Neil Newing, Counsel, and Ryan Cable, Associate, examine rule updates in the international arbitration market, which suggest that the new trend is likely to promote efficiency and cost-effectiveness, published in Law360.
Though still in its relative infancy, 2018 is shaping up as a year of arbitral institution rule updates.
Arbitral rules have historically developed in trends following pressure on one or two institutions (from users, tribunals or even national courts), with the competition between arbitral centers then driving updates across the board in an effort by each to attract more references. Arguably, the previous trend has seen the widespread introduction of detailed joinder and consolidation provisions to deal better with multiparty/multicontract scenarios, slimmed down procedures for expedited proceedings and rules for the appointment of emergency arbitrators to deal with urgent requests for interim relief. For instance, see the changes introduced in 2012 by the International Chamber of Commerce, in 2014 by the London Court of International Arbitration, in 2016 by the Singapore International Arbitration Centre, and in 2017 by the Arbitration Institute of Stockholm Chamber of Commerce.
A more recent trend appears to be the introduction of measures specifically designed to ensure the promotion of efficiency and cost-effectiveness of arbitral references. This is visible from, for example, the introduction in the 2016 SIAC rules of a provision enabling a tribunal to convene a meeting at any time (and not just at the outset of the case) to discuss the procedures that will be the most efficient and appropriate for the case, and more recently the guidance issued by the ICC in 2017 on the expeditious determination of manifestly unmeritorious claims or defences (thereby ensuring costs and time are not wasted pursuing patently bad arguments). The updates, which have come into effect already in 2018, together with those updates expected to take place during the course of the year, look set to follow this trend, and may well spark the next wave of changes to institutional rules as the various arbitral centers look to each other in competition.
With that in mind, we explore in this article some of the more innovative or “on trend” rule changes that are expected or predicted in 2018.
Dubai International Arbitration Centre
In November 2017, the DIAC announced that it would be introducing a new set of rules in 2018, replacing its current 2007 rules. There is no current date for enactment of the new rules, but the DIAC has published the proposed rules, which include the following:
- The Dubai International Financial Centre will become the default seat for DIAC arbitrations, with the result that such arbitration will be subject to the DIFC arbitration law and the supervisory jurisdiction of the DIFC courts. This addresses concerns raised by users that have arisen from differences between the arbitration law and court practices of the UAE compared to that of the DIFC, notably regarding issues of interim relief and enforcement of awards. Not only is this likely to increase the attractiveness of the DIAC as an institution in the region and improve competition and choice for users, but this should also provide greater certainty to the process and thus is likely to drive improvements in the efficiency of commencing and progressing such proceedings.
- The DIAC will also introduce the previous “trend” of arbitral rule updates by providing for the appointment of emergency arbitrators, the option of commencing expedited proceedings and the ability to seek consolidation of proceedings.
Vienna International Arbitral Centre
The updated VIAC rules came into force on Jan. 1, 2018, replacing the previous 2013 rules. With less ground to cover than the DIAC, the updates implemented by the VIAC could be seen as more progressive and indicative of following the new “trend” of efficient and cost-effective measures. For instance:
- The parties and the tribunal are under an express obligation to conduct proceedings in an efficient and cost-effective manner, with tribunals being expressly permitted to take the contribution by the parties in this regard into consideration in their decisions on costs (Articles 16.6, 28.1 and 38).
- Interestingly, the VIAC secretary general is also able to take into account the tribunal’s contribution to the conduct of efficient proceedings in determining the arbitrators’ fees. In particular, the VIAC secretary general has the authority to increase arbitrators’ fees by up to 40 percent in light not only of the level of complexity of the case but also especially efficient conduct of proceedings, and conversely can reduce them by up to 40 percent for inefficient conduct (Articles 16.6 and 44.7).
- Respondents may now seek security for costs, thus meaning that claimants may need to consider more carefully the merits of their claim before starting proceedings if they may potentially be exposed to such an application (Articles 33.6 and 33.7).
