| The Japan Commercial Arbitration Association (JCAA) held the "International Commercial Arbitration Forum 99" last November 1 in Tokyo. The Forum featured one of the most important elements of arbitration, "The Role of the Arbitrator in International Commercial Arbitration."
 In addition to the management of arbitration, JCAA holds international seminars and symposiums every year that feature international commercial arbitration from various perspectives in order to promote understanding and use of arbitration in Japan. The "International Commercial Arbitration Forum 99" was funded by the Ministry of International Trade and Industry and supported by the Ministry of Justice, the Japan Federation of Bar Associations and six other organizations. Despite the bad weather, approximately 200 audience members gathered at the venue. Their backgrounds included legal professionals and university professors, as well as business people from legal, international and other related fields. The Forum was held free of charge to the audience.
At the Forum, Professor Yasuhei Taniguchi of Teikyo University coordinated the discussion presented by, and sometimes made among, three excellent guest panelists, Mr. Gerald Aksen, Thelen, Reid & Priest from New York, Dr. Marc Blessing, Bar & Karrer from Zurich, and Mr. Kazuo Ihara, Ihara and Ihara from Tokyo. Each panelist has a wealth of knowledge about and experience in international commercial arbitration.
Some of the readers of this article already know well the expertise of the excellent guest panelists. For those who may not, Mr. Gerald Aksen was former General Counsel of the American Arbitration Association and possesses ample experience acting as an arbitrator and representative in various international commercial arbitrations. Dr. Marc Blessing is Honorary President of ASA/Swiss Arbitration Association and also has plentiful experience being involved in many international arbitrations. In addition to the two overseas guest panelists who kindly accepted the invitation to come to Japan for the Forum, we had the honor of having Mr. Kazuo Ihara, Attorney of Ihara and Ihara, who has been quite actively involved in JCAA, ICC and other international arbitration proceedings. All three guest panelists and the moderator, Professor Taniguchi, very much impressed the audience with their practical and academic perspectives about the role of an arbitrator.
As Professor Taniguchi pointed out at the Forum, the quality of arbitration depends very much upon the quality of the arbitrator or arbitrators. The role of an arbitrator would be, therefore, one of the main concerns of not only those who are actually involved in the arbitration proceedings but also those who are considering the arbitration proceedings as a dispute resolution mechanism. JCAA considers that it is helpful for the promotion of arbitration in Japan to make such people to become familiar with the role of an arbitrator. That was the main reason for choosing the theme for the Forum.
For the purpose of reference and as a guideline, an issue list was distributed to the audience. The issue list was compiled by the moderator, the guest panelists and JCAA, and included such topics as Initial Phase ("Selection of an Arbitrator by the Parties"), Contracting Phase ("Accepting the Mandate as Arbitrator"), Proceeding Phase (such as "The Chairman's Duty to Set the Stage for the Procedure"), and Award Phase (such as "How should the arbitral tribunal deliberate and make an arbitral award?") One of the panelists described the list as fairly representative of the recent major issues in international commercial arbitration.
The Forum began with the opening address and introduction of the panelists by Mr. Norihiko Maeda, President, JCAA, then continued with guest remarks by Mr. Tatsuya Kugo, Deputy Director-General, International Trade Administration Bureau, Ministry of International Trade and Industry, and by Mr. Seiichi Fusamura, Director-General, Judicial System and Research Department, Ministry of Justice.
The format of the Forum took the style of a lively exchange of opinions, that is, the moderator first presented a topic to the panelists and requests one or more of the panelist(s) to present their thoughts on the topic. Then, the moderator elaborated on the topic based upon the thoughts so presented and requested the second panelist for his thoughts or, on some occasions, counter-argument to the discussion made by the previous panelist and so on. Then the moderator moved to the next topic. The moderator from time to time solicited questions from the audience and appointed a panelist to respond to the question right away.
