The present issue of the Bulletin coincides with the publication of the latest report of the ICC Commission on Arbitration and ADR: Effective Management of Arbitration: A Guide for In-house Counsel and Other Party Representatives.1 Presented as a 'practical toolkit for making decisions on how to conduct an arbitration in a time- and cost-effective manner',2 the Guide offers our community something quite new in the ongoing effort to help arbitration evolve by recovering the lost advantages of cost and speed. The engagement of in-house counsel and users in that effort has always been the 'last mile' and therefore perhaps the hardest.

Much time and energy have been devoted to studying the roles and expectations of players in dispute resolution. To help take the discussion a step further, it can be instructive first to take a step back, and far back, to an analogy found in medieval literature.

The arbitration assembly

In his eighth-century masterwork Historia ecclesiastica gentis Anglorum, an English monk known to us today as the Venerable Bede recounts a metaphor used to explain to the King of Northumbria how what he could see was but a brief glimpse of a larger reality and why a grander philosophy than his own was needed to engage with that reality:

The present life of man upon earth, O King, seems to me in comparison with that time which is unknown to us like the swift flight of a sparrow through the mead hall where you sit at supper in winter, with your Ealdormen and thanes, while the fire blazes in the midst and the hall is warmed, but the wintry storms of rain or snow are raging abroad. The sparrow, flying in at one door and immediately out at another, whilst he is within, is safe from the wintry tempest, but after a short space of fair weather, he immediately vanishes out of your sight, passing from winter to winter again. So this life of man appears for a little while, but of what is to follow or what went before we know nothing at all. If, therefore, this new doctrine tells us something more certain, it seems justly to be followed in our kingdom.3

I propose the same metaphor to the assembled grandeur of the arbitration community as a way of thinking of their interaction with in-house counsel. The in-house counsel (as sparrow) flies into the light of the brightly lit hall of the broader arbitration community when in-house counsel engages the process of dispute resolution by bringing in outside counsel. Counsel, in turn, summon institutions, arbitrators and experts. Similarly, when an award is rendered (or shortly thereafter), the in-house counsel again disappears into the unknown darkness, and the assembled arbitration community loses sight of subsequent events.

To stretch the eighth-century analogy to its absolute limit, one can only imagine the frightened reaction of the sparrow flying from a world where its vision is adjusted to the darkness and the cold into a brightly lit hall filled with people and things that do not exist in the world outside. As the analogy recounted by Bede suggests, the strangeness of the two realities brought into proximity is resolved by acceptance of a worldview which makes each conscious and confident of what lies outside of visible reality.

I hope I will be forgiven for opening this commentary on the important work of the ICC Commission with a short historical parable. However, I believe this justified by the singularity of that work. The Commission's new Guide serves a special purpose that sets it apart. It is conceived as a tool for practical use by in-house counsel of all levels of experience and does not presuppose advance knowledge of arcane arbitral procedures. I hope, therefore, that it may make a difference by giving the in-house counsel and the assembled arbitration community a common practical framework through which to communicate, to understand and ultimately to influence their interaction in such a way as to bring out what is best in arbitration: the flexibility to resolve disputes in the manner most appropriate for the user.

In-house counsel: a player on the fringe

Leaving behind early medieval history, there is a paradox that afflicts the many efforts to continuously improve the effectiveness and efficiency of arbitration as a mechanism of dispute resolution. It is that those who may be in the best position to contribute to achieving the goals that the arbitration community sets for itself are, of the standard actors, the least involved in evolving the framework. Scan the attendee list of the many global arbitration conferences, and, among the familiar names of counsel, arbitrators, experts and institutions, the rare bird is the in-house counsel. There is an apparent disconnect between the means by which arbitration evolves at a macro level through an abstract exchange of ideas and the way that users engage the process on a case-by-case basis.

The paradox deepens when in-house counsel are polled about how they determine the level of their involvement in the arbitration community beyond the day-to-day management of individual disputes. Beneath the practical reasons given for hanging back (lack of time and money) there lurks an ironic lack of confidence among in-house counsel that they have something to contribute. It is as if there is an impression that the relevance of a contribution is measured by the ability to quote from memory-dusty awards or to tease out subtle comparisons between similar provisions of the ICC and UNCITRAL rules. Ironically, the very experts who are the best-versed in the arcana of arbitration are those calling most frequently and loudly for users to become involved and re-take a system that was built for them in the first place. Concerned that they may have little to add, users may not heed these calls and may shy away from the debate.

My fellow in-house counsel have turned this paradox on themselves. On the one hand, in-house counsel accept responsibility for the undesirable trend in time and costs in dispute resolution. On the other hand, they ascribe the need to 'do something' to others: counsel, arbitrators and institutions. In the renowned 2010 Queen Mary study, while users willingly (if anonymously) admitted to being at the origin of the problems of time and cost, they still looked to arbitrators and arbitral institutions to solve those problems for them.

