When Canadian mining companies are involved in international projects with multiple parties and jurisdictions, the legal landscape that comes with it can be challenging to navigate. If there is a dispute, the courts of more than one country may assert jurisdiction. The laws of more than one legal system may apply. Enforcement of rights and remedies must be effective.
In international mining transactions, international arbitration is the most appropriate dispute resolution mechanism. For parties to protect themselves and get the maximum benefits from the process, it is important to pay careful attention to drafting an arbitration clause. Considering these issues needs to happen early in the negotiation, rather than at the 11th hour. This will help ensure the arbitration mechanism is enforceable and that if there is a need to arbitrate, it proceeds in as timely and cost effective a manner as possible.
The benefits of international arbitration
Neutrality is the principal benefit of international arbitration. Neither party in an international transaction is likely to be willing to submit to the courts of the other side’s home jurisdiction. International arbitration provides an alternative – the parties agree on a neutral and convenient place of arbitration; on independent, impartial and qualified arbitrators; and on a neutral governing law.
The second principal benefit of international arbitration is the enforceability of the arbitral award (the decision) issued by the tribunal. The New York Convention is the international legal framework that commits the courts of its nearly 200 signatory countries to enforce decisions, without reconsidering the merits of the case. This makes decisions not only final, but – crucially – portable, and far easier to enforce in foreign countries than court judgements.
These benefits are particularly relevant in investor-State disputes. These disputes typically arise under bilateral or multilateral investment agreements, and involve issues such as expropriation of mining properties or unfair/discriminatory treatment of a foreign company by the State where a mine or other investment is situated.
The right framework and agreeing on rules
Unlike domestic litigation, international arbitration does not have one set of rules that all parties follow if there is a dispute. To maximize the benefits of international arbitration, and avoid an unenforceable or unworkable agreement, parties must state their intentions to arbitrate clearly. This is an essential requirement and makes it unambiguous that disputes will be handled through arbitration, rather to the courts. This is typically done by inserting a carefully considered arbitration clause in the contract.
Another key requirement is to identify expressly the place (the seat) of the arbitration. This impacts the efficiency of the clause and the process that results. The choice of the place is guided by looking at its arbitration law (which will usually govern the conduct of the arbitration), as well as whether the place is in a country that has adopted the New York Convention. Factors of convenience to the parties – distance, costs, etc. – should also be considered.
After selecting the place of arbitration, parties should consider agreeing on a set of procedural rules. The leading rules are those issued and administered by institutions such as the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA) and American Arbitration Association (AAA). There are subtle differences among these so-called “institutional” rules, and all of these differ from rules for so-called “ad hoc” or non-administered arbitration, such as the United Nations Commission on International Trade Law (UNCITRAL) Rules. All such rules allow for their modification by consent of the parties, in effect allowing the parties to tailor the process to suit their needs and interests and the nature of the industry, business and dispute in question.
The inherent flexibility of international arbitration should be used to maximize its potential. Doing so, however, requires careful attention to a range of both legal and practical considerations. This attention can anticipate and avoid or mitigate aspects of an arbitration that could otherwise lead to undue delay or costs, or even an unwanted outcome. Defining at the outset such practical matters as the scope of document production or the rules for presentation of evidence or the timeframe for the process is highly recommended. So too is consideration of potential arbitrators’ availability to conduct the arbitration and issue an award within an acceptable timeframe. Focusing on these and other important practical considerations will ensure the efficiencies and benefits that can be gained through international arbitration.