This format, although it may be familiar in some countries, was rather new to a symposium of this kind in Japan, and was well appreciated by the audience. In addition, as the discussion made at the Forum placed emphasis on various practical aspects of arbitration, it presented a good opportunity for the audience to grasp an inside view to the real world of arbitration. As a matter of fact, the discussion was so lively and interesting that many in the audience stated after the Forum that the scheduled time for the Forum, which was only half a day, was not sufficient. This article briefly reports on some of the main discussions at the Forum. The reporter takes full responsibility for the content and text of this report.
Selection of an Arbitrator by the Parties
The discussion at the Forum started with topics concerning the selection of an arbitrator (either as the third arbitrator (Chairman) or a party-appointed arbitrator), whose quality would affect the entire arbitration proceedings including arbitral award. When selecting an arbitrator, many aspects should be well considered and evaluated in advance. Such aspects include such issues as nationality, occupation or career, relationship (if any) with the appointing party. The relationship with the appointing party also relates to how an appointing party should approach a prospective arbitrator of his choice.
With regard to nationality, it was pointed out that a general practice would be for a party to appoint an arbitrator with the same nationality of the party. However, depending upon the issue of the case, a party may well appoint, as a carefully considered tactic, an arbitrator whose nationality is different from the party but who is most familiar with the issues. A similar consideration was presented for the Chairman-selection process, that is for a party to appoint an arbitrator of different nationality to retain the possibility of having the Chairman be of the same nationality of the party, subject again to the main issue of the case. Also, it was asserted that the place and language of each case should be considered when appointing an arbitrator.
Various merits to appointing as an arbitrator an attorney at law were argued because modern arbitration is based on law and because an attorney is well trained to find the real issue(s) of the case. A similar opinion was presented that an attorney at law would be the most suitable arbitrator. However, in response to a question from an audience member referring to the practice of maritime arbitration, it was agreed that, depending upon the nature of each case, a well experienced business person even without a legal career or background would be suitable as an arbitrator for a case which relates to his own field.
With regard to the way to approach a prospective arbitrator, it was indicated that one should avoid such conduct as treating a candidate arbitrator to a dinner in order to preserve the impartiality of the arbitrator. On this point, a certain "rule" was introduced for a meeting between a prospective arbitrator and the selecting party or his representative. It was pointed out that it is a well accepted general practice for a prospective arbitrator when approached by a selecting party not to inquire about the contents of the dispute which is the subject of the arbitration for which he was approached.
Relationship with Party - interests
As a difficult issue during the selection stage, the relationship or interests of an arbitrator with the selecting party were next discussed at the Forum. It was pointed out at the Forum that this issue would include a delicate situation where a prospective arbitrator had, for example, once been an advisor or consultant of the selecting party until 2 years prior but now had resigned. This issue is important both legally and emotionally. A panelist stated that he, as an arbitrator, never thinks that the party who selected him should always win and would confirm with the party up front that his opinion as an arbitrator would never be affected by who appointed him. It was argued that it is advisable to disclose any relationship with the appointing party which might raise a doubt or concern in order to preserve independence or impartiality. At the same time, it was asserted that as a party-appointed arbitrator, it does not mean that such an arbitrator should not pay particular attention to the argument presented by the appointing party. This is because an effort to make sure that such argument is correctly and appropriately understood and reviewed by the panel is an acceptable duty and does not impair independence or impartiality. Similarly, it is both practical and desirable for an arbitrator in an international arbitration, where different legal and cultural backgrounds are related, to explain an argument offered by a party representative who has the same legal and cultural backgrounds of his own in order to facilitate the review of such argument by the entire panel. Also, certain difficulties were mentioned about the conflicts check in a large law firm, especially in recent situations where mergers and acquisitions have become so popular and sometimes finding out the exact corporate relationship becomes a challenging task.
