Compte-rendu du petit-déjeuner du 14 décembre 2017 : « Procédure d’arbitrage accéléré : « Fast and Furious » ? »

Une nouvelle table-ronde « Wake up (with) Arbitration ! » s’est tenue le 14 décembre juin 2017 sur le thème « Procédure d’arbitrage accéléré : « Fast and Furious » ? », avec Melanie Van Leeuwen, avocat et arbitre et Juan Pablo Agentato, Counsel ICC.

Les débats s’étant déroulés en anglais, ce compte-rendu est exceptionnellement dans cette langue.

***

As 2017 is about to end, we must highlight a remarkable arbitration evolution. The International Chamber of Commerce (“ICC”) revised its 2012 Rules by including new provisions aiming at increasing cost-efficiency, transparency and speed in the procedure and at the same time giving the International Court of Arbitration of the ICC (“ICC Court”) significant decision-making powers.

On 1 March 2017, a new set of the ICC Arbitration Rules (“ICC Rules”) entered into force, introducing an expedited procedure handled by a sole arbitrator for claims of lesser value, where the amount in the dispute does not exceed USD 2 million, unless the parties specifically exclude it (Article 30 and Appendix VI, ICC Rules).

Apart from these changes, on the same day, the ICC Court published a Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (“Note to Parties”), intending to provide parties and arbitral tribunals with practical guidance on ICC arbitration.

These are changes to the ICC Rules, albeit not an absolute revolution in the international arbitration practice. In fact, for some, the expedited procedure presents parties with an effective, cost-saving and fast solution, while some others consider that although the expedited rules provide a fast solution, if the arbitration is well managed, a ‘standard’ arbitral proceedings should equally save time and money. This was the main points of the debate around the expedited procedure represented by the speakers.

Our first speaker held an affirmative position, defending the idea that the expedited procedure is “fast and furious”.

 

In order to maintain the popularity of arbitration and fulfill its goals (efficiency and time reasonableness), the ICC follows the footsteps of other arbitral institutions which have offered such procedures for a number of years, including the Swiss Chambers of Commerce’s Arbitration (article 42, Swiss Arbitration Rules 2012, modified in 2014), the Hong Kong International Arbitration Centre (“HKIAC”) (article 41, Administered Arbitration Rules 2013), the Singapore International Arbitration Centre (article 5, SIAC Rules) and the Stockholm Chamber of Commerce, who provides a range of guidelines applicable to expedited procedures: “Rules for expedited arbitrations 2017”.

For years, arbitration has been under “attack” for increased delays and costs (including but not limited to administrative fees, fees and expenses of the arbitral tribunal, as well as experts fees) which sometimes exceed the amount in dispute. Also, arbitration is facing a rigorous “competition market” with the establishment of alternative online centers and service providers, such as fast-arbitrate.com and eJust.com, which are likely to provide innovative solutions for a more accessible, simpler and faster justice system, while proving they are eager to take the market share from traditional arbitral institutions.

Expedited arbitration is like flying a low-cost carrier, and the conduct of the arbitral proceedings need to be protected, in the first speaker’s opinion, for the following reasons:

  1. Arbitration is an alternative to default dispute resolution by state courts’ litigation. The latter provides litigants with the right to a fair public hearing and to present their cases, which are fundamental due process rights. But parties who choose to resort to expedited arbitration in their contract are robbed of such rights. In that case, the expedited procedure cannot be considered as serious alternative dispute resolution method, let alone an attractive alternative.
  2. Expedited arbitration is not what parties have bargained for. If their dispute fulfills the condition of article 30 of the ICC Rules, parties will be made to go through the expedited procedure, even if they are not certain whether they want to apply it or even if they do not know that they can opt-out of it. Such uncertainty at the start of the arbitration becomes the cause of new delays prior to the constitution of the arbitral tribunal.
  3. The expedited procedure imposed on parties turns them into captive customers if they wish to obtain an internationally enforceable award. However, arbitration should respect parties’ legitimate expectations. One wonders, among other things, why ‘small claims’ are automatically suitable for an expedited procedure.

Thus, in order to save their reputation, market share and clients’ business, arbitral institutions have engaged in an ordinary cost cutting process, while providing limited proceedings and less case management techniques for ‘small claims’.

