of assets of the opposing party 5%

Concerns about the likely place of enforcement 5%

Reduced time 17%

Reduced costs 23%

Weak position 21%

0% 5% 10% 15% 20% 25% 30%

Figure 9. The reasons behind reaching a settlement agreement

Brazilian corporations (33%) consider that time is the most important reason
why parties reach an agreement before the award is made and, in conjunction
with this, avoiding unnecessary costs in dispute resolution comes out in second
place (25% of the participating corporations). The majority of the participating
Japanese and U.S. corporations indicated settlement as being more cost
effective, while most of the Swiss corporations prefer to settle to preserve
business relationships. U.K. corporations (23%) tend to settle when they are
placed in a weak position.
In the construction industry, 27% of the participating corporations indicated
that the weak position of the party in the dispute is the main reason for reaching a
settlement agreement. Thirty percent of the industrial manufacturing corporations
revealed that preserving a working relationship is the principal reason for settling
a dispute. In the energy, oil and gas sectors, the participating corporations
indicated the weak position of the party (24%), avoiding unnecessary costs (24%)
and preservation of the current business relationship (23%) as the top reasons for
settlement pre-award. Similar percentages have been revealed by corporations in
the retail industry. In the insurance sector, 46% of the corporations placed at the
top of the list the preservation of the business relationship, while the avoidance of
costs and delay came second, with 27% each.
338 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Institutional Response:

The arbitration institutions believe that the main factors influencing parties to
settle are the savings of time and costs and safeguarding of business relationships.
This broadly tallies with the responses given by corporations in this study.

Corporations consider a pre-award settlement to be a satisfactory alternative

to an arbitral award

Eighty-nine percent of the participating corporations found the settlement

agreements reached before an award had been made to be very or fairly
satisfactory. Only 5% of corporate counsel felt disappointed by the outcome of the
settlement pre-award. (See Figure 10.) During the interviews, some corporate
counsel explained that this satisfaction derives directly from the advantages of an
early settlement, as indicated in the above sections. Some of the counsel
acknowledged that the satisfaction also stems from the unpredictable outcome of
the arbitration proceedings and that it is always better to have something tangible
rather than only expectations.

DO YOU CONSIDER SETTLEMENT A SATISFACTORY

OPTION?

Not
Notsure
sure 0%

No, very disappointing

No, very disappointing 2%

No,
No, rather disappointing
rather disappointing 3%

Undecided
Undecided 6%

Yes,fairly
Yes, fairlysatisfactory
satisfactory 65%

Yes,very
Yes, verysatisfactory
satisfactory 24%

0% 10% 20% 30% 40% 50% 60% 70%

Figure 10. Settlement as a satisfactory option

Conclusions

In a significant number of cases, corporations prefer to settle before the first

hearing in the arbitration proceedings. Usually one of the disputing parties takes
the initiative to begin negotiations. This occurs for various reasons, including the
time and costs associated with an eventual arbitration procedure or the weak
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 339

position of the party who started the negotiations. However, the most important
reason seems to be the need of the parties to preserve their business relationship.
2. Settlement after Receiving an Arbitral Award

Settlement post-arbitral award is referred to here as an agreement reached by

the parties, after the award has been rendered by the arbitral tribunal, that alters
the award by changing the terms of its performance (for example by stipulating a
different time frame, agreeing payment in installments or agreeing to a reduced
payment, often in exchange for prompt payment). In many situations this kind of
settlement is convenient for both parties. For the non-prevailing party it might be
more suitable to substitute damages for specific performance or to pay a
substantial amount over a period of time. For the winning party, renegotiating the
arbitral award might be more profitable than spending time and money in
enforcing it.
The 2008 Survey gathered data on whether the participating corporations
usually employ settlement post-awards in their international disputes, the reasons
for doing so and the value of the settlement.
During the interviews, we attempted to ascertain whether an arbitral award has
a market value, in the sense that it might be considered a credit title and sold to
third parties. Some corporations revealed that there are situations when they
decide to “sell” their winning awards to specialized corporations or funds, where
it appears impossible for them to succeed in recovering the damages awarded by
arbitral tribunals. These cases prove to be isolated and most of them involve
states. Some interviewed counsel revealed that the award was sold together with
the whole business. These findings confirm the interesting debate in the arbitration
community – especially in investment arbitration disputes against states – on
whether the winning party should sell its award to a third party (a company, law
firm or fund), specialized in recovery of debts. There were some examples of
awards being factored to a third party at a discount of 50% to 75% of the award’s
stated value.

Settlements are frequently negotiated after an arbitral award has been made

Forty percent of the corporate counsel confirmed that they had negotiated a
settlement with the opposing party after the arbitral award had been delivered.
Thirty percent of the respondents indicated that they never negotiated a settlement
after the award had been delivered. (See Figure 11.)
340 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Has your organization reached settlement after

the arbitration award was rendered?

30%
40%
Yes
No
Not sure

30%

Figure 11. Settlement post-award

South American, Japanese and U.K. corporations rarely reached settlement

after the arbitral award had been delivered, while Swiss, Mexican and U.S.
companies consented to a settlement agreement after the award. These statistics do
not necessarily reflect cultural factors. For example, from a cultural perspective, it
can be argued that Japanese corporations would try to maintain their business
relations and negotiate an advantageous outcome for the parties involved in a
dispute, irrespective of when this might occur.
Forty-two percent of the construction companies revealed that they agreed to
settle after the delivery of an arbitral award. In the industrial manufacturing, the
energy, oil and gas, and insurance industries, the percentage is somewhat higher
(56%, 50% and 67%, respectively). Only 33% of the corporations in the retail
business agreed to settle after an award had been issued. In this last case, 50% of
the corporate counsel indicated that they never agreed on a settlement post-award.

Corporations choose to renegotiate arbitral awards to save money and time

Respondents’ main reasons for negotiating a settlement after an arbitral award

were to avoid costs and save the time that would be incurred in enforcement
(56%). The participating corporations were also motivated by preservation of a
working relationship with the other party (19%), while only 9% of the corporate
counsel reached a settlement because of concerns about the place of enforcement
of the award. (See Figure 12.) Some of the interviewed corporate counsel revealed
that they would prefer to receive less money rather than commencing enforcement
proceedings in countries with a corrupt or bureaucratic court system.
It is not surprising that the factors influencing settlement after the delivery of
an arbitral award are similar to the factors influencing pre-award settlement, albeit
with a slightly different emphasis, given the certainty resulting from the award.
During the interviews, one corporate counsel disclosed that after several years
of futile efforts and almost half of the value of the award spent in recognizing and
enforcing an arbitral award, the corporation decided to reach an agreement with
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 341

the award debtor. The attorney indicated that this kind of experience, as rare as it
may be, motivated the company to consider carefully the circumstances affecting
an enforcement procedure and to decide accordingly for settlement or
enforcement. Another attorney from the banking and finance industry indicated
that his corporation never settles after the delivery of an award. In his opinion, this
would affect the reputation of the company, with direct consequences on other
business relationships. Counsel for an industrial manufacturing corporation
revealed that it usually tries to reach an agreement after an award has been
rendered if the award-debtor would go bankrupt by paying the award or when it is
more advantageous to replace the payment of damages with specific performance.

IF THE SETTLEMENT WAS REACHED POST- AWARD, WHAT

WAS THE REASON FOR SETTLING?

Preservation of a
good relationship with 19%
the other party

Need for prompt receipt

16%
of the amount

Concerns about the

likely place of 9%
enforcement

Reduced time 23%

Reduced costs 33%

0% 5% 10% 15% 20% 25% 30% 35%

Figure 12. Reasons for post-award settlement

When it comes to industries, the corporations in the construction and the

energy, oil and gas industries prefer to settle even after an award has been issued
in order to avoid the costs that would be incurred with the enforcement
proceedings (49% and 46%, respectively). Forty percent of the corporations in the
industrial manufacturing sector reach a post-award settlement agreement as they
prefer a prompt receipt of the amount awarded by the tribunal in exchange for a
discount, rather than spending money and time for enforcement proceedings. This
might be an indication of the fact that claimants in arbitration proceedings tend to
overestimate the amounts claimed in the proceedings, which makes settlement
post-award at a discounted amount a good deal for them. In the insurance
industry, 49% of the corporate counsel indicated that they mainly settle after the
342 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

delivery of an award in order to maintain the working relationship with the

opposing party.

