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Costly Arbitration Is Cheap and Efficient

That seems to be the message from the continuing money pit that is the Americatel arbitration debacle:

Americatel El Salvador won an arbitration against Compañía de Telecommunicaciones de El Salvador -- or CTE -- to allow greater access to the Salvadoran market. It also got the green light from a federal judge in Miami to collect some $12 million in compensation.

But CTE didn't stop fighting. The company has appealed the arbitration decision all the way to the Supreme Court in El Salvador and is taking the U.S. bout to the federal appeals court in Atlanta.

Riding on the outcome is more than just prying open lucrative Central American telecommunications markets.

The CTE-Americatel matchup is a test of the growing practice of binding arbitration, the very purpose of which is avoiding lengthy and costly litigation. Contracts increasingly contain clauses pledging parties to submit to binding arbitration. Americatel versus CTE is not the first arbitration case to drag on in regular courts, but it has gained widespread attention and could set a precedent for many more pending cases.

But don't worry, says former Greenberger Pedro Martinez-Fraga, now toiling for some out-of-staters at SSD:

''The Americatel case is an aberration in its complexity and not the rule,'' said Pedro Martinez-Fraga, coordinator of the international dispute resolution practice in Florida and Latin America at Squires Sanders & Dempsey.

''There's an effort by courts universally to insure that appellate recourse is minimized,'' said Martinez-Fraga, who is not involved in the case. ``That's just the way the world is heading.''

Nice try, Pedro, but the trends say otherwise. Business-to-business arbitration is increasingly as costly, in some cases more so, than an efficiently managed federal suit.

In Americatel it appears we have the worst of both worlds.

Full post as published by South Florida Lawyers on August 26, 2008 (boomark / email).