Publications

Sustaining Economic Growth Through Alternative Dispute Resolution

Providing access to Alternative Dispute Resolution (ADR) (i.e. mediation and arbitration) forums to resolve commercial disputes is one of the existing challenges that confronts Trinidad and Tobago as it continues its attempts to sustain economic growth.

With the Government of Trinidad and Tobago’s recent approval of “Vision 2020”, a reference to the strategic plan to support the Government’s goal of reaching developed status by the year 2020, Trinidad and Tobago is positioned to sustain unprecedented economic success that has recently been fueled by investment and high energy prices.   However, if Trinidad and Tobago is to continue to grow its economy at “Chinese rates,” {{1}} [[1]]Economist, August 16-September 1st, 2006 edition, p. 29.[[1]] the business community must continue its successful efforts in enhancing investor confidence by embracing institutions such as the Dispute Resolution Centre (the Centre) and the use of ADR to resolve commercial disputes in lieu of litigation.

Understanding the ADR, Arbitration, and Mediation Concepts

Alternative Dispute Resolution (ADR) is a spectrum of processes that are used as an alternative to litigation to resolve disputes.  The ADR processes most commonly used by disputants are Arbitration and Mediation.   Mediation is an informal process in which an impartial third party assists disputants in finding a mutually agreeable solution to their dispute.  Whereas, arbitration is a formal process in which disputing parties hire a “private judge” to hear the dispute and issue a ruling based on the merits of the case.  Despite being a formal process, arbitration is less formal and more efficient than the traditional judicial process.

Parties involved in a business transactions should anticipate the potential for conflict and incorporate the selection of the desired ADR process(es) within the strategic planning stage of the business development process. Additionally, when determining the ADR process of choice, the following issues should be considered: the nature of the dispute and relationship concerning the parties that are involved in the transaction, the scope of the transaction, and the experience of the practitioner and forum that will administer the process.    Ultimately the selection of the desired ADR process(es) should be highlighted as a term and/or condition within an ADR clause of a contractual agreement.     Consequently, the ADR clause will govern the ADR process(es) of choice regarding future disputes between the contracting parties.  If arbitration is selected as the ADR process of choice, all parties must ensure that local and/or international laws are in place to enforce arbitral awards.

Trinidad and Tobago:  Creating a Legal Framework in Support of Commercial Arbitration Through The New York Convention, The Arbitration (Foreign Arbitral Awards) Act of 1996, and The Arbitration Act of 1939 (Ch. 5:01)

Trinidad and Tobago has created a legal infrastructure that supports the use of arbitration as a viable practice and process to resolve both domestic and international commercial disputes.  Specifically, the Government of Trinidad and Tobago has reserved power to the national courts to compel parties to honor arbitral decisions and/or awards.   This power is provided by the following treaty and legislation: the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention (NYC)), 1958, The Arbitration Act of 1996 (1996 Act), and The Arbitration Act of 1939 (1939 Act).

The NYC has been adopted by over 130 countries.{{2}}[[2]]A current list of parties to the Convention is available at http://www.uncitral.org (last visited October 2006).[[2]]  Under this treaty, signatory nations agree to enforce written arbitration clauses and refuse to litigate such disputes in their national courts.  As written in Article III of the NYC, each party has committed to recognize arbitral awards as “binding and shall enforce them in accordance with the rules of procedure of the territory where the award is relied upon.”{{3}} [[3]] United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards, Article III, 10 June 1958, 9 USC, ss 201, 330 UNTS 38 [hereinafter New York Convention].[[3]]

The NYC was ratified and implemented in Trinidad and Tobago through the Arbitration (Foreign Arbitral Awards) Act of 1996 (The 1996 Act).  This act, coupled with the Arbitration Act of 1939 Ch. 5:01 (The 1939 Act), serve as the source of law for international commercial arbitration within Trinidad and Tobago’s jurisdiction.   The 1996 Act places limitations on the types of disputes that may be arbitrated.  Specifically, the Government of Trinidad and Tobago declares that it will apply the convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the law of Trinidad and Tobago.{{4}}[[4]]The Arbitration Act, 1996 (Trinidad and Tobago) [hereinafter Foreign Arbitral Awards] [[4]]  The 1996 Act only applies to non-domestic awards.

