Procedural innovations in arbitration

This article discusses various innovative procedural features introduced in recently adopted institutional arbitration rules, such as emergency arbitrators, expedited arbitration and summary procedures, which are designed to increase efficiency of arbitral proceedings. Most practitioners will be familiar with these concepts, but the following provides a useful summary for those less familiar with the arbitration rules of the major arbitral institutions.

Once touted as a cost effective and flexible procedure, arbitration is facing increased criticism for the substantial time and costs involved and increasingly for the standardization of procedures. In theory, significant savings in time and costs should be possible in arbitration, given that parties and arbitrators can agree to tailor proceedings to the specific case. For example, whilst extensive document production, numerous exchanges of lengthy pleadings and expert reports followed by prolonged evidentiary hearings may be appropriate and indeed necessary in certain complex cases, they are often not appropriate for smaller cases and lead to unnecessary and disproportionate delay and expense.

But in practice it can be difficult to obtain party agreement, even if only on procedural issues, once a dispute has arisen. There are various reasons for this. It is partly due to the fact that with increasingly large sums in dispute and greater transparency (and therefore scrutiny) of arbitral awards, counsel face increasing pressure to exploit every opportunity to advance their client’s position, and in some instances that may mean delaying tactics or putting pressure on their opponent by driving up costs. Arbitrators can find it difficult to manage such conduct as they are under pressure to protect their awards from challenges, which means ensuring that parties are given every opportunity to present their case fully.

This is where arbitral institutions can play a useful role. Most major arbitral institutions now offer tools to assist parties and arbitrators to make appropriate case management decisions and most institutional rules contain provisions designed to ensure a proportionate arbitration procedure.

Parties can, of course, customize their arbitration agreements to provide for an arbitration procedure that is tailored to the parties and the types of dispute that might arise between them. For example, parties can limit certain procedural stages of an arbitration, most notably the document production phase. Providing for a sole arbitrator in appropriate cases could reduce time in various ways, including the time for formation of the tribunal and potentially for deliberation on and issue of the award.

The Swiss Chambers’ Arbitration Institution (SCAI) recently introduced an interactive tool to help users customize their arbitration clauses. Users can select up to four additions to a model clause (from abridged time limits to documents-only arbitration) and the online system will generate a customized clause for inclusion in the contract. Even though the options are limited, this tool is a useful starting point to encourage parties and counsel to think about what might be needed for a particular dispute in the future.

The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) is another institution that offers a range of standard clauses with various options. The SCC’s clauses are not presented in as technologically advanced format as the SCAI’s tool, but they remain useful for adapting the dispute resolution provision to the needs of the parties to a particular contract.

In practice, the option to tailor the arbitration clause is underutilised. Dispute resolution clauses are all too frequently included at the eleventh hour based on a standard form template and without adequate (if any) input from a dispute resolution specialist. This is regrettable as prioritizing and investing time in the negotiation of a tailored arbitration clause could save parties significant cost, time and aggravation in the event that a dispute arises. That said, care must be exercised when drafting bespoke arbitration clauses, as unclear drafting may lead to additional disputes over what the parties intended or even render the clause unenforceable.

The formation of the tribunal, particularly when a panel of three arbitrators is to be appointed, can take significant time. This may be particularly frustrating, or indeed damaging, when a party requires urgent relief to preserve the status quo between the parties.

To address this, most arbitral institutions have introduced so-called emergency arbitrator mechanisms into their rules. Parties may apply to the arbitral institution for appointment of an emergency arbitrator, prior to the formation of the tribunal, specifically to deal with urgent interim measure applications. In appropriate cases, a party can obtain relief relatively quickly, before formation of the tribunal and without having to resort to the courts. Any orders by an emergency arbitrator are temporary and may be varied or upheld by the substantive tribunal appointed in due course. This has consequences for enforcement, as not all jurisdictions will recognize a decision of an emergency arbitrator as an award for purposes of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Nonetheless, emergency arbitrator applications are increasingly common and are seen as an important means of restraining or compelling the conduct of an adversary.

Some arbitral rules also provide for expedited formation of the tribunal. For example, under the London Court of International Arbitration (LCIA) Rules, in cases of exceptional urgency, a party may apply for expedited formation and, if granted, the LCIA Court can abridge any period of time relevant for the tribunal formation. The parties can have a fully-functional tribunal in place much more quickly than in accordance with normal procedure – weeks instead of months.

Perhaps the best way to reduce the time and cost of arbitration is to condense or eliminate certain stages of the process. Parties can agree, either in advance or with the tribunal, a condensed or fast track (expedited) procedure. The procedure can be bespoke or parties may choose to adopt institutional expedited procedural rules, such as the SCC Expedited Arbitration Rules.

The rules of other leading arbitral institutions provide that an expedited arbitration procedure will apply by default if a case meets certain criteria, with reference to the value in dispute and/or complexity. The International Chamber of Commerce (ICC) recently adopted amendments to the ICC Rules of Arbitration to introduce an expedited procedure which will apply to all cases in which the amount in dispute does not exceed US$2 million, if the arbitration agreement is entered into after 1 March 2017 (or if the parties agree to opt-in to the mechanism). The International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry (the ICAC) also provides for an expedited procedure in its recently updated rules. While proceedings at the ICAC are already relatively quick and awards are often rendered within 6 months of the formation of the tribunal, under the expedited procedure the case should be completed within 120 days of the tribunal’s formation.

Although the specific rules differ, generally expedited arbitration rules include

• Preference for a sole arbitrator, where possible.
• Abridged periods of time for relevant procedural actions, in particular for delivery of the award.
• Right of the tribunal to limit written submissions and evidence, including document production.
• A presumption in favour of documentonly arbitration, i.e. without an oral hearing.

Expedited procedures have proven popular: as of 2016, 28 percent of SCC cases were administered under the Expedited Arbitration Rules; around 40 percent of cases under the Swiss Rules were resolved by expedited procedure; and some 30 percent of both the ICC’s and ICAC’s caseload also fell under the rules for expedited procedure.

An unmeritorious claim or hopeless defence can be particularly frustrating in arbitration, as traditionally arbitration has lacked a summary dismissal mechanism. Some institutions have moved to change that.

The first arbitral summary procedure was introduced by the Singapore International Arbitration Centre (SIAC) in 2016, but the SCC was quick to follow in 2017. Under the SIAC Rules, a party may apply for early dismissal of a claim or defence if: (i) a claim or defence is manifestly without legal merit; or (ii) a claim or defence is manifestly outside the jurisdiction of the tribunal. The SCC Rules appear to be somewhat broader, as the tribunal (upon the request of the party) may determine one or more issues of fact or law by way of summary procedure, i.e. without undertaking every procedural step that might otherwise be adopted. The issues to be determined by way of summary procedure may concern jurisdiction, admissibility or the merits of the case. Under both sets of rules, the application can only be determined after each party has had an opportunity to be heard.

It is not yet clear how extensively these provisions will be used. Nor is it clear how resulting decisions and orders will be recognised and enforced. However, the idea of granting tribunals powers to dispose of certain issues by way of summary procedure should be welcomed. It remains to be seen to what extent other institutions will follow suit.