International Arbitration and the Forensic Accountant; Martin Long, Forensic Accounting Partner at BTG Global Risk Partners in Birmingham - a Division of the Leading Professional Services Consultancy Begbies Traynor Group - Comments on the Need for Proper Preparation before Embarking on International Arbitration
Byline: Martin Long
An enduring trend in the legal world has been the increasing popularity of international arbitration as the preferred medium for transnational dispute resolution. The volume of international arbitration cases has increased several-fold during the past 20 years, accompanied by a proliferation in the number of arbitral institutions. There was a time when international arbitration was the province of state-to-state conflict or for disputes between major multinational corporations. But globalisation has brought about an inevitable increase in the number and complexity of cross-border commercial transactions such that relatively modest size companies are now required to address the potential risks associated with litigation in a foreign country. In this same vein, many countries have also now amended local laws and introduced new arbitration legislation in order to encourage overseas business. For the UK, a further consequence of these factors has been that international arbitration is no longer limited to the London legal market but is equally relevant for the regions.
Arbitral institutions are typically country specific or industry relevant. For international commercial arbitration popular general purpose institutions include the International Chamber of Commerce (ICC) based in Paris and the London Court of International Arbitration (LCIA). International commercial contracts commonly include a dispute resolution clause which directs the parties to one of these or the many other arbitral bodies. This means that should the contract go wrong, the parties have a pre-agreed demonstrably neutral forum in which to resolve matters rather than at least one party trusting to the vagaries (whether perceived or real) of a foreign court system. It provides certainty, or at least transparency, as regards the choice of arbitral institution, the location of formal hearings, language, selection and number of arbitrators, prevailing laws and procedures, as well as to some extent jurisdiction.
In business as in life it is often said that "failing to plan is planning to fail". Nowhere is this more relevant than in the face of impending litigation and in my experience especially so where international arbitration is involved. I say this because these legal claims frequently involve complex, cross-border issues and substantial amounts of money in the context of different cultures and business practices. Ultimately an international arbitration is not the same as the UK High Court. Important as it is for a client to instruct a legal team with a track record of acting in international arbitrations, the same applies to the use of forensic accountants and other experts.
The right forensic accountant can often add significant value to the claim process by being involved sufficiently early in a dispute destined for international arbitration. Before arbitration proceedings are even issued it may be fundamental to obtain an informed accounting view on the other party: a key question is, assuming that the client were to be successful before the arbitral tribunal and achieve an award of damages, what financial resources are likely to be accessible in law as regards the other side? …