Jurisdiction - Hong Kong
ADR In Asia Conference – In-House Counsel Session.

11 December, 2013


Legal News & Analysis – Asia Pacific


ADR In Asia Conference


International Arbitration In Asia: A Behind The Scenes Review


Session IV: In-House Counsel Session


Hong Kong Arbitration Week – 23 October 2013


While we like to think size matters, when it comes to selecting an outside law firm for arbitration, it is knowledge of the industry and experience that matter most according to leading in-house lawyers.


During an in-house counsel session at the ADR in Asia Conference, the panelists all placed high importance on knowledge of the industry especially when the case required a high degree of technical expertise and less on the name brand of the law firm when it came to selecting a law firm for arbitration. This is good news for firms that may not be “Magic Circle” or as well known.  


“[Lockheed Martin] had interviewed select marquis firms, but they found that they wanted someone or a firm that knew their business and their corporate culture,” said Lester Schiefelbein, Jr., current international arbitrator and former Vice President and Deputy General Counsel to Lockheed Martin Space Systems Company, while recollecting the longest arbitration Lockheed Martin ever had.


Session IV of the ADR in Asia Conference was an in-house counsel discussion covering a number of questions from their thoughts on whether the in-house counsel is the weakest link in arbitration to what they look for when selecting an outside law firm to assist with litigation. The panel members included Richard Hill from Royal Dutch Shell, Stephen Maloy and Matthew Ruby, Vice President and General Counsel for Advanced Micro-Fabrication Equipment, Inc., and Lester Schiefelbein Jr. current International Arbitrator and former Vice President and Deputy General Counsel to Lockheed Martin Space Systems Company. The discussion was moderated by Michael Moser of HKIAC.


With the increasing inclusion of mandatory arbitration clauses in contracts, companies are seeing a rise in the need to hire outside counsel for arbitration. However, the role of the in-house counsel has not diminished as the in-house counsel plays a vital role in all of the company’s legal affairs including arbitration. For example, they are the ones who select the outside firms. They are also the ones who manage the case budget and make the critical legal decisions. According to Hill, “Key factor for them is trust…[and] detailed experience.” He also added, “Having people who understand what we need to deliver…and the complexity of their product and case” is important to them.


Even though outside counsel may be hired for litigation or arbitration that does not mean that the in-house counsel does not play a vital role. After all, in-house counsel are the ones who construct the arbitration clause to begin with. As noted above they also control the purse strings and make the final strategic case decisions. There is this notion that in-house counsel tend to be the weakest link in arbitration. However, all the speakers seemed to agree that informed in-house counsel are not the weakest link. Schiefelbein noted that since his company, Lockheed Martin Space Systems, builds costly and very technical aeronautical equipment such as satellites where a lot of money is at stake he was heavily involved with the construction of the arbitration clauses and proceedings. Hill, however, conceded that, “In-house counsel can be the weakest link if they do not understand arbitration.” In light of this reason and to evidence the growing sophistication of in-house counsel, he noted that Shell formed an advisory committee to make sure their in-house counsel understood international arbitration.


Modernly, it is standard for contracts to have an arbitration clause. However, companies that do business in foreign countries may find it more manageable both legally and financially if they use a standard arbitration clause according to some of the panelists.  


Hill, representing Shell, stated, “After a look at all their contracts… they had discovered they had 48 venues for arbitration and 42 arbitration institutions involved.”  Based on that information, he noted that there is a need for his company to have some form of a basic policy to follow. He pointed out that Shell did not really have a standard policy until two years ago when they created a litigation committee and discovered just how many different venues they were arbitrating in.


While it seems a standard arbitration policy can be helpful to a company that finds themselves contracting in a multitude of jurisdictions, it also appears that the nature of the business itself and other applicable laws may prevent a company from having such a standardized policy to follow. Schieflebein commented, “Before we enter into a contract, the arbitration clause will be discussed and approved before we make an offer.” He explained that this is required because “they deal with a lot of military technology and non-U.S. nationals cannot have access to this technology.” Thus, they have to craft contracts with all clauses including the arbitration provision that comply with laws governing military technology.


A well drafted arbitration clause, informed in-house counsel, and selection of the right outside counsel are many ways the in-house counsel can manage costs and outcomes. However, it was mentioned that there are costs that in-house counsel have no control over, and that is the increasing costs of arbitration in general.


There a number of factors that can affect the costs associated with arbitration, but both Ruby and Maloy felt the ability of the parties to schedule and reschedule hearings and the like contributed to the increased costs of arbitration. Ruby explained that, “Arbitration by nature is very expensive because of the calendar…[It’s] easier to extend things with arbitration compared to litigation.” To the same effect, Maloy responded by attributing increased costs to the “casual nature with scheduling.”


In addition to the calendar, Ruby and Maloy both commented on the fact that the more technical the product that the dispute involves the more expensive arbitration can be. Ruby noted, “Every dispute is so complicated because everything is so high tech at my company.” Maloy also pointed out that the ability to select an arbitrator who has technical competence is a tremendous advantage with arbitration. However, this may cost the parties more.


In sum, marquis firms beware, the name brand of the firm is not determinative when selecting outside counsel for representation. Knowledge of the industry, trust, experience, and an appreciation for a company’s corporate culture are key selling factors. Finally, do not underestimate the role and competence of the in-house counsel as they do play a vital role from the construction of the arbitration clause to the beginning and end of any and all arbitration proceedings.     




Session I: Debate – Every Arbitral Tribunal Should Have the Power to Remove Counsel When the Integrity of the Process is Jeopardized


Session II: Emergency Arbitrator Application, Expedited Procedures, and Joinder and Consolidation


Session III: “Follow the Money” – Third Party Funding


Session IV: In-House Counsel Session


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For further information, please contact:


Tara Shah, Reporter, Conventus Law

[email protected]

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