The new article 30 and Appendix VI to the ICC Rules establishing the expedited procedure provides what we can call the six “A”:

  • Appointment of a sole arbitrator
  • Absence of terms of reference
  • After the constitution of the arbitration, no new claims may be submitted
  • A fifty days period after the transmission of the file to the arbitral tribunal to decide about case management
  • A limited submission and document disclosure procedure
  • A final decision within six months.

Furthermore, there is no consensus on the definition of ‘small claims’ and the concept depends on the arbitral institution: for HKIAC, the ceiling to apply expedited procedure is USD 250,000 (article 38 of HKIAC); for the Swiss Arbitration Court the ceiling is USD 980,000 (article 42(2) of Swiss Rules) and for SIAC the ceiling is USD 4.7 million (Article 5(1)(a) SIAC Rules). However, the ICC has chosen a middle ground under article 30(2)(a) of the ICC Rules and article 1(2) of Appendix VI: the expedited procedure shall only apply if the amount in dispute does not exceed US$ 2 million. Such amount will be seen by the concerned parties in relation to its context, but also to the transaction at stake. For instance, a claim for USD 1 million may bankrupt one company, while a claim for USD 1 billion may not have any impact on the existence of another one.

Thus, the ICC has included in such procedure the necessary safeguard to allow cases of greater complexity to be conducted according to the ordinary procedure. But does this mean that parties bringing small claims or taking part in an expedited procedure should be given fewer rights than those with bigger claims which follow the normal arbitral proceedings? The speaker pointed out that:

“Justice in arbitration should be equally accessible to all and should confer the same rights upon all who have to take recourse to it”

In other words, the small amount of the claim is not indicative of the complexity of the dispute. Additionally, article 38 of the 2012 ICC Rules (article 39 of the 2017 ICC Rules) encourages parties to shorten time-limits in their arbitration agreement or during arbitral proceedings. However, the strict emphasis on case management has failed to bring the desired results in practice, due to parties’ failure to decide and choose efficient procedures; they tend to be more concerned about the protection of their right of due process. This failure also applies to counsel and arbitrators, who find it difficult to change the habits of a double round of written submissions and of providing too much evidence (including documents discovery), a long process of oral hearing, post-oral hearing briefs and separate cost submissions. If parties, counsel and arbitrators determine the main useful steps and documents to be applied in their proceeding, ‘normal’ arbitral proceedings could become increasingly efficient.

The first speaker believes that the expedited procedure regime will render users FURIOUS about the way the proceedings are managed and will reduce the legitimacy of arbitral awards. Thus, the key is to encourage the parties, the decision-makers, to use more frequently the possibility of shortening time-limits. Arbitral institutions have established the FATUOUS expedited arbitration only as an excuse to cut costs and save time for claims categorized as ‘small’. But if they can focus on the requirements of the case, while providing parties with true guidance and there is full cooperation of arbitrators and parties, this may lead to cost-cutting and achieve a speedy resolution of the dispute.

In the end, what matters to parties is resolving the case FAST and as cheap as possible without going through FURIOUS proceedings. If the ICC decides to put flexibility in how to better consolidate arbitral proceedings by the implementation of the expedited procedure as well as trusting the substantial efforts from parties and decision-makers, this could lead to expediting arbitral proceedings for not only the ‘small claims’ but also for the ‘normal’ arbitral proceedings in the future.

Our second speaker held the opposite position, defending the idea that the expedited procedure is fast but not “furious”.

 

As the second speaker pointed out, the main features of the new ICC expedited procedure are efficiency and cost saving: the appropriate metaphor would be a flight on your own private jet that takes you to your chosen destination.

As to efficiency, the speaker stressed that “justice must come on a timely manner” and the introduction of the expedited procedure is considered a revival of the origins of arbitration, which was created as a more efficient alternative to the ordinary justice system.

Concerning the second point of cost saving, the longer arbitral proceedings for a relatively small claim last, the higher the arbitration costs will be and they may even exceed the amount in dispute, which makes no sense, either from a business or a commercial arbitration perspective. The only way to solve this problem is by limiting the duration and thus the costs.