The position of partners in the dispute is not determanitive in post-award

settlement

The position of the party in the arbitration proceedings is not conclusive as to

what drives settlement. It seems that claimants and respondents address settlement
in the same way. (See Figure 13.)

WHEN
WHENREACHING
REACHINGTHE
THESETTLEMENT
SETTLEMENT POST- AWARD,
POST-AWARD, WHAT
WHAT
WAS
WASYOUR
YOUR POSITION THE ORIGINAL
POSITION IN THE ORIGINALDISPUTE?
DISPUTE?

Respondent and
8%
Counter-Claimant

Claimant and Counter-

6%
Respondent

Respondent 41%

Claimant 45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 13. The position of the parties in the original dispute, when a settlement
post-award is agreed

More than half of post-arbitral award settlement cases are settled for over
50% of the award

The quantitative data gathered by the online questionnaire revealed that

following the post-award settlement, 54% of the participating corporations
negotiated a settlement amounting to over 50% of the award, and 35% of the
corporations settled for an amount in excess of 75% of the award. (See Figure 14.)
Several interviewed counsel were of the opinion that this percentage is more than
fair, if they consider the time and money spent during enforcement proceedings,
including attorneys’ fees.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 343

IF
IFTHE
THESETTLEMENT
SETTLEMENTWAS
WAS REACHED
REACHED POST-AWARD, AT
POST- AWARD, AT
WHAT
WHAT PERCENTAGE
PERCENTAGE OF
OF THE
THEAWARD
AWARD WAS THE
WAS THE
SETTLEMENT AGREED?

Not sure 43%

Less than 25%

0%
of the award

26%-50% of the
3%
award

51%-75% of the
19%
award

76%-100% of the
35%
award

0% 20% 40% 60% 80% 100%

Figure 14. The value of the post-award settlement

Conclusions

Settlement post-arbitral award is a common practice adopted by the

corporations involved in international arbitration. At the post-award stage,
settlement is triggered by various factors, including time and cost efficiencies and
maintaining a working relationship with the other party.

E. Compliance with Arbitral Awards

Corporations usually comply with the awards rendered in international

arbitration proceedings

The 2008 Survey is the first empirical survey to reveal a high level of
compliance with the awards rendered in international arbitration. Eighty-four
percent of respondents indicated that the opposing party had honored the award in
full in more than 76% of the cases. Only 3% reported that an award-debtor had
failed to comply with the award. (See Figure 15.) During the interviews, corporate
counsel often mentioned that more than 90%, typically 99%, of the awards had
been honored by the non-prevailing party.
344 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

HOW MANY ARBITRAL AWARDS HAVE BEEN CARRIED OUT

VOLUNTARILY BY THE OPPOSING PARTY?

None 3%

Less than 25% 2%

Between 26% and 50% 3%

Between 51% and 75% 8%

More than 76% 84%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Figure 15. Compliance with arbitral awards

The interviewed corporations revealed that the main reason for compliance
with the arbitral awards was to preserve a business relationship. In sensitive
industries, such as insurance and re-insurance, pharmaceuticals, shipping,
aeronautics and oil and gas, the percentage is significantly higher, as the number
of major players in these sophisticated markets is much lower than in other
industries (86% in the construction industry, 73% in the energy, oil and gas and
100% in the insurance and re-insurance). For this reason, probably the highest rate
of compliance with arbitral awards is encountered in the re-insurance sector. The
counsel of shipping companies revealed during the interviews that their
corporations use the so-called “Rule B attachment” by asking banks to support
them in recovering the value of the award: banks block the accounts of the non-
prevailing party. The counsel indicated that it is more efficient to “intercept” the
award than to enforce it.

Institutional Response:

The majority of the participating arbitration institutions do not keep records of

the arbitral awards after the proceedings are over. However, almost half of the
institutions believe that the non-prevailing party complies voluntarily with the
award in more than 76% of the cases.

F. Recognition and Enforcement of Arbitral Awards

The first Study placed among the major advantages of arbitration the
enforceability of arbitral awards. In 2008 we celebrated the 50th anniversary of
the New York Convention, which is considered one of the main reasons for the
success of arbitration and the implementation of arbitral awards. More than 140
countries are party to the New York Convention.8

8
The Convention is in force in 144 countries as of July 2009: www.uncitral.org.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 345

On the recognition and enforcement of arbitral awards, the 2008 Study tested
whether corporations experienced difficulties in enforcing arbitral awards, the
significance of the place of enforcement of arbitral awards and the time and
amounts recovered in the recognition and enforcement proceedings.

1. Difficulties in Recognizing and Enforcing Arbitral Awards

Most corporations have not encountered major difficulties in seeking

recognition and enforcement of arbitral awards

In only 11% of cases did participants need to proceed to enforce an award.

The majority of the participating corporations that had enforced awards reported
that they had not encountered major difficulties in doing so.
These findings of the 2008 Survey refute the anecdotal evidence that
corporations encounter major difficulties when resorting to recognition and
enforcement of arbitral awards. This theory rested on the fact that recognition and
enforcement proceedings are outside the arbitral tribunal’s powers and national
legal systems and local courts are involved in the proceedings. However, the
Study reveals that only a very small proportion of the participating corporations
faced problems when seeking recognition and enforcement of foreign arbitral
awards.
Out of the 11%, only 19% of the corporations had encountered difficulties
when seeking to have recognized and enforced foreign arbitral awards. Most of
the difficulties arose from attempts to enforce damages awards, although some
problems were also encountered when enforcing declaratory and specific
performance awards. (See Figure 16.)

Has your organization experienced difficulties in recognizing

and enforcing foreign arbitral awards? What were the remedies
covered by the arbitral awards?

Other 6%

Contract adaptation awards 4%

Specific performance awards 13%

Declaratory awards 15%

Damages awards 62%

0% 10% 20% 30% 40% 50% 60% 70%

Figure 16. Enforcing arbitral awards

346 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Most of the problems encountered when seeking enforcement of arbitral

awards relate to problems regarding the identification or lack of assets of the
non-prevailing party

Corporate counsel reported that their difficulties in enforcing an award often

arose because of the circumstances of the award-debtor rather than deficiencies in
the arbitral or court proceedings. Seventy percent of the problems related to the
debtor’s lack of assets or an inability to identify the debtor’s assets. Only 6% of
the respondents encountered difficulties because the country of enforcement was
not a signatory to the New York Convention. The small percentage in this last
case is related to the large number of countries party to the New York Convention.
Seventeen percent of the corporate counsel referenced the hostility of the place of
enforcement, which is understood as comprising, among others, an unstable and
bureaucratic political and legal system with all the consequences deriving
therefrom, including intimidation and threats or corruption. (See Figure 17.)
During the interviews, several corporate counsel indicated that they
encountered difficulties when seeking enforcement of interim measures ordered
by an arbitral tribunal, especially when such enforcement takes place in a country
different from the place of arbitration. This was blamed on the fact that the New
York Convention deals only with arbitral awards and not with orders of arbitral
tribunals, which do not have the finality of an award.
In recognizing and enforcing arbitral awards, how often have you
encountered the following difficulties?

