Practical Law

A recent study, the 2015 International Arbitration Survey on Improvements and Innovations in International Arbitration by Queen Mary University of London, found that the two areas of most concern to parties are costs and delay.

The current solutions

Section 68 of the Arbitration Act 1996: Challenge to award for serious irregularity

The problem of delay was recently considered in The Celtic Explorer where Flaux J began by rejecting the defendant’s preliminary argument that it was not open to the claimants to bring the section 68 application because they had failed to bring a section 24 application to remove the arbitrator during the delay. In essence, the defendants argued that the claimants could not simply wait until publication to complain.

On the section 68 application, his Lordship agreed that delay could be regarded as a procedural irregularity because it was a breach of section 33(1)(b) of the Arbitration Act 1996, namely the tribunal’s general duty to avoid “unnecessary delay.” However, the key difficulty was establishing that serious injustice had been caused by the delay. The tribunal had dealt with all of the issues and delay on its own does not necessarily constitute serious injustice.

Arbitral institutions

The ICC has taken the lead recently. It published new guidance, applicable from 1 January 2016, to encourage the swift publication of awards. The new guidance provides that awards should be published within three months for a multi-arbitrator tribunal or two months for a sole arbitrator tribunal. Where this timeframe is not met the following reductions in the arbitrator’s remuneration will apply:

• Where draft awards are submitted for scrutiny up to seven months after the last substantive hearing or written submissions, the fees are to be reduced by 5 to 10%.
• Where draft awards are submitted up to 10 months after the last substantive hearing or written submissions, the fees are to be reduced by 10 to 20%.
• Where draft awards are submitted for scrutiny more than 10 months after the last substantive hearing or written submissions, the fees are to be reduced by 20% or more.

Finally, to incentivise prompt publication, the new guidance also allows for increased remuneration where the award is published earlier than expected.

Further, the Hong Kong International Arbitration Centre has taken a slightly different approach. From 1 January 2016, it has introduced an Arbitration Evaluation System. This allows parties to give honest feedback about their arbitrator and experience of the process. It is hoped that this feedback will then manifest itself in the future performance of arbitrators and the institution as a whole.

Commentary

The Celtic Explorer was correctly decided and accords with the relatively hands-off approach taken by the court where parties are dissatisfied with the arbitral process. It cannot be the case that the court infers from delay that the tribunal has not dealt with the issues or failed to properly consider them. This is especially so in circumstances where transcripts were produced. As such, the onus must fall on the arbitral institutions to address this problem.

The ICC guidance is a positive step in the right direction and it is hoped that the ICC Court rigorously enforces it. However, the problem is not simply delay. Often, the concise reasoning in the award itself is likely to be exacerbated by strict deadlines. Whilst section 57 is available for corrections to awards where the parties feel that the reasoning is inadequate, any such application is likely to increase costs and lead inevitably to further delay in the final publication of the award. Thus it may be that the overall effect of the new guidance is simply an increase in costs, through section 57 applications, without any real saving in time.

The HKIAC reforms are an interesting alternative but rely heavily on arbitral institutions implementing feedback and properly policing their members. In practice, this may be very difficult and it will provide no comfort for the party making the complaint.

Further possible solutions

There are a number of further possible solutions:

• Parties could agree strict deadlines within their arbitration agreement. However, this is likely to involve complex drafting to provide for all possible scenarios in advance. Further, it is not clear what remedy, if any, would exist for breach of such an agreement.
• There could be a shift towards sole arbitrator tribunals, thereby circumventing the need for the tribunal to co-ordinate their award. Hopefully, this would lead to swifter publication. However, this would remove a key benefit of arbitration over court litigation, namely the possibility of having a multi-arbitrator panel at first instance.
• The arbitral institutions could change the terms of engagement such that arbitrators must block a period out of their diary after each trial in which to write their award. However, it would be difficult to enforce such a process in practice.

Overall, however, there is no easy solution to this problem and it may be that the onus simply falls on individual arbitrators to implement the feedback of the arbitration community.