Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
Although institutional rules arguably empower arbitral tribunals to streamline procedure and/or summarily dispose of claims or defences as part of their general case management authority, the trend now is for institutional rules to expressly recognise such powers. But do these procedural innovations aimed at cheaper and quicker arbitrations come at the price of a binding and enforceable award?
Since the introduction of an expedited procedure in the 2004 version of the Swiss Rules of International Arbitration, the phrase “Expedited Procedure” has become commonplace in institutional rules. In March 2017, the ICC became the latest arbitral institution to introduce an expedited procedure in its arbitration rules.
Broadly, the objective of an expedited procedure is to prescribe shortened timelines for arbitrations, to facilitate faster and more cost‑effective resolution of disputes. Usually the timeline is between three to six months from the constitution of the arbitral tribunal or transmission of the file to the tribunal to the rendering of the final award. It is increasingly common for a fast‑track procedure to apply by default (unless the parties have opted‑out) if the aggregate value of the claims made in the arbitration fall under a specified monetary value. Parties may also elect to opt‑in in other circumstances, so long as the institution or arbitrator also agrees that it is appropriate for an expedited procedure to apply.
Importantly, however, expedited procedure rules do not limit the scope of the arbitration. That remains for agreement between the parties or, failing that, is left to the discretion of the tribunal. Expedited proceedings are obviously ideal for arbitrations that do not involve significant documents or evidence (whether fact or expert evidence). However, arbitrations conducted under an expedited procedure do not necessarily always result in “arbitration‑light” proceedings. On the contrary, expedited procedures can sometimes involve imposing compressed timelines on a full‑blown arbitration which has all the usual stages of proceedings (witness and expert evidence, disclosure, an evidentiary hearing on liability and quantum, and post‑hearing oral and written submissions). There are obvious downsides for counsel, parties and arbitrators of such an intensive process. But the benefit of the mechanism is that it necessarily curtails what can be done in the available time, which serves to focuses the minds of the parties and the tribunal not only on expedience but also on what is truly at the heart of the dispute. Costs as well as time savings are therefore often made.
There can be risks associated with expedited proceedings. Two relatively recent cases conducted under the SIAC Rules are examples where the adoption of expedited proceedings led to challenges to the resulting awards.
In AQZ v ARA, the Singapore High Court considered whether the conduct of the arbitration under the SIAC expedited procedure in the 2010 Rules meant that the arbitral procedure was not in accordance with the agreement of the parties. The arbitration agreement in question was silent on which version of the SIAC Rules was to apply. The Singapore High Court therefore applied a presumption that the reference to SIAC Rules in an arbitration agreement refers to the applicable institutional rules as at the date of commencement of the arbitration and not at the date of contract. Based on this presumption, the Singapore Court held that the 2010 Rules (containing an expedited procedure mechanism, unlike the prior rules) were the applicable rules. The expedited arbitral procedure that was followed was therefore anticipated by, and in accordance with, the parties’ agreement to arbitrate.
In the more recent decision in Noble Resources International Pte. Ltd. v Shanghai Good Credit International Trade Co., Ltd, the Shanghai No. 1 Intermediate Court reached a very different decision. The relevant arbitration agreement provided for SIAC arbitration seated in Singapore, before a three‑member tribunal and for the SIAC Rules at the time being in force to apply. Noble commenced arbitration against Good Credit and requested that the expedited procedure apply in which case (notwithstanding the provisions of the parties’ arbitration agreement) the dispute would be heard by a sole arbitrator. Good Credit opposed that application and insisted that three arbitrators be appointed. The Vice Chairman of SIAC approved the application to apply the expedited procedure and appointed a sole arbitrator. The Shanghai Court subsequently reused to recognize and enforce the resulting award. The court did not find the expedited conduct of the arbitration under the SIAC expedited procedure objectionable. Rather, the court held that the award was not enforceable as the composition of the tribunal was not in accordance with the parties’ arbitration agreement (Article V(1)(d) of the New York Convention). Specifically, the court found that the appointment by SIAC of a sole arbitrator was contrary to the parties’ express agreement to a three‑member tribunal.
Many commentators have described this attempt to uphold party autonomy as misguided given that party autonomy could have been recognized by reading the parties’ agreement to a three‑member tribunal as subject to the arbitral rules they had chosen (and incorporated by reference into their arbitration agreement) which provided for a single arbitrator in circumstances where an expedited procedure was adopted.
This decision may lead to arbitral institutions amending their expedited procedure rules to provide clarity around this point. A further consequence may be that arbitral institutions will more closely consider whether to exercise their discretion to appoint a sole arbitrator where the parties’ arbitration agreement prima facie provides for a three‑member tribunal — at least, where one party objects.
Summary disposition simply means the early determination by the arbitral tribunal of issues of fact and law on an expedited, summary basis, without a full hearing of the evidence.
A few institutional rules contain express summary procedure rules. Rule 41(5) of the ICSID Arbitration Rules allows a party to file an objection that a claim is manifestly without legal merit within 30 days from the constitution of the tribunal or, in any event, no later than the first session (held within 60 days from the constitution of the tribunal). The SIAC Rules 2016 recently introduced provisions (based on Rule 41(5) of the ICSID Arbitration Rules) allowing for the early dismissal of claims or defences that are either (i) manifestly without legal merit, or (ii) manifestly outside the jurisdiction of the tribunal. This was followed by similar provisions in the SIAC Investment Arbitration Rules 2017. The SCC also recently amended its rules with effect from January 1, 2017 to expressly provide for issues of jurisdiction, admissibility or the merits to be dealt with by summary procedure. Most recently, in a public consultation for the revision of its Administered Rules, the HKIAC asked for feedback on whether the HKIAC should consider introducing an early determination provision.
But summary procedures are likely available to parties, even where they are not expressly provided for in the institutional rules. It is now widely accepted that this power is inherent in the general case management authority of tribunals. Most recently, the ICC expressly recognised in its October 30, 2017 Note to the Parties and Arbitral Tribunal on the Conduct of Arbitrations that “[a]pplications for expeditious determination of manifestly unmeritorious claims or defences may be dealt with within the broad scope of Article 22 [of the ICC Arbitration Rules]”. This endorses the position taken by arbitral tribunals in past ICC Arbitrations that they have the inherent power to utilise summary disposition procedures.
However, in practice, tribunals have been reluctant to utilise summary disposition because of the perceived risk that such awards would be set aside, or enforcement refused, on grounds of procedural irregularity or lack of procedural fairness. It remains to be seen whether this reluctance will continue where arbitral institutions have amended their arbitral rules to include express powers of summary disposition.
Cost and time of proceedings are perennial issues in international arbitration, as they are in litigation. It is therefore pleasing that the major arbitral institutions continue to update and adapt their arbitral rules to facilitate more efficient proceedings, including by expressly providing for expedited procedures and summary dismissal. However, it remains to be seen whether these mechanism are widely taken up by parties and/or whether in practice they will lead to significant saving in time and cost. As mentioned above, expedited procedures do not necessarily limit the scope of an arbitration. Real savings will therefore only be generated by the parties and the tribunal fully committing to conducting the proceedings in a sensible and efficient manner. With the inclusion of express summary procedure rules in key institutional rules, these rules are likely to be more widely used in the years to come. However, we are unlikely to see an immediate spike in uptake. Parties and tribunals will remain wary particularly where enforcement of the resulting award is in a jurisdiction where the courts are unfamiliar with the concept.
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