Other 5%

Local law allows enforcement in certain time limits 2%

The inapplicability of the New York Convention 6%

Unable to identify or access the assets of the debtor 24%

The lack of assets of the award debtor 46%

The place of recognition and enforcement was
hostile to foreign awards 17%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 17. Difficulties in enforcing arbitral awards

Thirty-seven percent of the corporations in the construction industry indicated

the lack of and the inability to identify or access the debtor’s assets as the main
difficulties in enforcing their arbitral awards. In the industrial manufacturing
sector, besides the circumstances of the award-debtor, 22% of the corporations
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 347

indicated the hostility of the place of enforcement as one of the main sources of
difficulty in enforcing arbitral awards. Eighty-seven percent of the corporations in
the energy, oil and gas industry revealed that the main problems stem from a lack
of or the impossibility of accessing or identifying the assets of the non-prevailing
party. Sixty-six percent of the corporations in the retail business indicated the lack
of assets of the award-debtor as the principal source of difficulties.

Institutional Response:

The participating institutions reported that parties to arbitration proceedings

administered by them experienced a range of difficulties when attempting to
enforce arbitral awards, including damages awards, declaratory awards and
specific performance awards. In their view, the two main difficulties are the lack
of assets of the award-debtor and the hostility towards foreign arbitral awards in
the place of enforcement.

2. The Place of Enforcement

The State where the non-prevailing party has most of its assets is the major
factor in choosing the place of enforcement of arbitral awards

Unlike the place of arbitration, the place of enforcement of arbitral awards is

usually chosen carefully as this has a critical impact on the execution of the
award. There are several factors influencing this decision, from the country where
the assets of the award-debtor are located to the recognition and enforcement
mechanism at the place of enforcement.
When invited to identify the main factors affecting their decision regarding
the place of enforcement, 27% of the corporations considered first the country
where the non-prevailing party had sufficient assets, while 22% put weight on the
recognition and enforcement mechanisms in the country of enforcement. Twenty
percent of the participants took into consideration the applicability of the New
York Convention. (See Figure 18.) One corporate attorney in the industrial
manufacturing sector indicated that his firm usually checks whether the New York
Convention is applicable and gathers information on the local court system and
the efficiency of the national legal system in general. The attorney added that in
one of these surveys on the local court system they discovered that the courts at
the potential place of enforcement had a tendency to favor foreign investors.
348 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Factors considered when choosing place of enforcement

30% 27%
25% 22%
20%
20% 18%
15% 12%
10%
5% 1%
0%
The state in which The recognition The applicability The attitude of Concerns related Other
the award debtor and enforcement of the New York local courts at the to state immunity
has sufficient mechanism Convention place of
assets applicable at the or other relevant enforcement
place of international
enforcement convention

Figure 18. Factors considered when choosing the place of enforcement

A variety of difficulties have been encountered at the place of enforcement

When asked what kind of difficulties they had experienced at the place of
enforcement, 56% of counsel indicated the recognition and enforcement or the
execution proceedings. The majority of counsel linked both these problems with
the attitude of the local bureaucrats and courts. Ten percent of respondents cited
difficulties arising from corruption at local courts. (See Figure 19.)

If you have encountered recognition and enforcement

difficulties related to the place of enforcement, what were the
particular problems?

35% 32%
30%
24%
25% 22%
20%
15% 12%
10%
10%
5%
0%
The recognition The local execution High costs Time Perceived
and enforcement procedure corruption of
procedure judges and
administrative
personnel of the
local courts

Figure 19. Difficulties encountered at the place of enforcement

2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 349

When it comes to the difficulties encountered at the place of enforcement,

50% of the construction companies indicated that they had problems with the
recognition and enforcement proceedings, while in the industrial manufacturing
industry, the local execution procedure and delays in the enforcement and
execution proceedings were placed first (29% each). Twenty-seven percent of the
corporations in the energy, oil and gas industry complained about perceived
corruption of the judges and the administrative personnel of the local courts.

Several countries are perceived as hostile to enforcement

We tested the experience and perception of corporate counsel regarding

potential countries or regions where difficulties are likely to appear in
enforcement or execution proceedings. Only a few respondents had actually
experienced difficulties due to the hostility of the country of enforcement (17%).
Brazil, China, India and South Korea were each cited more than once as countries
hostile to the enforcement of foreign arbitral awards. On the perception side,
China (31%), Russia (14%) and India (10%) were viewed as countries hostile to
the enforcement of foreign awards. (See Figure 20.) The actual experience of
corporations seems to match their perceptions, although there is much
misconception in this attitude. The three most cited regions perceived as hostile
were Central America, South America and Africa.
The interviewed corporate counsel acknowledged that this perception may be
associated with unstable political regimes or closed markets in the countries and
regions mentioned above. In countries such as China, for example, entering into
business relationships with local companies may be a challenge for Western firms,
as many local firms are integrated with the Chinese government at different levels.
Additionally, in our example, Chinese law does not allow parties to pursue ad hoc
arbitration.9 One corporate counsel disclosed that after litigating and arbitrating
his company’s disputes in China, he retained the impression that arbitrators and
judges are biased.
Another factor contributing to the perception that a country or region is hostile
is a lack of familiarity with its legal and cultural system. It is interesting that
counsel from civil-law jurisdictions believe that problems might arise in common-
law jurisdictions (for example, the U.S. or the U.K.) because of their unfamiliarity
with the legal system. However, in this case, the problems are not directly linked
with the place of enforcement, but with the legal experience of the interviewed
attorneys. A significant number of corporate counsel consider that problems are
likely to occur in countries that are not signatories to the New York Convention or
where there is no reciprocity for recognizing and enforcing arbitral awards.

9
Arbitration Law of the People’s Republic of China, promulgated by Decree No. 31
of the President of the People’s Republic of China on Oct. 31, 1994.
350 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

In which countries do you consider has your corporation might

In which countries do you consider that your corporation might
encounter problems
encounter problems inin enforcing
enforcingforeign
foreignarbitral
arbitralawards?
awards ?

Indonesia 5%
Iran 2%
South Korea 2%
Sudan 2%
Nigeria 2%
Romania 2%
UK 2%
UAE 2%
USA 6%
Bolivia 4%
Ecuador 2%
Peru 2%
Venezuela 4%
Colombia 4%
China 31%
Russia 14%
Tajikistan 2%
Argentina 2%
India 10%
Brazil 6%
Turkey 4%

0% 5% 10% 15% 20% 25% 30% 35%

Figure 20. Countries perceived as hostile to the enforcement of foreign arbitral

awards

Institutional Response:

Arbitration institutions were asked to name the countries where the parties in
arbitration proceedings administered by their institution encountered significant
difficulties in enforcing awards. The most cited countries were China, Turkey and
Taiwan.

3. Time and Recovery Rate in the Enforcement Proceedings

The average time to recognize, enforce and execute arbitral awards is less
than one year

The 2008 Study discovered that recognition, enforcement and execution

proceedings in international arbitration took less than one year in the majority of
cases.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 351

Fifty-seven percent of the participants had taken less than one year to obtain
enforcement and execution of their arbitral awards. Fourteen percent were
successful in less than six months. However, in 5% of cases, the proceedings took
between two and four years. (See Figure 21.) Most counsel pointed to the New
York Convention as the main reason for relatively short proceedings. Lengthy
proceedings were usually blamed on local bureaucracy.

WHAT WAS THE AVERAGE TIME TO RECOGNIZE, ENFORCE

AND EXECUTE THE ARBITRAL AWARDS IN WHICH YOUR
CORPORATION PREVAILED?

Not sure 20%

Less than 6 months 14%

Between 6 months and 1 year 43%

Between 1 year and 2 years 18%

Between 2 years and 4 years 5%

More than 4 years 0%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 21. The average time for recognizing, enforcing and executing arbitral
awards

Forty percent of the corporations in the construction industry indicated that it

took between one and two years to recognize, enforce and execute their arbitral
awards, while 40% of the industrial manufacturing corporations spent between six
months and one year in the proceedings. Forty-five percent of the energy, oil and
gas companies spent less than one year in the enforcement and execution
proceedings. In the retail sector, this percentage is almost double, with 83% of
corporate counsel spending an average of less than one year in enforcement and
execution proceedings.

