Arbitration for life sciences companies
Arbitration is a contractually agreed method of resolving disputes. It is an alternative to litigation before a national court and so if parties have agreed to arbitrate, they will generally not be able to go to court to resolve any dispute which may arise.
An agreement to arbitrate is often (although not always) found in the agreement that parties have entered into at the outset of a relationship, so it is something to think about early in your business dealings.
Key considerations for companies in the life sciences sector when thinking about whether arbitration is for them will be:
- Speed and flexibility
Life sciences companies routinely enter into international contracts including collaboration, licensing, supply and distribution agreements. If you may need to pursue your counterparty overseas, agreeing to arbitrate your disputes may well be the best option as arbitral awards are in general easier to enforce overseas than the judgments of national courts.
Whether you can enforce your judgment or award depends on which international conventions the relevant countries have signed up to. The most important of these from an arbitration perspective is the New York Convention, to which the UK is a signatory, along with 160 other countries from Afghanistan to Zimbabwe. In terms of the enforcement of court judgments, there is a series of conventions which apply differently between different countries.
Another important distinction is that the arbitral process itself is confidential. Parties may prefer not to have commercially sensitive allegations and details of their dispute, and their business, made public. In the life sciences sector confidentiality can be crucially important, for example where patents are licensed to multiple licensees, or on the launch of a new product where sensitive intellectual property or pricing details may arise.
In addition, for international contracts, arbitration is often perceived as a neutral option, allowing parties to avoid opting for one or the other of their national courts as the dispute resolution forum.
Speed and flexibility
The arbitral process can be much more flexible than that of court proceedings and it can be quicker. As long as the parties agree, they can choose how the arbitration will work – who the arbitrators should be and what procedural rules should apply. It is often possible to appoint an arbitrator with relevant sector experience. In practice, the process followed is not dissimilar to court proceedings and the procedure, evidence and timing will be decided by the arbitrator(s).
A criticism of arbitration is often that the process does not allow for emergency remedies to be granted or for summary assessment of claims, but many arbitral institutions have developed rules to tackle this issue.
In terms of costs, there is generally little difference between arbitration and court proceedings. Usually, the loser pays the winner’s costs, but this can be varied depending on the arbitral rules and the circumstances of the case. The private costs of the arbitrator(s) and any administering body, such as the LCIA or ICC, will need to be paid in addition to lawyers’ fees. The costs of holding a final arbitration hearing in an overseas location (if a venue neutral to all parties has been chosen) should be taken into account, but the significant advantages of arbitration as set out above tend to outweigh this concern.