Respondents [to the survey questions] believe that the parties contribute most to the length of proceedings (weighted score of 31%), followed by the tribunal (23%) and external counsel (21%). However, 30% consider that the tribunal is in the best position to render arbitration expeditious (by keeping themselves and the parties to the timetable) and 29% feel that the arbitration institution is in the best position to do this. 19% believe that the parties are in the best position to render arbitration expeditious.4

While the study confirmed that users were satisfied arbitration achieves its most basic goal of a fair and just result, it showed that they were also conscious of the paradox described above. Users understand that the process matters a great deal, perhaps even more than the outcome, and, at the same time, take general responsibility for the elements of that process with which they are dissatisfied.

Empowerment

However, a generalized statement on the need for in-house counsel involvement is not enough. Empowerment is what is required. Empowerment comes in two forms: institutional empowerment and knowledge. We are at last entering an age where we are seeing both.

Institutional empowerment has come with a wave of recent appointments of in-house counsel to leadership positions for important institutions, a pioneering example of which is the Governing Body of ICC Dispute Resolution Services.

Including in-house counsel in the organs that will shape the institutional future of arbitration is an important step. But far more important is the inclusion of in-house counsel in the many day-to-day decisions that collectively drive the future of dispute resolution. With apologies to Shakespeare, ignorance brings not bliss but fear and a lack of confidence in arbitration's ability to evolve in line with users' expectations. Armed (through the Commission's new Guide) with a working knowledge of the process written in a fashion that is meaningful for business, the community of in-house counsel will individually and confidently assert themselves and the perspectives of the corporations they represent.

Users who become comfortable with the flexibility of arbitration may no longer sacrifice efficiency in the name of tactical safety with procedural choices of 'both/and'. Rather, they may extract maximum value from a supple process and assist a tribunal to get to the nub of the dispute by choosing 'either/or'. An informed player will be more willing to make decisions that streamline the process of individual arbitrations even when those choices sacrifice short-term tactical opportunities in the name of a strategic outcome that may be more about quickly resolving a dispute than winning at all costs. In a business reality where most arbitrations involve long-term relationships and temporary adversaries must, after the battle, find peace to re-establish a mutually beneficial partnership, ownership of the process must lie in the hands of those who live this reality: the user and its in-house counsel.

The key is dialogue: it is important to maintain focus on the essence of a dispute through a chain of communication that begins with a disagreement between two business users, passes through the roles of in-house and outside counsel, is resolved through constructive settlement or arbitration and is translated back into the business through the implementation of an award done in a manner in which the user has confidence.

Long-term success will not be measured by the number of in-house counsel serving on institutional boards or speaking at conferences, although there may be positive correlations there. Rather, if positive evolution can be quantified at all, it will be through a resolution of the paradox described above. Victory will come when in-house counsel embrace their natural role as leaders of the evolution and accept that they, more than any law firm expert or eminent arbitrator, 'own' alternative dispute resolution and therefore have every incentive to contribute positively.

The Guide is an essential contribution to empowering in-house counsel. If empowerment through knowledge is to succeed, that knowledge must be conveyed in ways that are relevant in the day-to-day decision-making of those who hold that power in their hands: the in-house counsel who are with the client in the darkness outside the mead hall of Bede's metaphor.

Rising to the challenge

The Guide is built from the ground up around an in-house counsel's two core realities:

• The central mission of in-house counsel, unlike their brothers and sisters in the dispute resolution services market, is risk management. The duty owed to corporate principals, owners and shareholders is the driving logic behind every decision. Dispute resolution is but one tool of risk management and one that can be effectively deployed only if it is placed in the context of that duty.

• Risk aversion is a central principle of corporate management. Risk aversion and risk reporting have been legislated into corporate governance in a broad swathe of rules that govern the daily lives of corporate management and thus, in turn, their in-house advisors.

In simple terms and in light of such hard-wired risk aversion, a lack of understanding of the arbitral process and failure to engage in structuring that process can only lead a risk-averse party to a series of conservative choices that fail to take full advantage of the flexibility that is a key feature of arbitration. Conservative choices preserving all options inevitably lead to an increase in time and cost needed to resolve disputes. With all due respect to the creative thinking that goes on at arbitration conferences, improved guidance on the costs and benefits of decisions of the type provided in the Commission's new Guide might offer a more effective way to reduce the time and costs that result from procedural decisions intended to keep all options open.