Recovery through recognizing, enforcing and executing arbitral awards is

high

Forty-four percent of the participants reported that they usually recovered

100% of the arbitral award when using recognition, enforcement and execution
proceedings. Forty percent recovered over 75% of the amount awarded. (See
Figure 22.) During the interviews, corporate counsel indicated that the lack of
assets of the non-prevailing party is the main reason for the failure to recover the
full amount of an award.
352 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

What was the average amount recovered by your corporation

when recognizing, enforcing and executing an arbitral award?

Not sure 14%

Less than 25% of the amount 0%

Between 26% and 50% of the amount 0%

Between 51% and 75% of the amount 2%

Between 76% and 99% of the amount 40%

100% of the amount 44%

0% 5% 10% 15% 20% 25%30% 35% 40% 45% 50%

Figure 22. The average amount recovered during the enforcement and execution
proceedings

4. Resisting Recognition and Enforcement Proceedings

Less than half of the award-debtors resist recognition and enforcement

proceedings

Article V of the New York Convention provides several grounds upon which
national courts may refuse the recognition and enforcement of foreign arbitral
awards. Similar provisions may be found in national arbitration laws. In these
circumstances, the opposing party may resist recognition and enforcement by
asking the court to acknowledge the existence of one or more grounds for refusal
of the recognition and enforcement of an arbitral award.
Although it was believed that in a large number of cases the opposing party
will employ every tactic in order to delay compliance with an award, the
participating corporations indicated that in only 39% of the cases did the award
debtor resist enforcement proceedings. (See Figure 23.) During the interviews,
several corporate counsel indicated that in rare cases the resistance of the award
debtor is in fact a dilatory tactic. Nevertheless, the corporate counsel believe that
these situations are rare and in exceptional circumstances an arbitral award may be
refused recognition and enforcement.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 353

Have you experienced resistance from the

opposing party in enforcing the arbitral awards?

39%
Yes
No
61%

Figure 23. Opposition to the recognition and enforcement of arbitral awards

Among the grounds set out in by the New York Convention, the participating
corporations indicated that in 35% of the cases, the opposing party relied on
procedural irregularities in the arbitration proceedings. In 16% of the oppositions,
the award-debtor argued that the arbitral tribunal exceeded its jurisdiction, while
in 14% of the cases, the non-prevailing party argued the existence of an invalid
arbitration agreement. (See Figure 24.)

IN RESISTING ENFORCEMENT, WHAT GROUNDS HAVE BEEN

INVOKED BY THE NON-PREVAILING PARTY?

40% 35%
35%
30%
25%
20% 14% 16%
12% 13%
15% 10%
10%
5%
0%
Invalid Procedural Tribunal Award was Subject Public policy
arbitration irregularities exceeded its not binding or matter of the issues
agreement in the jurisdiction was dispute not
arbitration suspended or capable of
proceedings set aside being settled
by arbitration

Figure 24. Grounds for resisting recognition and enforcement of arbitral awards

Institutional Response:

We asked arbitration institutions whether they were aware of the number of

arbitral awards that were subsequently set aside. Sixty-five percent of the
institutions indicated that less than 25% (more typically less than 10%) of their
354 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

awards had been challenged. Twenty-nine percent revealed that none of their
awards had been challenged. However, these results must be considered in the
context that 42% of the participating institutions do not keep track of their awards
after dispatch.

Conclusions

Even in situations where the prevailing party has to resort to recognition and
enforcement proceedings, corporate counsel reported that they seldom face major
difficulties. When they encounter problems, this happens because the award-
debtor does not have sufficient assets to cover the value of the award or, even if
there are sufficient assets, it is difficult to identify them.
The place of enforcement of arbitral awards is important as it provides finality
to the arbitration proceedings. Corporations choose the place of enforcement
based on several criteria; however, the country where the non-prevailing party has
the majority of its assets is the most important one. African, Central American and
some Asian countries are regarded by the participating corporations as countries
hostile to arbitration and to recognition and enforcement of arbitral awards, in
particular.
It seems that time is not a major problem in enforcing arbitral awards, as the
Survey reveals that parties spend less than one year in enforcement proceedings.
As indicated during the interviews, this might be a direct consequence of the wide
applicability of the New York Convention. Following enforcement and execution
proceedings, 84% of the corporations tend to recover more than 76% of the value
of the award.
Only in a small number of cases does the award-debtor oppose the recognition
and enforcement of arbitral awards and this is usually the case when the non-
prevailing party feels that one of the grounds provided for in the New York
Convention or in the national laws is applicable.

G. States, State Enterprises and Recognition and Enforcement of Arbitral Awards

In the last decade, arbitration against states, and in particular investment

arbitration, increased significantly, along with the proliferation of Bilateral
Investment Treaties (“BITs”), the increased caseload of the International Centre
for Settlement of Investment Disputes (“ICSID”), and the cases under the Energy
Charter Treaty (“ECT”) and the North American Free Trade Agreement
(“NAFTA”). Investment arbitration disputes rely to a great extent on provisions of
investment treaties concluded by states – bilateral or multilateral treaties – and are
brought for adjudication to institutional or ad hoc arbitration. There are more than
2,700 BITs concluded between states and a significant number of multilateral
investment treaties and regional treaties, including NAFTA and DR-CAFTA.10 A
good number of investment disputes are submitted to ICSID; however, it is

10
Dominican Republic – Central America Free Trade Agreement, signed in 2004.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 355

believed that there are also a significant number of disputes adjudicated by ad hoc
arbitration, under the UNCITRAL Rules. If there seems to be a reporting system
for institutional investment arbitration, for ad hoc investment arbitration we can
only speculate on the number of adjudicated disputes. Few of the ad hoc
investment arbitral awards are made public, while the majority of institutional
awards are already in the public domain. According to UNCTAD, between 1987
and 2006 a total of 259 cases against states based on BITs were instituted before
various forums: 161 before ICSID and 92 before other forums.11
In this broad category of state arbitration we also included disputes between
state enterprises and private entities, irrespective of whether they relate to
commercial contracts, joint venture agreements or privatization contracts. In
2006, most of the disputes involving Eastern European states were disputes
against their enterprises in connection with privatization agreements. Of course,
this was the natural effect of privatizations carried out after the fall of the
communist regime in 1990.
It must be emphasized here that in the ICSID system, recognition and
enforcement of arbitral awards is based on the provisions of the ICSID
Convention. Under the ICSID Convention there is no possibility for the state to
resist enforcement of awards or to exercise any other challenge available in the
local law, except for those remedies provided for in the ICSID Convention.
Nevertheless, the execution proceedings of ICSID awards are carried out in
accordance with local law.

Private sector entities are the predominant users of international arbitration

Of the corporations surveyed, it appears that most of them (74%) have

experience arbitrating mainly with private organizations, while 21% have also
arbitrated disputes against state enterprises. Only 5% of the corporations polled
had experienced with arbitration with states. (See Figure 25.) A majority of the
construction companies participating in the study had faced state enterprises as
opposing parties in arbitration proceedings. During the interviews, one corporate
attorney disclosed that, while it is sometimes difficult to negotiate a contract with
a state, states are in fact very open when it comes to agreeing on arbitration
clauses and arbitration in general.

11
UNCTAD, IIA Monitor No. 1 (2008), available at http://www.unctad.org/en/
docs/iteiia20083_en.pdf.
356 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

How often has your

Experience organization
with encountered
various parties the following
in arbitration
opposing parties?

80% 74%
70%
60%
50%

40%
30%
21%
20%
10% 5%
0%
0%
A private organization A state A state enterprise Other

Figure 25. Users of international arbitration

Arbitral awards against states or state enterprises are most commonly

rendered in institutional arbitration

The surveyed corporations reported that their disputes against states and state
enterprises are principally brought before institutional arbitration, while only 33%
of disputes are adjudicated in ad hoc proceedings. (See Figure 26.)

In which of
In which of the
the following
following arbitrations
arbitrations have the
have the
arbitral awards against states been rendered?
Arbitral awards against states been rendered?

