Institutional Arbitration Rules: Emerging and Continuing Trends

Emerging and continuing trends in institutional arbitration rules enacted in 2018

As we are well underway with 2019, it is time to look back and consider any emerging and continuing trends in respect of the institutional arbitration rules that came into force throughout 2018. While 2017 was a significant year for international arbitration, given that many arbitration institutions amended their arbitration rules[1], 2018 has not been less exciting in this respect. Among the arbitration institutions that have enacted revised arbitration rules in 2018 are the following:

1. Arbitration Rules of the Court of International Commercial Arbitration of the Chamber of Commerce and Industry of Romania (CCIR Rules) in force as of 1 January 2018;
2. Rules of The International Commercial Arbitration Court at The Ukrainian Chamber of Commerce and Industry (ICAC Rules) in force as of 1 January 2018;
3. Rules of Arbitration and Mediation of Vienna International Arbitration Centre (the VIAC Rules) in force as of 1 January 2018;
4. DIS Arbitration Rules 2018 in force as of 1 March 2018;
5. Asian International Arbitration Centre (AIAC) Arbitration Rules (AIAC Rules) (formerly known as the KLRCA Arbitration Rules) in force as of 9 March 2018;
6. Arbitration Rules of the Mauritius International Arbitration Centre (MIAC Rules) in force as of 27 July 2018; and
7. Administered Arbitration Rules of the Hong Kong International Arbitration Centre (the HKIAC Rules) in force as of 1 November 2018.

A number of areas have undergone either small or considerable development in an attempt to make arbitration proceedings better tailored to parties' needs. In particular, fostering cost-efficiency and expediency have been the driving forces for these changes. This would not come as a surprise given that amongst the findings of the latest Queen Mary University of London' International Arbitration Survey was that costs and lack of speed continued to be seen as arbitration's worst features. Below we consider the ways arbitration institutions are trying to tackle these issues.

 

Sole arbitrators and Expedited Proceedings

Historically, a standard provision in the institutional arbitration rules is that if the parties have not agreed upon the number of arbitrators, the case should be heard by a three-member tribunal. Thus, each party is given the opportunity to select an arbitrator of its own choice. The ability to appoint an arbitrator is a key manifestation of the principle of party autonomy in arbitration and is often credited with contributing to arbitration's attractiveness as a method of international dispute resolution. Furthermore, it is argued by some that a three-member tribunal is best suited to tackle a case of any complexity. Indeed, the 2010 International Arbitration Survey confirmed that there was an overwhelming preference for three-member tribunals - 87% of survey respondents - mainly because of a perception of greater neutrality and balance in the award, less risk of a poor decision, the right to appoint one of the arbitrators and the opportunity to benefit from experienced panel, which might be of particular importance where disputes involve a great deal of technical evidence. Not every case, however, warrants the appointment of a three-member tribunal. Consideration should be given to deviating from standard arbitration clauses providing for three arbitrations, with respect to low-value and relatively straightforward disputes. It has become clear that a one-size-fits-all approach to arbitration often does not lead to a satisfactory outcome and, in fact, may significantly increase the costs and duration of arbitration proceedings.

Faced with the need to reduce costs in arbitration, while safeguarding one of the key elements of party autonomy, arbitration institutions are coming up with new solutions to foster time- and cost-efficiency in arbitration. One of the emerging trends involves granting arbitration institutions the power to decide whether a case should be heard by a sole arbitrator or a three-member tribunal. Such decision is taken in consideration of the complexity and circumstances of the particular case, rather than by application of a boilerplate solution. For example, Article 6.1 of the HKIAC Rules states that “[i]f the parties have not agreed upon the number of arbitrators (...), HKIAC shall decide whether the case shall be referred to a sole arbitrator or to three arbitrators, taking into account the circumstances of the case”. Similar provisions are included in the ICAC Rules (Article 30(1)) and VIAC Rules (Article 17(2)). The latter stipulate that in determining whether the dispute will be decided by a sole arbitrator or by a panel of three arbitrators, “the Board shall take into consideration the complexity of the case, the amount in dispute, and the parties' interest in an expeditious and cost-efficient decision”.

Another approach taken by arbitration institutions in an attempt to balance efficiency with party autonomy is the adoption of an expedited procedure. The ICAC Rules (Article 45), HKIAC Rules (Article 42), DIS Rules (Annex 4), VIAC Rules (Article 45) and the CCIR Rules have all opted for this solution. Parties should be mindful, however, that the grounds for applying the expedited procedure are not the same in the aforementioned arbitration rules. Thus, under the VIAC Rules the expedited procedure applies only if the parties have agreed on its application, either in their arbitration agreement or subsequently (Article 45(1)). The HKIAC Rules, however, enable only one of the parties to apply to HKIAC for the arbitration to be conducted according to the rules on expedited procedure. The application should be made prior to the constitution of the arbitral tribunal (Article 42).

