With transaction practices tanking, law firms are looking to other areas to make a buck. Justin Whealing looks at the competitive machinations within international commercial arbitration.

DLA Piper partner Scott McDonald was in Sydney’s sister city, San Francisco, in June. However, the former head of Phillips Fox’s Sydney office in the 1990s, prior to the merger with DLA Piper, didn’t have time to explore the cafes that inspired Jack Kerouac or visit the bars where Jefferson Airplane and Faith No More strummed their stuff.

It was strictly a business trip.

“There was a company here that licensed technology that produced dental restorations, which is a fairly complex business,” says McDonald, who is now ensconced back at his regular office digs in Sydney. “They had a licence dispute with a US company that was meant to be developing the product in the US market.

“Thankfully a strong arbitration/dispute resolution clause had been included by our transactional lawyers.”

Under the terms of the dispute resolution clause, any arbitration would be determined procedurally in the USA under the International Centre for Dispute Resolution regulations.

McDonald had to quickly pack his bags and get over to the American west coast.

 “I hopped on a plane with Alec Christie, the intellectual property and client relationship partner from DLA Piper who drafted the licence agreement, and we took an Aussie barrister with us and had a five-day hearing in San Francisco,” he says.

His week’s work was profitable, as the arbitrator’s interim decision came down in favour of his client.

“That is the sort of thing that a litigation practice at a global law firm is now doing and preparing for day in and day out.”

As part of a global law firm, it is not surprising that McDonald’s work is consistently taking him to foreign lands, with his client base also become more geographically diverse.

However, there is still lots of work for Australian law firms acting for Australian parties looking to settle a dispute through arbitration, which offers parties the advantage of confidentiality.

“I haven’t seen any impact on my practice from the arrival of the global law firms,” says TressCox Lawyers partner Alistair Little, a leading Australian litigation and dispute resolution partner.

Little acted for Colin Hay, the lead singer of Men At Work, and EMI Music in the famous Federal Court case over whether or not the Australian band plagiarised Kookaburra Sits in the Old Gum Tree in its 1983 number one hit, Down Under.

 “What has tended to happen is that the top end of the market has cannibalised itself... in terms of the clients we have and the referrals we get from the contacts we have overseas; it has had no impact at all really and changed the type of clients we get or the work we do.”

It is not surprising that both McDonald and Little are bullish about their respective firms’ practice in the new Australian legal world. Despite their differences with regard to their respective firms’ place in the international commercial arbitration pecking order, they both agree that Perth is not just a great place to be for energy and mining lawyers.

“WA is picking up a fair bit of dispute resolution work, which is not surprising having regard to the sheer size of deals and infrastructure projects over there.

“A lot of energy and resources contracts involving international and Australian parties list Perth as the seat [to hear arbitration],” says McDonald.  “Perth is experiencing some good fortune and I occasionally get calls from Rob Edel (the head of the firm’s global mining group) in our Perth office about this sort of thing.

“We discuss who would be the appropriate arbitrators to use and whether barristers from the Sydney, Melbourne or Perth Bar are best suited to act for our client on the specific matter.”

Putting Oz on the map

It would be remiss for any feature on international commercial arbitration not to include Doug Jones.

The doyen of disputes has done more than anyone to boost Australia’s alternative dispute resolution (ADR) stocks.

The Clayton Utz partner and president of the Australian Centre for International Commercial Arbitration (ACICA) spends as much time up in the air as George Clooney as he criss-crosses the globe spruiking Australia’s international ADR wares.

When speaking to Lawyers Weekly, he laughs that he has just spent one month in Australia and will spend the next few months in London, Dublin, Vietnam, Dubai, Miami and Germany.

Despite such promotional efforts, Jones said that Australia still has a way to go before the Australian International Dispute Centre (AIDC), which opened in Sydney in 2010, can challenge established regional international arbitral seats in Singapore and Hong Kong.

“Our goals are still aspirational,” he says. “Our objective is to have the AIDC considered as an option when people are considering neutral seats for international arbitration in the region.

“It is enough for us at the moment for people to be saying ‘well, there is Singapore, there is Hong Kong and there is Australia. That is what I have been trying to pitch in the roadshows I have been doing globally.”

In June, Jones led an ACICA delegation that visited China. He says that China’s emergence as the world’s foremost economic power and its interest in Australia’s energy and resources sector makes it a logical destination to target.

“Australia is uniquely placed to provide a neutral venue because the other two centres in Asia, Hong Kong and Singapore, are often viewed by counterparts to Chinese companies from other parts of the world as too closely connected with China.”

One of the strange international couplings arising out of the Cold War, and in the post-Soviet Union geo-political and legal environment, was that Stockholm became an important destination for hearing commercial disputes involving Chinese and foreign parties, with the Chinese viewing the Swedish capital as an acceptable western forum in which to hear arbitration.

Jones is working hard to take some of those matters away from Stockholm and bring them to Sydney.

“Stockholm is a long way from Beijing and in a completely different time zone,” says Jones.  “Australia is closer and in the same region, therefore, for the Chinese market, we have a particularly useful message to convey.

“We can provide neutrality and you don’t need to go to Europe to get it.”

The big private practice law firms have a vested interest in seeing that Australia gets more international arbitration work, with Allen & Overy and Squire Sanders conspicuous as the only major national or global law firms that are not members of ACICA.

“ACICA’s corporate members provide a pretty formidable lobby group,” says McDonald.

Strength in settlement

Litigation’s days as the main game in town for dispute resolution are now long gone. As ADR continues to gather momentum, perceptions of the skills lawyers need in this formerly highly-adversarial area are also changing.

“You can’t be a litigator with no ADR skills unless you only want to do small stuff,” says Little. “Any large matters now require you to be able to deal with arbitrations, mediations and expert determinations.

“If you want to do anything that has an international flavour you need to understand how to run an arbitration because, unless you are dealing with a Commonwealth country as the location of the other country [where the other party to a commercial dispute is based], you can’t enforce the judgment of an Australian court.”

It is not just the lawyers that are wising up to the benefits of arbitration and ADR.

Clients are increasingly drawn to it. Arbitration has always had the benefit of privacy for parties looking to keep matters under wraps, but it could be expensive. However, with recent changes to Australia’s domestic arbitration laws making the cost of staging and running arbitration less prohibitive, it is now also seen as providing an opportunity to settle a dispute quicker and at a fraction of the cost of litigation.

“Clients are more savvy and they are more readily looking to settle matters,” says McDonald. “Our more sophisticated clients are well through having any notion that settlement is a sign of weakness.

 “It is now seen as a position of strength if you can precisely evaluate your case early on its legal merits and then translate that into commercial terms.

“With arbitration clauses in an ongoing supply contract, resolving any dispute via that mechanism doesn’t stop business.

“General counsels say that and I think it is true.”

McDonald’s words increasingly ring true for the whole legal community.