33%

Ad hoc arbitration
Instutitional arbitration
Institutional

67%

Figure 26. Arbitration against states and state enterprises

The 2008 Survey indicates that, aside from ad hoc arbitration, the most
popular venues for adjudicating disputes against states are the ICC, AAA, LCIA
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 357

and ICSID. (See Figure 27.) ICSID is only used in investment arbitration, where
the home state of the investor and the state party to the dispute are contracting
states to the ICSID Convention.12 As reported by the interviewed counsel, the
AAA, ICC and LCIA are used not only for disputes against state enterprises, but
also in disputes against states.

INSTITUTIONAL AND
INSTITUTIONAL AND AD
AD HOC ARBITRATION IN
HOC ARIBTRATION IN DISPUTES
DISPUTES
AGAINST STATE AND STATE ENTERPRISES
AGAINST STATES AND STATE ENTERPRISES

Other 11%

LCIA 6%

ICSID 6%

ICC 33%

AAA 11%

Ad hoc arbitration 33%

0% 5% 10% 15% 20% 25% 30% 35%

Figure 27. Ad hoc and institutional arbitration against states and state enterprises

States and state enterprises regularly comply voluntarily with arbitral awards
or negotiate a settlement

While the number of arbitrations involving states is increasing, these cases

represent only a small proportion of the total number of arbitrations.
Consequently, many of the participants have not experienced recognition and
enforcement of arbitral awards against states. Only 19% of respondents have
experience in enforcing arbitral awards against states or state enterprises.
(See Figure 28.) However, there are a significant number of cases involving
enforcement against state enterprises. An additional factor is the high degree of
voluntary compliance with arbitral awards (around 90% of the cases, as disclosed
during the interviews). Compliance often resulted in the renegotiation of contracts
between corporations and the state or state enterprises, rather than the state paying
damages to an investor.

12
Under the ICSID Additional Facility Rules, a dispute may be adjudicated by an
ICSID tribunal if one of the states involved in the dispute (the host state or the home state)
is a party to the ICSID Convention. The Additional Facility Rules are applicable only
upon the consent of the parties in dispute. Since these disputes are outside the jurisdiction
of ICSID, the provisions of the ICSID Convention are not applicable.
358 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

During the interviews, several corporations indicated that they did not attempt
to enforce awards against states as they considered they would be unsuccessful. In
these cases, corporations sometimes sold or assigned the awards to third parties or
sold the underlying local business involved in the proceedings to someone
prepared to take the risk of obtaining value from an arbitral award.

Has your organization enforced or sought to

enforce against states or state enterprises?

19%

Yes
No

81%

Figure 28. Enforcement against states and state enterprises

Forty-three percent of construction corporations and 33% of industrial

manufacturing companies sought to obtain recognition and enforce arbitral awards
against states and state enterprises. The enforcement rate in the energy, oil and gas
sector appears to be slightly lower (13%). (See Figure 29.)

Recognition and enforcement against states and

state enterprises / Industries

50%
43%
45%
40%
33%
35%
30%
25%
20%
13% 14%
15%
10%
5% 0%
0%
Construction Industrial Energy, oil Retail Insurance
manufacturing and gas

Figure 29. Enforcement against states and state enterprises / Industries

2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 359

Institutional Response:

Fifty-nine percent of the participating arbitration institutions indicated that

less than 25% of their awards are rendered in proceedings involving states or state
enterprises. Twenty-four percent revealed that they never administrated cases
involving states or state enterprises.

Corporations experienced fewer significant problems in enforcing arbitral

awards against states and state enterprises than in enforcing awards against
private sector entities

Of the minority of participants that had experience in enforcing awards against

states or state enterprises (i.e. 19% of the corporations who arbitrated against states
and state enterprises), over half had no significant problems. (See Figure 30.) A
small proportion had experienced significant difficulties and the interviews indicated
that there was a correlation between countries where corporations experienced
broader business issues and the countries where there were difficulties in
enforcing arbitral awards. In countries like Venezuela or Ecuador, the
participating corporations admitted that they were practically forced to sell their
investments due to political and economic measures imposed by these states.

Has
Hasyour
yourcorporation
corporation encountered difficultiesin
encountered difficulties inenforcing
enforcing
arbitral awards against states or state enterprises?
Arbitral awards against states or state enterprises?

60% 54%

50%

40%
31%
30%

20% 15%

10%
0%
0%
Yes, significant Yes,
Yes, minor
minordifficulties
difficulties No Not sure
difficulties

Figure 30. Difficulties in enforcing awards against states and state enterprises

When asked what type of difficulties they encountered in enforcing against

states or state enterprises, the majority of corporate counsel (68%) indicated the
impossibility of identifying the assets of the state or state enterprise. Thirteen
percent of respondents experienced immunity from execution problems in
enforcement proceedings against states. (See Figure 31.) We can conclude that the
problems encountered when enforcing awards against states are not much
different from those experienced in commercial arbitration proceedings.
360 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

What problems has your corporation experienced in

enforcing arbitral awards against states?

The subject matter of the dispute was not

6%
capable of being settled by arbitration

The state or the state enterprise lacked

0%
capacity to arbitrate

Tribunal's jurisdiction was challenged in

13%
national courts

Unable to identify or access state's/state

68%
enterprise's assets

Immunity from execution 13%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 31. Types of difficulties encountered when enforcing arbitral awards

against states

As far as perceptions are concerned, a large number of corporations that did

not attempt to enforce any arbitral awards against states or state enterprises (28%)
believe that it is somewhat more difficult to enforce against states then against
private entities. (See Figure 32.) This might flow from the belief that a state is an
abstract concept and it is unlikely to identify its assets, while private companies
are tangible entities with more transparent rules governing their activity and
liability.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 361

Do you consider that is more difficult to enforce arbitral

awards against states or state enterprises than against
companies?

50%
44%
45%
40%
35%
30% 28%
25%
20% 18%
15% 10%
10%
5%
0%
Yes, significantly Yes, slightly more No Not sure
more difficult difficult

Figure 32. Perception: enforcing arbitral awards against states and state
enterprises

Institutional Response:

Only a few arbitration institutions were aware of problems regarding the

enforcement of awards against states and state enterprises. Twenty-three percent
of the institutions suggested that it is more difficult to enforce arbitral awards
against states and state enterprises than against corporations. However, 59% of the
institutions were unable to comment and 18% felt that there were no difficulties.

Conclusions

Corporations have limited experience when it comes to recognition and

enforcement of arbitral awards against states. There are several explanations, but
two appear to have considerable weight: compliance with or renegotiation of the
arbitral awards and assignment of arbitral awards rendered against states.
Corporations that sought to enforce arbitral awards against states have not
encountered significant problems. If they had problems, these appear to be similar
to those they experienced when enforcing awards against corporations: they were
unable to identify or access the assets of the state or state enterprise. In a few
cases, corporations faced difficulties related to immunity from execution when
attempting to enforce against states.
362 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

H. The Arbitration Institutions

Institutional arbitration is generally preferred to ad hoc arbitration

The 2008 Survey confirms that there is significant support for institutional
arbitration. Eighty-six percent of the awards had been rendered under the rules of
an arbitration institution, while 14% under ad hoc arbitration. (See Figure 33.)
These results are consistent with the 2006 Survey. The corporations indicated that
the main reason for using institutional arbitration was the reputation of the
institutions and the convenience of having the case administrated by a third party.
One European corporate counsel disclosed during the interview that his
company mainly uses institutional arbitration because of the fear that they “would
get wrong the ad hoc arbitration clause.” For this reason, the attorney indicated
that they often import the standard arbitration clauses recommended by the
arbitration institutions. Another corporate counsel revealed that the corporation
only uses institutional arbitration because in that particular country arbitrators do
not have experience with ad hoc arbitration proceedings.