Contrary to what the first speaker argued, parties to arbitral proceedings are not kidnapped or trapped in the expedited procedure. The ICC Rules give parties the possibility to opt-out, as they may also do it in the case of the emergency arbitrator, either by excluding it in their contract (via the model clauses provided by the ICC) or before the commencement of the arbitral proceedings. Actually, many parties are opting-in, in practice: according to the second speaker, 7 expedited procedure arbitrations were brought right after the introduction of the 2017 ICC Rules and, to date, about 30 cases have been filed.

In addition, safeguards have been included in article 30(3)(c) of Appendix VI to the ICC Rules, in order to avoid an automatic application of the expedited procedure where, even though the conditions of the date of execution of the arbitration agreement and the amount in dispute are met, the ICC Court determines that it is inappropriate to apply the provisions under the given circumstances (for instance, sensitiveness or complexity of the case), either on its own motion or at the request of any party, after having heard and received comments from the parties in writing. This protects parties’ due process right and does not force them to choose the expedited procedure. The ICC Court will assess this possibility on a case-by-case basis and the party who objects to the application of the expedited procedure will have to justify its objection.

Apart from the foregoing considerations, arbitrations where the amount in dispute does not exceed USD 2 million represent one-third of ICC cases and those arbitrations have typically been handled over the last decades in a sort of expedited procedure, since to date, the overwhelming majority of these cases (80%) are decided by sole arbitrators[1]. The speaker indicated here that if the parties wish to have a three-member tribunal even where the expedited procedure applies, party autonomy will prevail.

Consistent with the principle of party autonomy and the spirit of the ICC Rules, the nomination of the arbitrator must be made within a reasonable time-limit. Outside the expedited procedure, parties have a 30-day time-limit, from the date when the claimant’s request for arbitration is received by the other party, to nominate the sole arbitrator (article 12(3) of the ICC Rules), but such time-limit may be extended, if necessary, by the ICC Court Secretariat. One would presume that this period will be shorter if the expedited procedure applies. This is explicitly stated by article 2(2) of Appendix VI, when it provides that this must be done ‘within as short a time as possible’ by the ICC Court, if the parties fail to jointly nominate the sole arbitrator within the time-limit fixed by the ICC Court Secretariat.

Equally, we are all aware of arbitrators’ busy schedules, which is why the provision mentioned above involves a particular challenge for the ICC Court. The suitable answer is to strike a balance between the experienced arbitrators, who are usually busy and unable to dedicate time for cases of expedited nature and less experienced arbitrators, who are willing to dedicate time, even though they are not aware, at the beginning or do not calculate the actual extent of such commitment, due to their limited experience and the important time and work to be put during expedited proceedings.

The adequate remuneration for arbitrators dealing with expedited procedure cases was discussed by the participants at this point: One participant argued that these arbitrators should be better paid than the arbitrators who handle ‘standard’ arbitral proceedings, given the significant effort they must put within a short time to issue carefully crafted procedural orders and solve the case. Other participants rejected such proposition. We know that this is not the case under the ICC Rules, but on a related question, we do know that the ICC Court has already implemented its new policy to reduce arbitrators’ compensation for those who fail to render a draft award within the 6 months’ period following the last hearing or last submission[2].

Furthermore, when it comes to expedited procedure, the conduct of the proceedings is different. Pursuant to article 3(1) of Appendix VI to the ICC Rules, no Terms Of Reference (“TOR”) are needed[3] and the tribunal will only have to identify the main issues discussed at the case management conference and put them in writing, or alternatively use the transcripts of the meeting, which will then be signed by the parties. However, if, for instance, the place of arbitration is in a jurisdiction which requires that the TOR or a similar type of document be drawn[4], the parties and the sole arbitrator will sign such document to ensure the enforceability of the award.

Once the arbitral tribunal has been constituted, no new claims may be submitted, unless the arbitrator authorizes it, after considering the circumstances of the case (article 3(2), Appendix VI to the ICC Rules). This provision is similar to the provision in article 23(4) of the ICC Rules, but the difference is in the starting point, i.e., the day of the constitution of the arbitral tribunal in expedited procedure arbitrations, or, in standard arbitrations, the date of execution of the TOR. In practice, a difficulty may exist in determining what circumstances can be qualified as ‘exceptional’ and the cost and benefits of admitting a new claim. Once again, the solution is in the hands of the parties and the arbitrators. Parties need to be diligent in the preparation of their request for arbitration and make sure that all the claims are covered in the request.