Concerning the 1939 Act, this law governs both domestic and international arbitration.  This law does not contain different rules for domestic and international arbitration.  According to this law,

“this Act applies in relation to every arbitration under any other written law passed before or after the coming into force of this Act as if the arbitration

were pursuant to an arbitration agreement and as if that other written law were

an arbitration agreement…except in so far as this Act is inconsistent with the other written law regulating the arbitration or with any rules or procedure authorized or recognized by that other written law.” {{5}}[[5]]Ch 5:36, The Arbitration Act, 1939 (Trinidad and Tobago) [hereinafter 1939 Act][[5]]

Consequently, this legislation will apply to all arbitration agreements unless the 1996 Act contains different provisions, wherein the provisions of the 1996 Act will supersede the provisions of the 1939 Act.

Global Business & ADR: Distinguishing between Investment Disputes and Commercial Disputes 

Partly because of Foreign Direct Investment (FDI) and its burgeoning energy sector, Trinidad and Tobago has quickly become a global business center for international trade and business transactions.  Consequently, it is imperative that the business community understand the distinction between international investment and commercial disputes to access the appropriate ADR forum to address disputes between contracting parties. As a general rule, investment disputes can be distinguished from ordinary commercial disputes on several grounds, including: (1) The State as a party (Investment Disputes); and (2) disputes involving private parties (Commercial Disputes).

Foreign Direct Investment (FDI) involves the transfer of tangible or intangible assets into a host country.  Transferred assets are under the total or partial control of the foreign investor.{{6}}[[6]]M Sornarajah, The International Law of Foreign Investment (Cambridge University: Cambridge 1994) Chapter 1.[[6]]  FDI, as it pertains to arbitration and dispute settlement, is invariably bound by international instruments “– bilateral, regional and multilateral agreements – that normally contain two types of dispute settlement mechanisms: (i) State-to-State, which is available only among the State parties to an agreement, and (ii) investor-State, whereby an investor can submit a claim against a host State to international arbitration.”{{7}}[[7]]Consultation and Settlement of Disputes Between Members, World Trade Organization (Working Group on the Relationship between Trade and Investment). (p. 1) August 1, 2002.[[7]]

Arbitrations and mediations involving a State as a party differ significantly from commercial arbitrations and mediations that involve only private parties.  As mentioned previously, contract law, in which businesspeople insert ADR clauses into their international commercial agreements as a mechanism to resolve potential business disputes, governs commercial ADR process(es).

Currently, parties involved in investment disputes with Trinidad and Tobago can access the International Centre for the Settlement of Investment Disputes (ICSID), which is an international dispute resolution forum that is sponsored by the World Bank and was established through the Washington Convention of 1965 (the Convention).  However, parties should access institutions such as the DRC to resolve commercial disputes.  Because ICSID is an international dispute resolution organization that only addresses investment disputes, the continued growth and development of the DRC is vital to ensuring a viable business climate within Trinidad and Tobago regarding its services in response to commercial disputes.

The Dispute Resolution Centre and its Potential Impact on Domestic and Regional Economic Growth

The Dispute Resolution Centre is positioned to play a significant role in Trinidad and Tobago’s efforts to sustain economic growth if fully embraced and utilized by the business community.  As an institution that provides both arbitration and mediation services in response to both regional and domestic commercial disputes, the Centre has established itself as a forum that is prepared to be a vital asset within the local economy by serving as a viable mechanism to avoid and/or to reduce commercial interruptions that are caused by conflict.  Through collaborative efforts with the business community to enhance the profile and to increase the use of services provided by the Centre, the Dispute Resolution Centre can ultimately serve as a model for the Caribbean region regarding the use of ADR and its impact on economic growth and development.

John Woods is the Managing Partner of NS&J Advisory Group.   Mr. Woods also serves as an Adjunct Business Professor as well as an Arbitrator and Mediator.