Arbitral Procedure
The discussion at the Forum next moved to the role of the Chairman or the third arbitrator who is usually appointed by the two party-appointed arbitrators (in case of three arbitrators). Typically speaking, there are two types of Chairmen, the "dictator" type and the "friendly hôtelier" type. It was pointed out that having a friendly, collegial type Chairman is one of the merits of arbitration as compared with litigation, at least in the U.S.A. It was agreed that the collegial type of management would be desirable in a Chairman. One panelist told the audience his experience in managing a difficult arbitration case as a collegial Chairman that started in a very hostile atmosphere but came to a friendly and successful end. At the same time, an important aspect was pointed out that, although the Chairman should generally treat the parties and other arbitrators in a friendly manner, for proper and appropriate progress of the arbitration procedure, the Chairman should not be afraid to exercise his "iron hand covered with velvet."
It is generally accepted that one of the merits of arbitration is that it does not have some of the drawbacks of litigation. However, it was pointed out that there is a worldwide tendency that arbitration proceedings follow litigation proceedings. With regard to the comparison of arbitration to litigation, the difference in case load was mentioned. An arbitrator, unlike a judge, can concentrate the case at hand whereas a judge usually has a backlog of cases. Also, the absence of the discovery process is one of the important merits of arbitration in the U.S.A., especially from the viewpoint of an attorney's costs. It was argued that the arbitration process should not be affected by local civil procedure and the importance of the Chairman's first setting appropriate rules for the case at hand was stressed. For that reason, it was asserted that a professor of civil procedures without practical experience is not always a good arbitrator, to which various opinions were presented. It was pointed out that the arbitration process could be facilitated greatly if both party-representatives thoroughly prepare the case in advance, taking advantages of the situation where arbitrators are not overloaded with a case backlog as are judges.
With regard to the taking of evidence, the panel discussed the absence of evidence rules in the arbitration rules of most arbitration institutions in the world and presented the IBA Rules on the Taking of Evidence in International Commercial Arbitration prepared by International Bar Association as a basic guideline for an arbitrator (Chairman) in establishing the rules of evidence in each actual case. One panelist also presented to the audience his successful experience of limiting documentary evidence to only the best evidence where the party initially considered presenting a huge volume of documents which was far beyond any human's ability to review thoroughly.
Confidentiality
One of the audience members presented a question regarding confidentiality of arbitration, which is a difficult issue and has been argued in many places of the world. It was pointed out that confidentiality in arbitration was generally accepted treatment and it was a reason for business people to select arbitration over litigation. Also, it would be inappropriate to disclose an arbitral award without the consent of both parties. However, confidentiality nonetheless has recently become a subject of re-consideration and certain doubt has been put on it. As a practice, reference was made to the benefit of arranging a short confidentiality agreement among the parties. It was agreed that confidentiality is one of the most difficult issues of arbitration, especially considering disclosure requirements imposed on large corporations. Practical difficulties were mentioned regarding keeping absolute confidentiality in the real world. Finally, confidentiality is a matter of degree in comparison with litigation.
Settlement in Arbitration
Introducing the aspect of mediation into arbitration is an interesting topic both theoretically and practically. As explained at the Forum, little doubt has been cast in Japan upon the practice of trying to reach a settlement during proceedings in both litigation and arbitration. However, in some countries such a practice has been questioned seriously from the viewpoint, for an example, of the adequacy or appropriateness of the continuance of the same person as arbitrator when a settlement has not been reached between the parties.
This particular issue of settlement in arbitration, or to put it in other words, the involvement on the part of the arbitrator (especially the Chairman) in settlement discussions between the parties inside or outside the arbitration proceedings revealed quite different views among the panelists. On the one hand, a view was presented that such a practice would make an arbitrator uncomfortable. From this viewpoint, it was pointed out that historically speaking an arbitrator, like a judge, has been considered as one who adjudicates but does not suggest a settlement. At the same time, the panelists acknowledged recent movements in the U.S.A. regarding ADR (Alternative Dispute Resolution) as well as a similar approach in Japan (and perhaps Germany). It was also pointed out that in a large arbitration case, the case sometimes is bifurcated into liability and damages and it is not uncommon for the parties to reach a settlement after an award is rendered on the liability issue but before the damages issue is decided. It was mentioned that knowing the real concern of a party as a mediator exceeds information which an arbitrator should know, and such additional knowledge or information can not be erased when a settlement is not reached and the case comes back to arbitration where the same person must perform the role of arbitrator again.