 

Case Management Conference

Probably one of the most significant continuing trends in the institutional arbitration rules is the incorporation of explicit rules on case management conference. This, again, is aimed at ensuring greater efficiency and expediency of the proceedings. Case management conferences are not a novelty in arbitration, as they have been considered best practice for the past couple of years now. However, it was only in the latest edition of some institutional arbitration rules (notably the ICC Rules and the SCC Rules) that express provisions on case management conference have been included. Where the arbitration rules do not provide for a case management conference, a more general provision is incorporated, stipulating that the arbitration proceedings will be conducted in an efficient and expedient way. Thus, Article 13.5 of the HKIAC Rules state that “[t]he arbitral tribunal and the parties shall do everything necessary to ensure the fair and efficient conduct of arbitration”. Similar provision is included in the VIAC Rules, according to which the arbitral tribunal will conduct the arbitration “in an efficient and cost-effective manner” (Article 28).In the 2018 edition of arbitration rules, only the DIS Rules and CCIR Rules have opted for a mandatory case management conference. The DIS Rules provide for a narrow timeframe within which the case management conference is to be held (“in principle within 21 days”). Interestingly, they also set out a list of measures and additional points to be discussed with the parties. Some of the suggested measures for increasing procedural efficiency are limiting document production, providing the parties with a preliminary non-binding assessment of factual or legal issues in the arbitration and making use of information technology. It should be noted, however, that even where arbitration rules do not provide for a mandatory case management conference, parties are free to agree on holding such conference.

 

Joinder of additional parties, consolidation of proceedings, multi-contract and multi-party arbitration

All of the revised sets of arbitration rules have come to terms with the new realities in international commercial arbitration, namely the complexity of disputes involving more than two parties or contracts, and the necessity to accommodate these disputes by amending the rules. Parties should be aware that the arbitration rules on joinder of additional parties, consolidation of proceedings (i.e. joining multiple existing proceedings together) and multi-contract and multi-party arbitration differ from one set of rules to another, so they have to carefully choose the rules that will govern their arbitration. Thus, while the HKIAC Rules, DIS Rules, VIAC Rules and CCIR Rules contain provisions regulating the joinder of additional parties and multi-contract arbitrations, the MIAC Rules and ICAC Rules do not provide for consolidation of proceedings. As multi-party disputes have become more and more common (particularly in the construction industry), parties should examine how their preferred arbitration rules deal with joinder and consolidation at the time of drafting the contract.

 

Emergency Arbitrator

Emergency arbitration is becoming ever more popular mechanism for protecting the parties' rights most often in the period between the filing of request for arbitration and the constitution of the arbitral tribunal. Until recently, a party seeking interim relief on an emergency basis had no choice but to resort to the court at the seat of arbitration. In the past couple of years, however, most of the major arbitral institutions have revised their rules to incorporate procedures that allow parties to seek urgent interim or conservatory measures before the constitution of an arbitral tribunal. Under emergency arbitrator procedures, a sole arbitrator is appointed by the arbitral institution on an expedited basis to determine applications for interim relief. Arbitral institutions that have adopted emergency arbitrator mechanisms include of the ICC Rules, Swiss Rules of International Arbitration, SCC Rules, LCIA Rules, and SIAC. Following in the footsteps of these institutions, the HKIAC Rules, CCIR Rules and AIAC Rules have also been updated with rules on interim relief through emergency arbitration. Although emergency arbitration provisions still raise concerns in terms of effectiveness and efficacy of the protection they provide, as uncertainties persist regarding the enforceability of rulings given by emergency arbitrators, more and more arbitration institutions now cater for parties seeking emergency relief.

 

“Reasonable” versus “full” opportunity to present one's case

One of the limited grounds on which a party can ask a court to overturn the outcome is violation of due process. Where a party has been denied a reasonable opportunity to present its case, leading to real unfairness, it can request from the court to set aside the arbitral award. What is a “reasonable” opportunity, however, could be difficult to ascertain as due process language used in arbitration rules and statutory instruments varies. To give a few examples of the 2018 edition of arbitration rules, Article 36(1) of ICAC Rules states that “[t]he parties shall be treated with equality and each party shall be given a full opportunity of presenting his position”. The language used in the MIAC Rules is narrower as the latter provide that “the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case” (Article 17(1) and the HKIAC Rules state that “the arbitral tribunal shall adopt suitable procedures for the conduct of the arbitration in order to avoid unnecessary delay or expense (...) provided that such procedures ensure equal treatment of the parties and afford the parties a reasonable opportunity to present their case” (Article 13.1).Such nuances in the language can blur the due process boundaries and it is uncertain to what extent they can impact the scope of the parties' rights and arbitrator's obligations in the proceedings. It is worth noting, however, that a recent decision by the Commercial Court can give parties guidance in this respect.