In addition to the particular realities faced by in-house counsel, there are forces of human nature to contend with. A review of behavioural science in this area would be of particular value to counsel who believe their added value comes only in presenting all the options rather than empowering clients to support the early and decisive exclusion of some alternatives.

It has been shown that humans have a natural tendency to make less-than-rational choices and pay high prices for keeping options open.5 This paradox is investigated in a study of irrational decision-making by Jiwoong Shin and Dan Ariely:6

From a naive, rational perspective, one could expect that the value of an option (having the ability to make a choice) would be based solely on the expected utility of the outcomes it represents. From a psychological perspective, however, there are two primary reasons why the subjective value of an option can exceed its expected value: a desire for flexibility and aversion to loss.7

The authors offer the following resumé of the problem:

In summary, the experimental evidence presented suggests that individuals value options in a way that is different from the expected value of these options, and, in particular, that decision-makers over-value their options and are willing to overinvest to keep these options from disappearing.8

However, this human bias towards keeping options open can be overcome. In one of the experiments described in the study, it is demonstrated that guidance to participants on how to make decisions that either preserve or foreclose options is one of the few factors that can help mitigate the strong loss aversion we all feel as humans.

It is not that fee-earners outside the corporate environment do not know these realities. On the contrary, they are acutely aware of them. However, outside counsel are subject to another economic reality that impacts their visibility of a business dispute: the sparrow's flight into the bright light is expensive when that light is paid for by the hour. It is a reality that external dispute resolution counsel will rarely be involved until reasonably close to the initiation of the dispute and will rarely stay involved after the award. The light of Bede's metaphor shines on the bird only when someone pays for the candles!

Institutions and arbitrators are aware of the realities in-house counsel face. Yet, their ability to support users in the management of risk in any concrete dispute is limited to the assistance the users (through their counsel) request. With every good intention and even armed with the power of Article 22(2) of the ICC Rules of Arbitration, a tribunal's ability to contribute is limited. Guidance towards possible settlement or, failing that, the delivery of a high quality award achieved with efficiency and due process is the limit of what a tribunal can provide in terms of assisting risk management. The now mandatory early case management conference provided for in Article 24(1) of the Rules and all the techniques supplied as ideas in Appendix IV to the Rules will be helpful only if parties come armed with the knowledge of what procedures will truly contribute to the resolution of the dispute. By the same token, the role of institutional frameworks in reducing time and cost also has its limits in party autonomy. The admonishment embedded in Article 22(1) that parties seek to resolve disputes expeditiously and at least cost will help only if parties are also armed with knowledge about the costs and benefits of actively shaping and therefore streamlining the process.

With its new Guide the Commission has taken a unique step into the shoes of in-house counsel and asked, from a purely practical point of view, what it is that in-house counsel need to chart a course through the darkness to the point where a dispute enters the arena of formal resolution. And more, what costs and benefits are to be weighed in cooperation with outside counsel to chart a course forward through the dispute. Beyond that, the Guide potentially delivers something more: the freedom to use the flexibility inherent in arbitration. This freedom is not free. Only in-house counsel who enjoy the trust of their business counterparts and who can have a confident dialogue with their chosen external representatives on a common ground of procedural understanding will feel free to make choices that will streamline the process. For such choices to be possible, in-house counsel must believe (and be able to persuade business stakeholders) that forgoing tactical options to streamline the dispute will not forfeit strategic opportunity. The Guide offers a framework that facilitates that conversation and helps parties and their representatives make those choices.

The Guide in practice

It may be useful to provide a few illustrations of how, mechanically, in-house counsel may use the Guide in such conversations, both prior to the onset of a dispute and while it is in progress.

While not all companies have formal policies governing dispute resolution, it would be unusual for them not to have an established way of decision-making to determine how to approach disputes. If systematically integrated into pre-dispute counselling, the Guide will serve to inform the timing, content and courage of the strategic decisions that will influence the way in which the dispute is to be resolved and the cost of resolving it. The quality of the internal conversations that lead to those decisions will often depend on the mutual respect of what each brings to the table. The Guide will certainly strengthen the hand of in-house counsel when advising on corporate dispute resolution strategy and can be used to illustrate the flexibility of the arbitral process to internal clients.

The crystallization of a commercial dispute is generally preceded by a period, whether of months or days, of rising tensions and position-taking by the parties in correspondence and meetings.9 Whenever outside counsel are finally retained, there is generally some portion of this pre-dispute period when they are not yet on board. During this time, in-house counsel will offer guidance on how to avoid the dispute or, failing that, how best to position the company for a successful outcome. At that early stage, the Guide will offer in-house counsel visibility over the process that will govern resolution of the dispute in the absence of settlement so that advice from outside counsel when subsequently retained is used to best effect. Experience shows that hard facts are sometimes absent from discussion prior to the retention of expert outside counsel, given that not all users of arbitration have salaried lawyers with a practice centred on arbitration. Opportunities to streamline the arbitration may be excluded by the reluctance of in-house counsel to reconsider positions taken earlier and, worse, be compounded by outside counsel feeling that they need to align with tactical or substantive positions taken prior to their arrival on the scene.10 The Guide will be a valuable aid in establishing a common baseline for discussion at the moment of retention and beyond, and help to make in-house counsel more confident in that discussion.