AD HOC AND INSTITUTIONAL ARBITRATION

14%

Ad hoc arbitration
Institutional arbitration

86%

Figure 33. The use of ad hoc and institutional arbitration

More than 95% of the participating corporations from South America have
used institutional arbitration. Interviewed counsel of South American corporations
believe that this preference is mainly determined by the supervisory role of the
institutions.
Ninety-three percent of the construction companies have used institutional
arbitration, while 45% of the companies in the insurance sector have employed ad
hoc arbitration procedures to resolve their disputes. In the other sectors, an
average of 85% of the corporations have used the services of an arbitration
institution for their disputes.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 363

The ICC, followed by AAA-ICDR and LCIA remain the most popular
arbitration institutions

In the first Study we asked corporate counsel to choose their preferred

institutions from a list of ten well-known arbitration institutions. Back then we
tested the preference of the corporations and not the actual number of cases
submitted with those institutions.
Arbitration institutions regularly report the number of cases administered
under the institution’s rules. Notwithstanding the reported statistics, this year we
asked corporations to identify the institutions used in the arbitration proceedings,
in order to determine whether their responses matched the number of cases
reported by arbitration institutions. Forty-five percent of the participating
corporations preferred to submit their disputes to the ICC, followed by the AAA-
ICDR (16%) and the LCIA (11%). (See Figure 34.)
In line with the findings of the 2006 Survey, the participants reported an
increased preference for regional arbitration institutions, with several of
corporations using CAM, NAI, FIESPI and KCAB as viable alternatives to the
international institutions.
It is interesting to observe the solid popularity of ICSID. Although in a
significant number of cases parties might be compelled to arbitrate under the
auspices of ICSID, there are instances where corporations may choose whether to
submit the dispute to ICSID or to another designated institution (most often to the
SCC or ICC).

Institutional arbitration awards involving your organization were rendered under the
auspices of which institution?

WIPO 1%
Swiss chambers arbitration 4%
SIAC 3%
SCC 2%
Other 9%
LCIA 11%
JCAA 2%
ICSID 2%
ICC 45%
HKIAC 1%
DIS 1%
CRCICA 1%
CIETAC 2%
AAA-ICDR 16%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 34. Arbitration institutions and international arbitration

364 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

There is significant support for the ICC, AAA-ICDR and regional institutions
coming from South American corporations. Asian corporations prefer to submit
their disputes to the ICC, CIETAC, SIAC or LCIA, while U.S. corporations prefer
the AAA-ICDR, ICC and HKIAC. These statistics can be easily explained by
various factors, including the geographic position of the corporations and the
nationality of their business partners. However, the geographical factor is not the
decisive one. For example, although it is believed that Swiss corporations might
prefer to arbitrate with Swiss Chambers, the Study showed that they would rather
submit their disputes to the ICC or AAA-ICDR.
The corporations in the construction industry submitted their disputes to the
ICC (73%), followed by the LCIA (11%). In the industrial manufacturing sector,
corporate counsel indicated that they used the ICC (37%), followed by the AAA-
ICDR (20%) and regional arbitration institutions (15%). Energy, oil and gas
corporations resorted to the ICC (60%), followed by the AAA-ICDR (12%) and
the LCIA (9%) to resolve their disputes.

Reported statistics from the institutions show that the AAA-ICDR is the most
frequently used institution, closely followed by the ICC

The information gathered from corporations is supported by the number of

international cases reported by the arbitration institutions participating in this
second Study. The AAA-ICDR administered 621 international disputes in 2007,
while the ICC and CIETAC registered 599 and 429, respectively.

Institutional Arbitration: Arbitration cases between 2003 and 200713

Institution Type 2003 2004 2005 2006 2007 TOTAL

14
ICC International 580 561 521 593 599 2,854
AAA/ICDR15 International 646 614 580 586 621 3,047
16
LCIA International 99 83 110 130 127 549
International
SCC17 and Domestic 169 123 100 141 170 703

13
For 2008, the following statistics are publicly available as of February 2009: The
ICC received 663 referrals (a 10.7% increase), the LCIA received 221 new cases (a 60%
increase), the Swiss chambers received 68 cases, the Milan Chamber received 118 new
cases and the SCC received 176 cases.
14
International Court of Arbitration of the International Chamber of Commerce, at
http://www.iccwbo.org/court/arbitration.
15
International Center for Dispute Resolution, American Arbitration Association, at
www.adr.org/international.
16
London Court of International Arbitration, at http://www.lcia-arbitration.com.
17
Stockholm Chamber of Commerce Arbitration Institute, at http://www.sccinstitute.
com/uk/Home.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 365

Institution Type 2003 2004 2005 2006 2007 TOTAL

Swiss
Chambers18 International 0 52 54 50 58 214
19
HKIAC International 287 280 281 394 448 1,690
SIAC20 International 35 48 45 65 70 263
21
CIETAC International 422 462 427 442 429 2,182
International
DIS22 and Domestic 81 87 72 75 100 415
ICAC International
(Ukraine)23 and Domestic 389 262 366 323 319 1,659
24
CICA International 70 77 72 62 54 335
KCAB International 38 46 53 47 59 243
VIAC25 International 45 50 54 36 40 225
26
SAKIG International 46 55 48 40 32 221
NAI International 32 33 32 29 28 154
ICSID27 30 27 26 24 35 142
WIPO
Arbitration and
Mediation
Centre28 International 8 9 22 23 32 94
CAM - Milan International 15 11 18 20 23 87
Mongolian
National
Arbitration
Court29 International 11 13 11 22 12 69
30
JCAA International 14 17 10 11 14 66

18
Swiss Chambers Arbitration Court, at https://www.sccam.org/sa/en.
19
Hong Kong International Arbitration Centre, at http://www.hkiac.org/HKIAC/
HKIAC_English/main.html.
20
Singapore International Arbitration Centre, at http://www.siac.org.sg.
21
China International Economic and Trade Arbitration Commission, at http://www.
cietac.org.cn/index_english.asp.
22
German Arbitration Institution, at http://www.dis-arb.de.
23
International Commercial Arbitration Court at the Ukrainian Chamber of
Commerce and Industry, at http://www.ucci.org.ua/arb/icac/en/icac.html.
24
Court of International Commercial Arbitration attached to the Romanian Chamber
of Commerce and Industry, at http://arbitration.ccir.ro/engleza/index.htm.
25
Vienna International Arbitration Centre, at http://wko.at/arbitration.
26
Court of Arbitration at the Polish Chamber of Commerce, at http://www.sakig.
pl/en_index.php.
27
International Centre for the Settlement of Investment Disputes, at http://icsid.
worldbank. org/ICSID/Index.jsp.
28
World Intellectual Property Organization, at http://www.wipo.int/amc/en.
29
See http://www.mongolchamber.mn/en/modules.php?name=News&file=article&sid=83.
30
Japan Commercial Arbitration Association, at http://www.jcaa.or.jp/e/index-e.html.
366 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Institution Type 2003 2004 2005 2006 2007 TOTAL

PCA31 International 5 5 6 5 9 30
ACICA32 International 1 1 2 2 1 7
Total 3,023 2,916 2,910 3,120 3,280 15,249

*Including cases submitted under ICSID Additional Facility Rules.

Forty-two percent of the arbitration institutions do not keep track of their

arbitral awards

Arbitration institutions were asked whether they keep track of arbitral awards
after they have been rendered. We were interested in whether arbitration
institutions consider that their task is over as soon as the tribunal renders the
award (and the fees have been paid) or whether they continue to monitor the
awards and their enforcement or voluntary compliance, in order to measure the
efficiency of their management. While it is true that compliance with arbitral
awards or their enforcement is not directly linked to the arbitration institutions,
this is a factor that has to be considered.
Forty-two percent of the arbitration institutions participating in this Study
reported that they had no system to monitor awards after they had been
dispatched, while 29% confirmed that they did perform some form of regular
monitoring. Twenty-nine percent of the institutions keep track of arbitral awards
only in certain cases. (See Figure 35.) In this last situation, the institutions
indicated that they monitor awards that are challenged in setting-aside proceedings
or by resisting recognition and enforcement. This is because the parties usually
request from the institutions various documents in connection with the arbitration
proceedings or the arbitral award. Institutions assist on some occasions with
enforcement by supplying supporting documents or letters addressed to enforcing
courts. However, in most cases, institutions do not keep track of the awards
rendered under their auspices.

