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Whose arbitration is it anyway?

Users’ complaints about the cost and inefficiency of arbitration are nothing new. The most recent Queen Mary University of London (QMUL) International Arbitration Survey, 2015 (Survey) has yet again highlighted that cost is perceived to be the worst feature of arbitration, closely followed by a lack of speed. In this regard, 92% of respondents favoured inclusion of simplified procedures in institutional rules for claims under a certain value.

While many institutions already have separate rules for dealing with low value claims, in the author’s experience, the need for procedures aimed at shortening the process applies with equal force to any claim (regardless of value) to which there is no credible defence or, in some cases, no defence at all. In court, such claims can be adjudicated upon using a summary or default procedure, meaning they are arguably dealt with more efficiently and promptly. Arbitrators, it seems, are more reluctant to make use of these procedures, which are not expressly authorised under any of the current institutional rules. This may stem from a number of contingent factors including observance of the duty to give each party a reasonable opportunity to present their case and (in some cases, legitimate) concerns about enforcement. The question arises whether something can or should be done to encourage more widespread use of summary procedures to address the continued concerns of users.

Despite the lack of express authority, most institutional rules do give arbitrators a wide mandate when it comes to conducting the procedure of an arbitration. Many now also focus on a requirement for that mandate to be discharged expeditiously:

  • Article 14.5 of the London Court of International Arbitration (LCIA) Arbitration Rules, for example, gives the tribunal “the widest discretion to discharge [its] duties” (at the same time imposing a “good faith” duty on the parties to assist the tribunal in achieving this end).
  • Article 22 of the International Chamber of Commerce (ICC) Rules of Arbitration allows the tribunal to “adopt such procedural measures as it considers appropriate” and requires the tribunal and the parties “to make every effort to conduct the arbitration in an expeditious and cost-effective manner”.
  • Articles 19 of the Stockholm Chamber of Commerce (SCC) Rules and 13.1 of the Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules are in similar terms.

From this (and earlier versions of these rules), some tribunals have concluded that they have the power to utilise summary judgment procedures. For example, in ICC Case No. 11413, the tribunal, while noting that the ICC Rules 1998 and the English Arbitration Act 1996 (the AA 1996) did not provide specific provisions for summary judgment, cited Article 15 of the ICC Rules and section 33 of the 1996 Act to conclude that it was “empowered to grant a motion to dismiss” provided it was “reasonable to do so in the circumstances of the case.” Examples of this are, however, rare.

One relatively recent English decision provides some support for the proposition that the arbitral power to award summary judgment is available in certain circumstances, whilst at the same time highlighting some of the pitfalls in exercising such a power. In Travis Coal Restructured Holdings LLC v Essar Global Fund Ltd, Blair J expressed his disagreement with the general proposition that the adoption of summary procedures by arbitrators amounted to a denial of due process. In his view, “this is not a question that can be addressed in general terms without regard to the particular case”, and the availability of summary judgment “will depend… on the terms of the arbitration agreement and the procedure in fact adopted by the Tribunal”. In that case, the arbitration agreement (contained in a guarantee governed by New York law) expressly empowered the tribunal to hear any issue or issues said to be “dispositive of any claim” in such manner as was considered appropriate. The summary procedure adopted by the tribunal (seated in New York) for dealing with certain defences was nevertheless challenged by the respondent in enforcement proceedings under the 1996 Act.

While the challenge in Travis was found to have no “realistic prospect” of success, the court expressed the view that the procedure adopted, “so far as it was summary”, fell within the scope of powers conferred by the arbitration agreement and not Articles 19 and 22 of the ICC Rules (which were discussed separately). In other words, on the basis of this decision it might be argued that, absent express wording in the arbitration agreement, the procedural powers in Articles 19 and 22 of the ICC Rules (and similar provisions in other rules) are not wide enough on their own to authorise decision-making on a summary basis.

It follows from the above that the power to adopt summary procedures in arbitration remains, arguably, uncertain, and carries with it the risk of challenge, either on issue of the award or in recognition and enforcement proceedings. Parties can take steps to mitigate these risks by agreeing expressly to empower their tribunal to make use of summary procedures (either in the arbitration agreement, as in Travis, or by agreement with the tribunal at the outset of proceedings). However, it might be questioned whether this will result in more routine and widespread use of such procedures in appropriate cases, thereby addressing the concerns of users as expressed in the latest Survey.

One alternative (or further) solution has recently been proposed by the SCC in its newly issued draft rules, due to be finalised in 2017. In a welcome development, Article 39 of the draft rules makes provision for the use of summary procedures in appropriate cases. However, even if adopted, it remains to be seen (given the risk of such procedures being challenged, as in Travis) whether the SCC’s proposal will encourage more widespread adoption of summary procedures. If not, one further step might be to introduce legislative support for these procedures, to put beyond doubt the question of whether or not an English-seated tribunal has the power in the first place. This, of course, presupposes that legislative review is both necessary and desirable more widely (on which the author offers no view given the limits of space). Moreover, such a change would not remove the risk of challenge (due process may still be lacking as a matter of fact, even if the procedure itself is authorised) and issues of enforcement may still arise. But it might encourage tribunals to be more receptive to the use of such procedures, where appropriate. It could truly empower tribunals to go where they have perhaps feared to go in the past. It should be acknowledged that, even with such a change, cases where summary procedures are appropriate may well be relatively few and far between, but the express provision for such powers should encourage a more robust approach on the part of tribunals to what giving a party “a reasonable opportunity to present its case” means in more general terms. This might go some way to addressing the concerns expressed by users about the time and cost of arbitration.

The author would like to thank Sophie Walker, trainee solicitor at Allen & Overy LLP, for her assistance in preparing this blog.

Allen & Overy Kate Davies

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