Poorly informed parties can place time and cost burdens on the dispute resolution process. The usefulness of having even (and maybe especially) an opponent informed about the arbitral process to come should also be acknowledged. How much easier it is to discuss with counterparts who share a common base of knowledge about the process. There is nothing worse than the complications layered on top of an already delicate commercial situation of debating facts with uninformed counsel opposite.

I am reminded of an opponent's repeated threats in pre-arbitral settlement discussions to 'take the deposition of every member of senior management' and to 'seek a restraining order from the tribunal' against the company I represented. Had I then had a copy of the Guide to share with that in-house counsel, I would have gladly put it in his hands. The failure of that particular settlement discussion is, in my memory, very much associated with our collective inability to focus on the commercial issues. I also recall lengthy attempts, as an interested party, to impress upon a colleague (who was clearly a gifted trial lawyer) that his experience might be different in what was to be his first experience with arbitration. The fact that our company ultimately prevailed in the arbitration is of limited comfort given the cost of doing so in terms of time, money and damage to the parties' relationship. One is reminded of the immortal words of the late US Senator Daniel Patrick Moynihan, 'Everyone is entitled to their own opinions, but they are not entitled to their own facts.' The Guide offers a practical set of procedural facts that will at least allow us common ground on which to address the matters of genuine opinion.

When opposing counsel sense that, although representing different points of view and clients, they at least share a common enthusiasm for resolving the dispute and a common understanding of how this might be accomplished absent parties' agreement, they will generally rise to the occasion and seek collaborative solutions to the dispute resolution process. Again, the Guide will do much to foster their exchanges.

A rallying cry

The introduction of a framework for dialogue, as provided in the Guide, is but a first step. Its usefulness will depend on the enthusiasm of the broader arbitration community to continue the dialogue with in-house counsel in response to the repeated calls for that dialogue. It will depend further on the willingness of all parties to rationally identify their collective interest in avoiding unnecessary tactics of delay and process interference. The measure of success will not be merely when the time and cost required for resolution of disputes goes down but when users of arbitration and their in-house counsel see the process itself as more credible than other traditional forms of dispute resolution.

Having been given the means to address the paradox we have brought on ourselves, it is now up to us to let the light shine. In-house counsel of the world, it is now time to recognize that arbitration is ours and to take up our responsibility to make it respond better to our collective needs.

1
ICC Publication 866. Printed copies of this 64-page booklet can be requested from bulletin@iccwbo.org. The publication can also be downloaded from http://www.iccwbo.org and consulted online in the ICC Dispute Resolution Library at http://www.iccdrl.com.

2
Foreword to the Guide.

3
Bede, Ecclesiastical History of the English People, (Project Gutenberg Trans. 2011) at 156-57, available at http://www.gutenberg.org/files/38326/38326-pdf.pdf or http://www.thelatinlibrary.com/bede.html.

4
School of International Arbitration, Queen Mary, University of London, 2010 International Arbitration Survey: Choices in International Arbitration, p. 32, available at http://www.whitecase.com/files/upload/fileRepository/2010International_Arbitration_Survey_Choices_in_International_Arbitration.pdf.

5
A notable exception was the third century BCE Chinese general, Xiang Yu. Having crossed the Yangtze river into enemy territory, he ordered all his army's boats to be burned and all cooking pots smashed. The motivation this move aroused in his troops was apparently sufficient to bring him victory. While he may have been vindicated in this instance, it is doubtful that a 'victory or death' approach, as opposed to informed decision-making on tactics, is the most efficient in terms of cost or outcome for users of arbitration.

6
J. Shin & D. Ariely, 'Keeping Doors Open: The Effect of Unavailability on Incentives to Keep Options Viable', Management Science, Vol. 50, No 5: 575-586 (May 2004).

7
Ibid. at 575.

8
Ibid. at 584.

9
The darkness of Bede's metaphor, out of which the sparrow enters the brightly lit hall.

10
This tendency can have a devastating impact on time and costs, especially if conservative positions have already been taken by in-house counsel vis-à-vis senior corporate management or opponents prior to retaining outside lawyers. Let the Guide be as well a path to establishing the reputation of arbitration counsel as wise stewards of corporate funds and champions of value creation.