In Reliance Industries Ltd and another v Union of India [2018] EWHC 822 (Comm) various challenges to an arbitral award under the Arbitration Act 1996 (the 1996 Act) were made but crucially the claimants argued that contrary to Article 15(1) of the UNCITRAL Arbitration Rules 1976 the tribunal did not give them a “full” opportunity to deal with a new point that had never been advanced by the defendant or explored by the tribunal with the parties at any stage. Further, the claimants contended that the standards of procedural fairness that the tribunal had to meet should have been based on Article 15(1) of the UNCITRAL Arbitration Rules 1976 (which state that “at any state of the proceedings each party is given a full opportunity of presenting his case”), rather than on s. 33(1)(a) of the 1996 Act (which stipulate that the tribunal shall give each party a “reasonable opportunity of putting his case and dealing with that of his opponent”) - arguably requiring that the parties be given a better opportunity to present their case. Popplewell J in the Commercial Court considered this point, commenting that “While I recognise that the words 'full' and 'reasonable' can mean different things, I do not regard the difference as imposing any higher burden on the Tribunal so far as relevant to the current challenge”.

• Popplewell J's decision provides welcome guidance in respect of this discrepancy in the due process language.

 

Encouraging Amicable Settlement

One of the most significant development in the latest edition of arbitration rules is the more outspoken support for amicable settlement of the dispute during the arbitration proceedings. Although practitioners and scholars have been advocating for this for some time now, arbitration institutions have been slow in introducing amendments to their arbitration rules in this respect. Arguments against the involvement of arbitrators in the amicable settlement of the dispute mainly have to do with the perceived loss of arbitrators' impartiality and independence. It is often considered that arbitrators should not adopt a mediator's or conciliator's hat as the arbitrator's preliminary views on the merits of the case may unduly influence his or her assessment, if the settlement attempt fail. Aside from parties' perceptions, arbitrator's role in encouraging settlement can also be influenced by arbitrator's legal background[2]. That legal culture is a significant factor in promotion of amicable settlement is evidenced also by the arbitration rules that support settlement. Only the DIS Rules and CCIR Rules incorporate provisions encouraging settlement subject to the agreement of the parties. Unsurprisingly, the Swiss Rules of International Arbitration are also in favour of this approach. In contrast, the ICC Rules, SCC Rules and LCIA Rules do not contain such provisions.

 

Time Limits

It is not often that one sees provisions setting explicit time limits of the arbitration proceedings in institutional arbitration rules. The ICAC Rules, however, stipulate in Article 38(1) that “[t]he time limits of the arbitral proceedings shall not exceed 6 months from the date of the Arbitral Tribunal Constitution”. The ICAC Rules also set a very short period for rendering the arbitral award. According to Article 60(3) “[t]he Arbitral Tribunal renders the Arbitral Award within 30 days from the date of a case completion of hearing”.The CCIR Rules also set a “term of maximum one month from the date of closing of the proceedings or, as the case may be, from the date of the filing of the post-hearing submissions or, as the case may be, within the time limit agreed upon with the parties”, within which the arbitral award should be rendered (Article 45(2)).

In comparison, the DIS Rules and AIAC Rules set a three-month time limit for the arbitral tribunal to send the final award for review to the DIS, respectively the Director of AIAC. The HKIAC Rules also stipulate a three-month deadline for rendering the award, while the VIAC Rules fix a six-month time limit. Many arbitration institutions, however, are still reluctant to put any constraints on the time limit within which the arbitral award should be rendered, which parties should carefully consider when drafting the arbitration agreement. Aside from any more general conclusions that can be drawn in respect of the most current trends in the development of international commercial arbitration, the revised arbitration rules are yet another reminder that parties need to carefully consider the arbitration rules that will govern the arbitration proceedings in order to better control the time and costs of arbitration.

 

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[1] The Stockholm Chamber of Commerce (SCC) Arbitration Rules and Singapore International Arbitration Centre (SIAC) Investment Arbitration Rules both came into effect on 1 January 2017, the Thai Arbitration Institute (TAI) Arbitration Rules came into force on 31 January 2017, the International Chamber of Commerce (ICC) Arbitration Rules on 1 March 2017, the Kuala Lumpur Regional Centre for Arbitration (KLRCA) Arbitration Rules on 1 June 2017 (but note that Kuala Lumpur Regional Centre for Arbitration rebranded itself to the Asian International Arbitration Centre, the Arbitrators' and Mediators' Institute of New Zealand (AMINZ) Arbitration Rules on 22 May 2017, and the Chinese Arbitration Association, International (CAAI) Arbitration Rules on 1 July 2017.

 

[2] See the results of an intriguing study carried out by Prof Gabrielle Kaufmann-Kohler and Victor Bonnin “Arbitrators as Conciliators: A Statistical Study of the Relation between an Arbitrator's Role and Legal Background”