On the other hand, a different view was presented with regard to the arbitrator's attempting to reach a settlement as an affirmative practice. However, some caveats therefor were noted. An example is when the arbitrator inquires as to the parties' opinions on such issues as whether he can continue to act as arbitrator if a settlement is not reached and whether he, as arbitrator, can rely on information that is obtained during settlement negotiations. In this position, it was reported that generally speaking the parties would respond affirmatively to those inquiries and therefore the arbitrator should not feel uncomfortable to act as both mediator and arbitrator. The panel stressed the importance in resolving the dispute by means of creating a workable solution through finding out the hidden interests of the parties. In a case where both parties so agree, a preliminary assessment of the case might be disclosed after enough evidence has been presented by the parties. Sometimes an inquiry is made to the parties as to whether they desire the panel to present a settlement proposal. On this point, a procedure called MEDALOA (mediation and the last offer arbitration) was introduced. From these viewpoints, it was asserted that the efforts by an arbitrator to try to reach a settlement is appropriate.
Adequacy for allowing dissenting opinion in an arbitral award was also discussed at the Forum and various views were presented to the audience.
The Forum was successful in providing the audience with insight on arbitration which only very knowledgeable and experienced experts who have acted as arbitrators could present. JCAA again expresses deep appreciation to the excellent guest panelists and the coordinator for their valuable contribution and input at the Forum.
Housing Quality Assurance Law
A New Mechanism for Resolving Disputes
The Housing Quality Assurance Law was enacted in Japan in June, 1999 in order to guarantee housing quality, to protect the interests of house purchasers, and to promptly resolve disputes related to housing, and it will soon be put into effect.
The Housing Quality Assurance Law features two major points. First, the law reinforces liability for defects in new houses and mandates a warranty for basic structures including the foundations, columns, floors, slabs, etc. for at least ten (10) years. Second, the law establishes a Housing Performance Indication System. The System is voluntary and its application is at the discretion of housing suppliers and consumers. Suppliers and consumers can include in a housing contract a Performance Evaluation Report marked with a special logo covering quality tests such as structural safety, energy efficiency and sound insulation. The Report is issued by a designated evaluation body based upon the Japan Housing Performance Indication Standards and the Evaluation Methods Standards. The Ministry of Construction will designate these evaluation bodies and establish the Standards.
In the event that a dispute arises between a consumer and a supplier over a house for which a Performance Evaluation Report is included in the housing contract, they can submit the case to alternative dispute resolution (ADR) bodies. The ADR bodies are designated by the Ministry of Construction. Such ADR bodies conduct mediation, conciliation and arbitration to resolve disputes in cooperation with local Bar Associations, building specialist groups, etc. The ADR bodies are also supported by the Housing Dispute Resolution Center (designated by the Ministry of Construction) which supplies them with information and training.
Over 4000 consultations concerning housing safety and quality were brought to the Japan Consumer Information Center in 1996. In view of the tendency for the number to increase every year, this new Housing Performance Indication System including the ADR bodies are expected to serve as an efficient means for resolving disputes in the housing field.
JCAA President Delivers Speech at the First World Arbitration Congress in
The First World Arbitration Congress was held in Panama from October 18 to 22, 1999, and on its opening day, JCAA President Mr. Norihiko Maeda delivered a speech on ADR in Japan. His speech covered the history of Japanese ADR, the various ADR systems in Japan, features of Japanese ADR, and the recent situation with international commercial arbitration in Japan. He also gave an outline of the APEC ADR Executive Education Project 2000 and solicited audience members' participation in its activities.