31
Permanent Court of Arbitration, at http://www.pca-cpa.org/showpage.asp?pag_id=363.
32
Australian Centre for International Commercial Arbitration, at http://www.
acica.org.au.
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 367

Does your institution keep track of the arbitral aw ards

after they are rendered?

29%
42% Yes
In some cases
No
29%

Figure 35. Arbitration institutions and the monitoring of the arbitral awards

A simple system for monitoring arbitral awards – for example, a questionnaire

sent to the parties one year after the completion of the proceedings – might
improve the institutions’ awareness of how parties fared, which might also assist
in the institutions’ management of cases and the efficiency of their proceedings.

III. THE 2008 SURVEY: METHODOLOGY

The research for the 2008 Study was conducted between November 15, 2007
and April 15, 2008 by Crina Baltag, with the assistance of Loukas Mistelis and
Stavros Brekoulakis, all from the School of International Arbitration, Centre for
Commercial Law Studies, Queen Mary University of London.

A. Limitations

The aim of the 2006 and 2008 Surveys was to test the effectiveness of
international arbitration. The purpose of both Surveys was not only to contribute
to the debate on whether international arbitration is an efficient dispute resolution
mechanism, but also to reveal the areas where further actions should be taken in
order to improve the process. As with any other publication, surveys are
undertaken in a particular time and geographical framework.
The 2008 Survey constitutes a study of the experiences and perceptions of the
end users of international arbitration. We have only interviewed and asked for the
opinions of corporate counsel and arbitration institutions and we have not
interviewed lawyers in private practice, arbitrators or academics.
The research analysis was limited to settlement and recognition and
enforcement proceedings in international arbitration, and, in connection with this,
general attitudes towards international arbitration. We have not asked specific
questions relating to arbitration procedure or the arbitral tribunal. Our intention
was to establish general trends for the corporations involved in international
arbitration. Where necessary, we revealed the trends of a specific industry or
368 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

region. One additional limitation was that the participating corporations all had
experienced arbitration in the recent past, typically five years, to ensure that there
was adequate “institutional memory” or records.

B. Methodology

The research was divided into two major streams:

• The experiences and attitudes of corporations towards settlement,

recognition and enforcement in international arbitration;
• The experiences and attitudes of arbitration institutions towards
settlement, recognition and enforcement in international arbitration.

The research involving corporations comprised two phases: a quantitative and a

qualitative phase. This was the practice since different data can come out when
using quantitative and qualitative techniques. Second, at the qualitative stage,
respondents could easily explain their views and further questions could be asked.
Phase 1: An online questionnaire completed by 82 respondents between
November 15, 2007 and February 28, 2008.33 Almost all interviewed corporations
also produced written responses to the questionnaires but the quantitative data was
counted only once. Respondents were general counsel, heads of legal departments
or counsel, on the authority of the general counsel.
Respondents answered a total of 37 substantive questions, as follows: five
questions on the arbitration framework, nine questions regarding settlement pre-
and post-arbitral award, 17 questions on recognition and enforcement of arbitral
awards and six questions as to recognition and enforcement against states and
state enterprises. The questions had single or multiple answers. Some questions
required respondents to rank possible answers/options.
The questionnaire was drafted by Loukas Mistelis and Crina Baltag, following
a thorough review of issues relating to settlement, recognition and enforcement in
international arbitration. The first draft had been submitted for review to a Focus
Group comprising 14 lawyers and specialists in the international arbitration field
from the U.K., France, the U.S. and Sweden. 34

33
Actually more than 82 corporations produced questionnaires; five questionnaires
were disqualified, largely because the corporations had not experienced arbitration in the
recent past.
34
The focus groups consisted of John Fellas (Hughes Hubbard and Reed LLP), Paul
Friedland (White and Case LLP), Matthew Gearing (Allen Overy LLP), Paula Hodges
(Herbert Smith LLP), Ed Kehoe (Kind and Spalding LLP), Daniel Kalderimis (Freshfields
Bruckhaus Deringer LLP), Karl Mackie (CEDR), Simon Nesbitt (Lovells LLP), Robin
Oldenstam (Mannheimer Swartling), Guy Pendell (CMS Cameron McKenna LLP),
Philippe Pinsolle (Shearman and Sterling LLP), Javier Rubinstein (PwC), Franz Schwarz
(Wilmer Cutler Pickering Hale and Dorr LLP), Audley Sheppard (Clifford Chance LLP),
and Joseph Tirado (Norton Rose LLP).
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 369

Phase 2: Forty-seven face-to-face or telephone interviews with corporate

counsel conducted between February 1, 2008 and April 15, 2008. Interviews
departed from a set of guideline questions and varied from 30 minutes for
telephone interviews to two hours for face-to-face interviews. Face-to-face
interviews were conducted in the U.K., the U.S., Sweden, Switzerland, Greece,
Japan, Mexico and Brazil.
The research involving arbitration institutions had only a quantitative phase,
although in one case (the LCIA), an interview was conducted. The participating
arbitration institutions completed a questionnaire containing 18 substantive
questions: five questions on arbitration framework, three questions regarding
settlement, seven questions on recognition and enforcement and three questions
related to recognition and enforcement proceedings against states and state
enterprises.
The following arbitration institutions participated in our Study: the ICC,
AAA-ICDR, LCIA, PCA, JCAA, ACICA, HKIAC, the Swiss Chambers,
CIETAC, VIAC, NAI, WIPO Arbitration and Mediation Centre, CICA, SAKIG,
ICAC (Ukraine), the Mongolian National Arbitration Center, CEPANI,35 DIAC,36
KCAB and the Milan Chamber of Arbitration.
The online questionnaire for corporate counsel was completed by 82
respondents, via mail or e-mail. Forty-six percent of the participating counsel
were heads of legal departments (usually litigation/arbitration departments) and
22% were general counsel. Twenty percent of the respondents were counsel, but
they participated under the authority of general counsel. (See Figure 36.) Of the
47 interviews conducted, the majority of the interviews were with general counsel
and heads of legal departments.

What position do you hold in your organization?

Other 5%

Counsel 20%

Head Legal Department 46%

Deputy General Counsel 7%

General Counsel 22%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure 36. The corporate counsel and their position in the organization

35
Belgian Centre for Arbitration and Mediation.
36
Dubai International Arbitration Centre.
370 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Respondents from the following industry sectors participated in our Study:

• Industrial Manufacturing
• Financial Services and Banking
• Energy, Oil and Gas
• Engineering and Construction
• Automobile and Transportation
• Retail and Consumer
• Media and Entertainment
• Telecommunications
• Insurance
• Shipping
• Mining and Metals
• Consulting/IT/Outsourcing
• Pharmaceuticals
• Aeronautics

As demonstrated in the chart below, we covered all significant industry

sectors. However, a majority of the respondents (23%) were acting in the energy,
oil and gas industry. This percentage can be explained by the large number of
arbitrations (including investment arbitrations) in this industry sector, as well as
by the fact that we grouped three sub-sectors in this category: energy, oil and gas.
Some participating corporations are active, for example, only in the gas industry.
In our first Study, a significant number of respondents came from the industrial
manufacturing sector.
Respondents by industry sector

Aeronautics 2%

Automobile and Transportation 4%

Consulting/IT/Outsourcing 3%

Energy, Oil and Gas 23%

Engineering and Construction 11%

Financial services and Banking 6%

Industrial manufacturing 10%

Insurance 7%

Media and Entertainment 2%

Mining and Metals 4%

Other 1%

Pharmaceuticals 5%

Retail and Consumer 12%

Shipping 3%

Telecommunications 7%

0% 5% 10% 15% 20% 25%

Figure 37. The surveyed industries

2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 371

As this second Study mainly deals with recognition and enforcement of

foreign arbitral awards, it was natural for us to target corporations that act
globally. Seventy-six percent of respondents have global structures, while only
13% operate at a national level. (See Figure 38.) However, even in the latter case,
the participating corporations had participated in recognition and enforcement
proceedings.

