One of the worst characteristics of international arbitration (according to the respondents to the 2015 International Arbitration Survey conducted by the School of International Arbitration at Queen Mary University of London) is lack of speed – a rather worrying finding given the continuing attempts of most of the major arbitral institutions to ensure that arbitrations are conducted in a time and cost effective manner.
In the same survey, 92% of respondents indicated that they would like simplified procedures to be included in institutional rules: 33% as a mandatory feature and 59% as an optional feature.
This is an interesting finding – particularly in view of the fact that a number of the major institutional rules (including AAA, JAMS, SCC, HKIAC and SIAC) do include simplified procedures for expedited arbitration. Perhaps even more interesting is the fact that, in spite of concerns about delay, relatively few international commercial arbitrations are conducted under the expedited procedures that are available.
The 2015 statistics issued by the SCC reveal that only 27% of the cases were administered under the SCC Rules for Expedited Arbitration. SIAC’s statistics reveal that between 1 July 2010 and 1 October 2015 there were only 216 applications for arbitrations to proceed under the expedited procedure of which 132 were successful, roughly 26 per year.
So why is it that expedited arbitration may not be the answer to perceived delay in the arbitration process?
Mandatory or optional
One of the reasons for this lies in the responses to the QMUL survey. Whilst 92% of respondents would like to see simplified procedures included in institutional rules, only 33% favoured their inclusion as a mandatory feature. In other words, the majority of respondents would not want expedited arbitration to become the default procedure. This is reflected in the expedited procedures that have been adopted by arbitral institutions.
The Rules for Expedited Arbitrations introduced by AAA, JAMS and the SCC all only apply if the parties agree to adopt them. Similarly the expedited procedure under the SIAC and HKIAC Rules is only available if certain criteria are satisfied, one of which being that the parties agree.
This requirement for party agreement is a significant constraint in the effectiveness of expedited arbitration procedures. Unless the parties have agreed in advance to adopt an expedited procedure, it is unlikely that a respondent will agree to do so once a dispute has arisen.
There is a widespread perception that expedited arbitration is not suitable for all cases. The SCC’s expedited procedure is recommended for disputes “of a simpler nature” whilst under the SIAC and HKIAC Rules an application may be made for the proceedings to be conducted in accordance with the expedited procedure if the amount in dispute does not exceed SD5m (raised to SD6m with effect from 1 June 2016) (SIAC)/HKD25m (HKIAC). The default values set by both institutions is relatively low, again significantly limiting the availability of the expedited procedure. This in spite of the fact that the value of dispute does not always correlate with its complexity. A high value dispute may require the determination of discrete issues that can be addressed through an expedited process and conversely a relatively low value dispute may not.
Interestingly, 94% of the respondents to the QMUL survey thought that the threshold value at which simplified procedures would be suitable should be set at USD1m – this was in spite of the fact that for 61% of the respondents fewer than 10% of their disputes would fall below this threshold. This highlights the dichotomy that appears to exist between the stated desire for simplified procedures and a reluctance to actually use them in practice.
The expedited procedure
An expedited arbitration procedure requires the parties limit their submissions, comply with shorter deadlines and potentially forgoing stages of the process, for example by agreeing to a documents-only arbitration. The SCC recognises that this may only be appropriate for less complex disputes. However, even with simpler disputes, parties are often reluctant to limit or forgo stages of the process - be that the ability to nominate an arbitrator to serve on a three member tribunal or the ability to make submissions to the tribunal in a hearing – even if it will speed up the process.
The reality is in commercial arbitration that it may not be feasible to complete a process with which both parties feel comfortable within a limited time frame and a balance always has to be found between ensuring a fair process by which both parties have a reasonable opportunity to put their case and a process that satisfies the commercial needs of the parties in terms of timing.
Addressing delay in arbitration
Back in 2007, the ICC Commission published its report on controlling time and costs in arbitration whilst retaining the flexibility of the arbitral process. Following that report, arbitral institutions have progressively introduced a variety of provisions designed to address delay including: the introduction of case management conferences at which the parties and the tribunal can establish an appropriate and time and cost effective procedure for the arbitration; a requirement that arbitrators formally confirm that they are able to devote sufficient time, diligence and industry to ensure the expeditious conduct of the arbitration; the introduction of deadlines for the delivery of awards; and the ability to apportion costs with regard to each party’s contribution to the efficiency of the arbitration.
It will be some time before we see the full effect of these changes and whether they are sufficient to address the problem of delay. That said, one of the most valuable characteristics of arbitration is its flexibility so it’s perhaps not surprising that a range of measures rather than a default expedited procedure is more likely to find favour with the parties.
This blog post first appeared on Practical Law Arbitration Blog on 27 May 2016.