"Symposium of International Commercial Arbitration Law in Asia and Oceania Region: Prospects and Comparison" at the Meijo University
The Institute for Socioeconomic Dispute Studies of the Meijo University Graduate School of Law held a "Symposium of International Commercial Arbitration Law in Asia and Oceania Region: Prospects and Comparison" on February 22 and 23, 2000 in Nagoya, Japan. The Symposium focused on the characteristics of and problems associated with revising international commercial arbitration laws and arbitration center rules in Asia and Oceania.
Although various aspects of arbitration laws and rules in the USA and European countries have been studied up to now in Japan, few studies on Asia and Oceania have been carried out. The Institute for Socioeconomic Dispute Studies, led by Professor Kaoru Matsuura of Meijo University, started a project in association with Japan's Ministry of Education, Science, Sports and Culture which aims to provide a clearer picture of what will be required and what actions should be taken to activate the international commercial arbitration system in Asia and Oceania. And in order to achieve this objective, the study also involves researching the current conditions and problems faced by these regions in the practice of international commercial arbitration. The project will continue for five years and many experts and professionals have joined the project from Japan and overseas including President Maeda and other members of JCAA.
As has been said already, the project takes the position that, in order to carry out the project efficiently, it would be indispensable to first review and clarify the current status of international commercial arbitration laws and arbitration center rules, especially with regard to recent revision problems. Therefore, the Symposium held in late February focused on these issues to complete its activities in the first Fiscal Year of the project. In the morning session on the first day of the Symposium, problems involved in revising arbitration laws and rules were reported on from Australia by Mr. Michael Pryles, Partner (Professor) at Minter Ellison Solicitors, from New Zealand by Mr. Roger Pitchforth, Associate Professor at Massey University, and from the Philippines by Mr. Custodio Parlade, Managing Partner at Benitez Parlade Africa Herrera Parlade & Panga. Professor Matsuura coordinated the session.
With regard to the possibility of having a universal law on arbitration, the UNCITRAL Model Law presents one concept. Many countries have considered the Model Law and some of them have adopted it. Reviewing their situations would be quite useful and informative for the purpose of the project. Therefore, the afternoon session on the first day of the Symposium invited Mr. Jernej Sekolec, Senior Legal Officer at the International Trade Law Branch (UNCITRAL Secretariat), as the special speaker to report on the main aspects of the Model Law and the overall status with regard to its adoption in the world. The session then focused the discussion on the current status of countries in the subject region, including modifications to the Model Law that they incorporated at adoption. Relevant reports and discussions were presented by Mr. Pryles (Australia), Mr. Pitchforth (New Zealand), Mr. Robert Morgan, Associate Professor at the University of Hong Kong, and Mr. M. Sornarajah, Professor at the University of Singapore. The discussion was followed by status reports on reform activities and practices of international arbitration: from Malaysia by Ms. P.G. Lim, former Director of The Kuala Lumpur Regional Center for Arbitration, from the Philippines by Mr. Parlade, from China by Mr. Zhan Xianbin, Professor at Tsinghua University, from Chinese Taipei by Mr. John Huan Wen Chen, Professor at the National Defense Management College, from Korea by Mr. Sang-soo Kim, Associate Professor at Dondduk University, and from Japan by Professor Matsuura.
The morning session on the second day of the Symposium was moderated by Professor Matsuura and focused more on reform activities in Hong Kong, Malaysia and Singapore with Mr. Morgan, Ms. Lim and Mr. Sornarajah. The afternoon session on the second day was coordinated by Mr. Toshio Sawada, Vice President of the ICC International Court of Arbitration and discussed the details of arbitration laws and rules, and their reform activities in China, Chinese Taipei, Korea and Japan with Mr. Zhan Xianbin, Mr. Chen Jung Tsung, Professor at National Taiwan University, Mr. Kim, and Mr. Matsuura.
The attendants included many law professors, lawyers, and businessmen, who contributed to the two-day Symposium by presenting questions and comments. It is expected that the project will be a driving force in promoting international arbitration in the region.
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