Mr. Mason writes: Two international telecommunications companies entered into a sophisticated commercial agreement in 2003. The agreement provided for final resolution of all disputes by arbitration but provided for one type of arbitration for a certain class of disputes and another type of arbitration for all other disputes. After the arbitral panel was convened, held its hearings, and rendered its award, one side commenced litigation in the U.S. to enforce the award while the other side litigated in El Salvador to vacate the award, alleging that the panel was illegally constituted. Decisions of the courts in both countries are still pending.
Arbitration has been the dispute resolution method of choice for international telecommunications providers for a number of reasons. Some of these have to do with the technical nature of typical telecom issues such as interconnectivity, call termination, and billing, which are more easily understood by arbitrators with telecom backgrounds and experience. Others are the traditional ones generally favoring arbitration for international commercial transactions – privacy, speed, expense, and relative ease of enforcement of awards. Nowhere has this been more true than in Latin America.
However, when one or both parties decide to resort to litigation in national courts in an effort to overturn their arbitral award, the effect is decidedly negative with a tendency to corrode the arbitration process and sap away many of its benefits. Like oil and water, arbitration and litigation most often do not mix. If the parties had wanted litigation, they should have contracted for it in the first place. Excessive litigation over an arbitration award can erode confidence in the arbitration process not only for the parties themselves but also for observers from the outside world. From the point of view of preserving the integrity of the process, such litigation is best not entered into lightly. [footnote omitted]