A Case Management Conference (“CMC”) must be held within fifteen days of the transmission of the file to the tribunal (article 3(3), Appendix VI). To rush things, no in-person meeting is needed and a conference call is the simplest method available in this case.

The arbitral tribunal “may, after consultation with the parties, decide not to allow requests for document production or to limit their number, length and scope of written submissions and written witness evidence” (Article 3(4), Appendix VI). In other words, the exchange of written submissions on the merits is reduced, as well as, potentially, the document production phase. An argument on document disclosure may take place in this case, and to save time, the arbitral tribunal will ban or denied such request. Although one of the parties may view this as a violation of its fundamental due process rights[5], the answer is simple: parties who accept the ICC Rules and do not opt-out of the expedited procedure in their clause may not validly raise such a due process argument.

Also, under the ‘Interim Measures and Emergency Arbitration Proceedings’ (‘EA Proceedings’), the proceedings are conducted within 15 days only and the parties get to make two rounds of submissions and a hearing via videoconference. Why could not parties apply this in expedited procedure arbitration?

Furthermore, in the expedited procedure, the arbitral tribunal is expressly allowed, after consulting the parties, to decide the dispute ‘solely on the basis of the documents submitted by the parties, with no hearing and no examination of witness or experts.’ (article 3(5), Appendix VI). Even if a hearing must be held, in view of the complexity of the case, the arbitral tribunal may conduct it ‘by videoconference, telephone or similar means of communication’ (article 3(5), Appendix VI). As one of the participants pointed out, given that most parties feel that a hearing is absolutely necessary, such an opportunity should not be too easily dismissed in favor of the time factor.

Under article 31(1) of the ICC Rules, the time-limit to render the final award is six months starting from the execution (or approval) of the TOR. This is already the default time-limit contained in the ICC Rules for all proceedings (even if in practice it is frequently extended, although it may be applied more strictly in expedited proceedings). This six-month time-limit for rendering the final award has been kept in article 4(1) of Appendix VI, from the date of the case management conference. But, if an extension is agreed by the parties, the ICC Court will have no basis to interfere, and the sole arbitrator may be left to express regret over the delay. Even if there is no TOR, the main feature of ICC arbitration procedure is still there: SCRUTINY of the draft award, a quality control that helps to ensure the award is enforceable.

The second speaker concluded that the concept of expedited procedure is not new for the ICC, but its implementation in the Rules is new. Given that the arbitral tribunal must act “fairly and impartially to ensure that each party has a reasonable opportunity to present its case” (article 22(4) of the ICC Rules), in expedited procedure due process is respected just like it is in ‘ordinary’ arbitral proceedings, at the same time allowing the procedure to be FAST. But in the end, the expedited arbitration is not FURIOUS as “justice that is not timely is not justice at all”.

[1] In 2015: one third (32%) of the 801 new cases filed within the ICC Court involved claims with an amount in dispute below USD 2 million. In over 80% of the cases, a sole arbitrator was appointed.

[2] ICC Note to Parties and Arbitral Tribunal on the Conduct of Arbitration Proceedings of 22 September 2016, paragraph 45.

[3] The TOR is a ‘distinctive feature of ICC arbitration, not found in the rules of other major international arbitration institutions’- Fry, Greenberg& Mazza, The secretariat’s Guide to ICC Arbitration, para3-826 (ICC Publication no. 729-2012)

[4] Article 10/E of the Turkish International Arbitration law or articles 203,2015 and 2015 of the UAE Code of Civil Procedure

[5] J. Trappe, The Arbitration Proceedings : Fundamental Principles and Rights of the Parties, 15 Journal of International Arbitration  98 (1998)

***

Nous remercions une fois encore nos intervenants pour la qualité de leurs présentations et également les participants, qui ont su enrichir le débat !

Nous publierons prochainement le calendrier de nos tables-rondes 2018 « Wake up (with) arbitration ! ».

Si vous avez des questions, des thèmes de débat à proposer ou si vous souhaitez vous inscrire à l’un de nos rendez-vous, contactez-nous via LinkedIn ou notre formulaire de contact.

A très bientôt !

L’équipe de « Wake up (with) Arbitration ! »

Valence Borgia, Maria Beatriz Burghetto & Caroline Duclercq

 

Publicités