Three recent high-profile arbitral awards highlight the risks of arbitration and demonstrate that, contrary to widespread belief, arbitration is often not cheaper, faster or more predictable than litigation. These three awards, as well as emerging trends in arbitral proceedings, call into question the common practice among corporations of including contractual provisions mandating arbitration in the event of any disputes.
In May of this year, in arbitration proceedings that have been pending for nearly eight years involving a patent license agreement between the technology companies Amkor Technology and Tessera Technologies, Tessera was awarded $145 million. And this was on top of $64 million Amkor had already paid to Tessera in connection with a prior, related ruling. These adverse awards far exceeded even Amkor’s publicly disclosed worst-case estimates of its possible exposure. The Amkor proceedings present a recent example of the delays, costs and unpredictability often associated with arbitration. But they are by no means a worst-case scenario. The dangers of arbitration hit two prominent retail corporations on a far greater scale.
