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Is it time for arbitration to face its Woolf reforms?

It is no secret that regular users of arbitration are dissatisfied about costs and delay. Despite choosing arbitration as their preferred dispute resolution process, respondents to last year’s Queen Mary University of London survey identified “costs, lack of effective sanctions during the arbitral process, lack of insight into arbitrators’ efficiency, and lack of speed” as the worst features of the process. The sort of active case management that fosters efficiency and reduces cost is sadly lacking in many cases.

The Woolf reforms

The English Courts faced similar criticisms in the 1990s before reforms by then Master of the Rolls, Lord Woolf. His changes put case management firmly in the hands of judges by introducing case management conferences to set a timetable, consider alternative dispute resolution (ADR), narrow the issues and decide on the scope of future evidence and pleadings. The reforms also introduced a new offer to settle procedure, with costs consequences for a party refusing an offer to settle where it does not ultimately “beat” the offer, and a new summary judgment procedure for weak cases. The Woolf reforms are generally credited with increasing efficiency in the English Courts (if not necessarily in reducing cost, later tackled by Lord Justice Jackson). It is suggested that the time has come for arbitration to look to these reforms with a view to tackling cost and efficiency.

The current position in arbitration

In some ways, arbitration poses more of a challenge than the English courts. There is no one set of rules that can be overhauled, and arbitrators are not subject to the same level of scrutiny and accountability as judges and their judgments. However, in other respects, the flexibility inherent in arbitration could be an advantage as there can be no “one size fits all” approach to case management. Most major institutions already require the tribunal to minimise cost and delay, and give the tribunal power to adopt such procedural measures as it considers appropriate. The International Chamber of Commerce (ICC) goes a step further, with a list of case management techniques that may be used to control time and costs, and penalties for late delivery of awards, while the new Singapore International Arbitration Centre (SIAC) rules give tribunals discretion to bifurcate or require submissions on preliminary issues which could dispose of the case.

However, it remains all too easy for busy arbitrators to take the path of least resistance, fixing a timetable at an early stage (often before the issues in dispute are properly pleaded) and thereafter adopting a reactive stance. Often, the end result is many rounds of lengthy submissions, which are not strictly focused on the issues in dispute, with superfluous witness evidence. Investment treaty disputes tend to fare the worst, with submissions often running to over 300 pages, and little or no narrowing of the issues before the final hearing. Post-hearing submissions, entailing extra time and cost, have become commonplace.

Users of arbitration (the parties and their counsel) of course need to share responsibility for making the system work. In his keynote speech at the recent Legal Business International Arbitration Summit, Frank Berman QC called for parties not to take every bad point, as well as every good one. However, no one wants to be the first to take the risk that a tribunal might infer a concession from a failure to address a point in a world where taking every point is the norm. For this reason, the impetus for change has to come from tribunals and the institutions appointing them. Faced with a more proactive approach from tribunals and institutions, it is to be hoped that parties and their counsel would follow suit.

In search of something better

Institutions and tribunals should consider the following measures to improve efficiency and cut costs:

  • Institutions should scrutinise more closely arbitrators’ availability before making appointments, with a view to ensuring that an arbitrator will have sufficient time for case management as well as a final hearing.
  • A case management conference should be held (potentially by telephone) as soon as the issues in dispute are clear (likely to be after the memorial and counter-memorial are filed). Counsel should then address the tribunal on the appropriate case management measures to be adopted, with the tribunal also raising measures of its own initiative. Currently, a procedural conference will often take place shortly after the constitution of the tribunal (too early to focus on narrowing the issues). Similarly, pre-hearing reviews come too late in the process to serve this purpose. Tribunals should be prepared to revisit case management directions as the matter progresses but should be slow to extend deadlines once fixed.
  • Tribunals should limit the number of submissions and the issues to be addressed. They should consider fixing page limits designed to force parties to avoid repetition and to address only new facts or issues arising from the other party’s latest pleading. The number and content of witness statements (factual and expert) should be limited and a strict view taken on document production.
  • Tribunals should give an early steer where possible on any points that appear to be without merit, a distraction from the main issues or on which the tribunal considers that it has had sufficient assistance from the parties. SIAC’s new early dismissal procedure is a welcome innovation in this regard.
  • Other institutions should follow the ICC’s lead by taking steps to expedite delivery of awards (setting a short time frame for tribunals to produce an award, with potential fee reductions for delay).
  • An indicative time frame of 12 months from start to finish should be sufficient for all but the most complex or document heavy disputes. Institutions should be prepared to consider the case management measures which a tribunal has and has not taken when fixing fees for proceedings that take longer than that to reach a conclusion. The ICC and Stockholm Chamber of Commerce (SCC) rules already set time limits for the final award, although experience suggests that they are regularly (and perhaps too readily) extended.
  • Tribunals should be more willing to take into account the parties’ conduct when awarding costs. Cost penalties for missing deadlines, pursuing bad points, or tactical interlocutory applications lacking merit could act as real disincentives to parties dragging their feet or failing to cooperate, particularly if imposed “on the spot”, rather than awaiting the end of the proceedings.

Conclusion

It is apparent that the arbitral system already allows for the sort of case management that could achieve real savings in time and cost for the parties. What is needed is a change in the attitudes of parties and arbitrators, with appropriate guidance and oversight by institutions. Putting responsibility for case management firmly in the hands of arbitrators, just as the Woolf reforms did for litigation, needs to be the first step. Corresponding changes to institutional rules to encourage robust case management would help to address concerns raised in many quarters, including by Bernardo Cremades in his Chartered Institute of Arbitrators’ Alexander Lecture, that robust case management currently tends to attract due process challenges.

Allen & Overy Laura Brierly

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