In a drive to improve the efficiency of arbitration, many of the major arbitral institutions including, most recently, the International Chamber of Commerce (ICC), have introduced procedures for expedited or fast track arbitration. However, the major arbitral institutions are not alone in having considered expedited procedures. As of 3 October 2013, parties have been able to arbitrate using the ARIAS Fast Track Arbitration Rules (AFTAR).
ARIAS UK (the UK chapter of the International Insurance Law Association, AIDA) is a not-for-profit society formed to improve arbitration procedures for insurance and reinsurance disputes and to create a source of insurance-practitioner arbitrators.
The AFTAR are intended by ARIAS to provide a faster and lower cost dispute resolution process for insurance and reinsurance related disputes, where the traditional three person panel might be excessive. While AFTAR is aimed at insurance and reinsurance disputes, certain key features are similar to those found in other expedited procedures.
The AFTAR must be voluntarily adopted, unless otherwise incorporated into the agreement to arbitrate. This approach is consistent with the approach adopted by most arbitral institutions, other than the ICC. The rules for expedited arbitrations introduced by the American Arbitration Association (AAA), JAMS and the Stockholm Chamber of Commerce (SCC) all only apply if the parties agree to adopt them. Similarly the expedited procedure under the Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC) Rules is only available if certain criteria are satisfied, one of which being that the parties agree. In contrast, the new ICC expedited procedure rules apply automatically for disputes of up to US $2m in value.
Benefits of the AFTAR
Parties that do agree to use the AFTAR may benefit from the following cost and time saving measures:
- Restricting the parties to a sole arbitrator (to be agreed within 28 days of delivery of a Notice of Arbitration, failing which ARIAS will choose the arbitrator).
- Dispensing with oral hearings and witness evidence in most cases.
- A preliminary hearing for directions within seven days of appointment.
- A four month timescale from commencement to close of submissions.
- Final awards to be published within 14 days of close of submissions.
An additional point of interest is that arbitrators are advised by ARIAS to request cost estimates from parties at the preliminary hearing, which can later be taken into account when deciding whether costs are proportionate to the issues and sums involved.
Why are the AFTAR not more popular?
Unlike the ICC expedited rules, the AFTAR do not set any threshold to trigger their use. It is up to the parties to decide whether the AFTAR are appropriate for their dispute. ARIAS envisaged that parties would be best placed to decide between themselves which disputes are best suited to the AFTAR. The draftspersons of the AFTAR had in mind disputes such as those that:
- Are limited in scope.
- Demand an urgent outcome.
- Are low value.
However, unless an agreement to adopt the AFTAR in particular circumstances has been drafted into a policy or contract, it can be difficult to obtain both parties’ consent to use the AFTAR on an ad hoc basis.
Sometimes a defending party believes it is in its interests to drag out a dispute for as long as possible. Other times, a claim might be of low value to one party (and of low value in absolute monetary terms), but of great significance to the other party. The claim might be capable of establishing a principle or basis for further claims, or an individual’s reputation might be at stake.
The selection process for the arbitrator may create a stumbling block to agreement to use the AFTAR. Parties tend to get comfort from appointing an arbitrator they feel may be more sympathetic to their side of the dispute. When faced with trying to choose a single arbitrator, parties are more likely to fail to reach agreement than party appointed arbitrators are when appointing a chairperson. In choosing the AFTAR, parties may be wary of losing control of the selection process once the 28 day window to agree an appointment expires.
The AFTAR are still relatively new, and parties that do not engage in a great deal of disputes may not yet have experienced an arbitration run under these rules. Parties often prefer to stick to more familiar rules.
Similarly, lawyers that have yet to conduct an arbitration using the AFTAR (or similar expedited procedures) may be wary of proposing it to clients.
Why should you agree?
The list of reasons as to why the AFTAR are not more popular is far from exhaustive. However, the cost and time saving benefits of the AFTAR are there to be shared by all parties to a dispute.
In our experience, the AFTAR have been successful where there has been a single issue in dispute, or where the quantum of the claim would obviously be otherwise dwarfed by legal fees, but where the parties have nevertheless been unable to reach a negotiated settlement through their own efforts.
The costs of an arbitration run under the AFTAR can be kept to the low tens of thousands of pounds. By contrast, arbitrations under the regular ARIAS rules with a three arbitrator tribunal can cost amounts running into the hundreds of thousands of pounds. The timescale is also kept short under AFTAR: awards can be published within five months.
Parties that are looking for a fast, (relatively) low-cost outcome to an insurance or reinsurance dispute would be well-advised to consider proposing the AFTAR (and related expedited procedures) to counterparties. More so if the dispute is not particularly complex and the key issues are capable of being communicated on paper. ARIAS has provided template wording by which parties can agree, at the pre-contractual stage, to separately consider use of AFTAR if a dispute arises.
When considering what dispute resolution clause to include in a policy or contract, it is worth considering for insurance or reinsurance disputes fast track procedures such as the AFTAR. By agreeing thresholds at a pre-contractual stage, such as whether claims up to a particular monetary value should be subjected to a fast track procedure, parties increase the likelihood that fast track procedures become more widely used.
This blog post first appeared on Practical Law Arbitration Blog on 4 July 2017.