Is your organization active

13 11

National level
Regional level
Global level

76

Figure 38. The surveyed corporations and their business coverage

Although the majority of the participating corporations have

operations/offices in numerous countries, they are primarily based in the U.S.,
Mexico, the U.K., Brazil, Switzerland, Germany, Turkey, Italy, France, Japan,
Nigeria, Canada, Singapore, Australia, India, Russia, Croatia, Poland, Czech
Republic, the Netherlands, Belgium, Austria, Greece, Romania, Venezuela,
Argentine Republic and Egypt. It was difficult to reach corporations from Africa
and South-East Asia.
372 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

Geographic location of respondents/interviewees

45%
40%
40%
35%
30%
30%
25%
20%
15%
15% 11%
10%
4%
5%
0%
North America Asia and Pacific Europe South and Africa
Central America

Figure 39. The geographic location of the participating corporations

As to the financial profile of the participating corporations, more than 68%

had an average yearly turnover of more than U.S. $5 billion. (See Figure 40.)

Annual turnover of
respondents/interviewee corporations

3%

29% More than US$ 5 Billion

Between US$ 500 Million

and US$ 5 Billion

Less than US$ 500

68% Milllion

Figure 40. The average yearly turnover of the participating corporations

2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 373

IV. INTERNATIONAL ARBITRATION AND THE IMPORTANCE OF

EMPIRICAL SURVEYS

The 2008 Survey revealed that 88% of the participating corporations have
used arbitration at least once in the last ten years, while 44% have used arbitration
in over 75% of their disputes. Although there were several counsel who felt
disappointed by the arbitration process, most indicated that they will continue to
use arbitration, as it provides major advantages over litigation. Corporate counsel
are seeking other forms of alternative dispute resolution when arbitration and
litigation prove to be inefficient. This is a general trend revealed by the Survey,
with 15% of the disputes generally being resolved through mediation,
conciliation, expert determination or dispute boards. One of the interviewed
corporate counsel felt very disappointed with international arbitration and
indicated that his corporation is now trying to implement an ADR policy for
dispute settlement, although a large number of their disputes are still being
adjudicated in arbitration proceedings.
The participating corporations expressed the view that when the right
conditions are in place, they prefer to settle their disputes, even after an arbitral
award had been issued, rather than engage in a bureaucratic, expensive, time-
consuming or unknown procedure. Corporations indicated that they also prefer to
settle a dispute in order to avoid negative publicity or to preserve a working
business relationship with the opposing party. Several corporate counsel revealed
that they prefer to settle, before, during or after an award is made, if the opposing
party lacks sufficient assets to cover the claim.
Only a small percentage of the participating corporations had to resort to
recognition and enforcement proceedings in international arbitration. A clear trend
appears to be towards voluntary compliance with arbitral awards. The 2008
Survey indicates that when recognition and enforcement of arbitral awards is
employed, this is effective in practice, with a small number of corporate counsel
pointing at difficulties encountered during these proceedings. When problems
appear, these are usually blamed on the lack of, or impossibility of identifying, the
assets of the non-prevailing party. Problems are also encountered in countries with
alleged corrupt legal and political systems or with centralized economies. The
interviews indicated that the efficiency of the recognition and enforcement
mechanism is ensured by the worldwide application of the New York Convention.
So how is the future of international arbitration? While international
arbitration is an efficient and popular dispute resolution mechanism, it does not
mean that it is perfect.
We embarked on the two Surveys with a genuine academic interest and
without any agenda. We anticipated that we would identify issues and might not
be able to offer solutions. For this very reason, we decided not to collect data from
arbitrators or outside counsel, but to focus on corporations and in-house lawyers
as users of the arbitration process. But identifying issues was a good enough
exercise: there was so little data available that any topic one could survey would
bring new insights, stimulate interest and form the basis of future research.
374 THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION [Vol. 19

The 2008 and the 2006 Surveys have reignited interest in empirical research
in international arbitration. Christopher Drahozal and Richard Naimark were right
when, in 2005, they stated that more empirical research would make arbitration a
science (rather than merely an art).37 Hopefully, researchers will use and analyze
the data with a view toward providing further insights into international arbitration
and making it a more efficient and user-friendly process.
Arbitration institutions, law firms and corporate counsel assessed the findings
and decided to take action in respect of critical conclusions. To name a few
examples:

• The ICC Arbitration Commission established a task force on Techniques

for Controlling Time and Costs in Arbitration, the most striking concern
of arbitration users according to the first survey.38 Similar working groups
have operated in other arbitration institutions, such as the International
Institute for Conflict Prevention and Resolution (“CPR”);
• The Centre for Effective Dispute Resolution (“CEDR”)39 formed a
commission to explore settlement in international arbitration.40 The work
was to some extent inspired by the 2006 Survey and was also informed by
the findings of the 2008 Survey, which specifically looked at the issue of
settlement;
• Many law firms have organized internal training seminars as well as client
seminars to assess and discuss the findings of the two surveys.

Most importantly, the two surveys have empowered and given voice to
corporate counsel. In-house lawyers are now invited to most major arbitration
events; arbitration institutions have acknowledged the importance of corporations
and their in-house lawyers, not only for the promotion of arbitration as a
procedure, but also for the assessment and improvement of the process. More
specifically, in late 2006, the Corporate Counsel International Arbitration Group
(“CCIAG”)41 was created.42 An official platform now exists for corporations that

37
TOWARDS A SCIENCE OF INTERNATIONAL ARBITRATION: COLLECTED EMPIRICAL
RESEARCH (Christopher Drahozal & Richard Naimark eds., 2005).
38
See http://www.iccwbo.org/uploadedFiles/TimeCost_E.pdf.
39
Centre for Effective Dispute Resolution, at http://www.cedr.co.uk.
40
See http://www.cedr.com/about_us/arbitration_commission. The work is ongoing.
41
See http://www.cciag.com/index.html. Corporate counsel representing 23
multinational corporations met in Paris on November 3, 2006, to explore the foundation of
a group to represent corporate users’ views in international commercial arbitration.
According to http://www.cciag.com/About%20Us%20Mission%20Statement.html, the
CCIAG aims to be the premier
forum to represent the interests and views of corporations in relation to the
conduct, practice and scope of international arbitration and other forms of early
and alternative dispute resolution as a means of dispute resolution. The CCIAG
shall also be a forum within which the members may share knowledge and best
practices, network with their peers with respect to matters of general interest,
2008] RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS AND SETTLEMENT 375

are active and interested in arbitration. The shift of the focus of arbitration back
on the users represents a most welcome consequence of the two surveys.
The three main themes and the specific findings of this Survey are also
discussed in several separate articles in this issue.43 A further survey will be
conducted in 2009 and 2010 and will be presented in late 2010.44

obtain education and training, and participate in other joint initiatives and
activities; subject in all cases to any legal constraints on such activities. The
initiatives and activities of the CCIAG shall have as their common purpose the
promotion of higher standards in international commercial arbitration.
42
Two presentations were made, by Chris Lemar of PricewaterhouseCoopers and
Professor Loukas Mistelis; they detailed the findings of the 2006 Survey and prompted
lively discussion with the participants.
43
Crina Baltag discusses Enforcement Against States, (infra at 391), Stavros
Brekoulakis explores Enforcement of Awards and the Commercial Limitations of the
Current System and the Gradual Development of Private Means of Enforcement, (infra at
415), Loukas Mistelis analyzes Settlement as Enforcement (infra at 377), Paul Friedland
provides Comments on the Survey (infra at 447) and Gerry Lagerberg discusses the
Business Rationale (infra at 455).
44
For any comments and suggestions please contact Professor Loukas Mistelis at
L.Mistelis@qmul.ac.uk.