German Arbitration Institute
Much like the DIAC, the German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit or “DIS”) has sought to modernize itself, having not updated its rules since 1998. However, whereas the DIAC has effectively sought to “catch up” with the major arbitral institutional rules, the DIS has modernized and taken the opportunity to implement the new “trend” of efficiency and cost-effectiveness. Of all the updates of 2018, it may be those by the DIS which catch the attention of other institutions. For instance:
- The tribunal “shall, at every stage of the arbitration, seek to encourage an amicable settlement of the dispute” (Article 26). The same provision permits parties to object to any such efforts by the tribunal, however, it would be interesting to see how any such objection would be viewed when dealing with the issue of costs.
- The tribunal and parties shall conduct the proceedings “in a time- and cost-efficient manner, taking into account the complexity and economic importance of the dispute” (Article 27.1).
- Article 27.4 requires that, during the case management conference (which is ideally to be held within 21 days of the tribunal’s constitution: Article 27.2), the tribunal, “[w]ith a view to increasing procedural efficiency … shall specifically discuss” certain issues with the parties including the following measures for increasing procedural efficiency set out in Annex 3:
- Placing limits on the length and number of written submissions, witness statements and expert reports.
- Rendering one or more partial awards or procedural orders on specific issues.
- “Regulating whether the production of documents can be requested from a party that does not bear the burden of proof, as well as possibly limiting document production requests generally.”
- “Providing the parties with a preliminary non-binding assessment of factual or legal issues in the arbitration, provided all of the parties consent thereto.”
International Institute for Conflict Prevention and Resolution
The U.S.-based CPR, introduced its revised Rules for Non-Administered Arbitration of Domestic and International Disputes, which entered into effect in March 2018. In a first of its kind for arbitration rules, the CPR has introduced what it calls the “Young Lawyer” rule: “In order to support the development of the next generation of lawyers, the Tribunal, in its discretion, may encourage lead counsel to permit more junior lawyers with significantly less arbitration experience than lead counsel to examine witnesses at the hearing and present argument. The Tribunal, in its discretion, may permit experienced counsel to provide assistance or support, where appropriate, to a lawyer with significantly less experience during the examination of witnesses or argument.” This is an honorable effort to develop the next generation of arbitration practitioners, and may help promote a more diverse pool of arbitrators (another topical trend), but it remains to be seen whether this will gain traction with other institutions.
The HKIAC last updated its rules in 2013. However, in late 2017, the HKIAC Rules Revision Committee announced that it was considering amendments and released a list of potential updates for interested parties to provide their views. Notably, with respect to the potential new “trend,” the updates presently under consideration include:
- Provisions to permit the parties to pursue other means of settlement post-commencement and to allow them to resume the arbitration upon request (e.g., “Arb-Med-Arb”). Consideration is also being given to whether an arbitrator or emergency arbitrator should not participate in the other dispute settlement process if they may be privy to ex parte communications with any party, except with the express consent of all parties.
- Expanding the grounds for:
- Joinder: possibly to include the joinder of an additional party that is: (i) not bound by the arbitration agreement; or (ii) is bound by a different arbitration agreement under the HKIAC rules, provided that common questions of law or fact arise, the relief claimed arises out of the same transaction or a series of related transactions, and the arbitration agreements are compatible.
- Single arbitration under multiple contracts: allow parties to commence a single arbitration under multiple contracts even where the parties are not completely identical.
- Concurrent proceedings: expressly permit the same tribunal or possibly different tribunals to hear multiple proceedings at the same time or sequentially in situations where common questions of law or fact arise.
- Whether the tribunal may award costs of a third-party funder.
- Whether an early determination procedure should be introduced, allowing the tribunal to determine on one or more issues in a preliminary or separate phase in a summary fashion.
London Court of International Arbitration
While there has been no announcement as yet from the LCIA, it should not come as a surprise if new rules are introduced during the course of 2018. The LCIA may take the opportunity to update its 2014 rules by introducing further measures to promote efficiency and cost-effectiveness, while at the same time addressing the particular issue of single requests for arbitration where there are multiple contracts.
Attention was recently drawn in this regard by the English Commercial Court to the requirement under the 2014 LCIA rules that a request for arbitration must be filed in respect of each separate arbitration agreement, even if all parties and issues are otherwise identical. The English Commercial Court in A v. B considered whether a single request for arbitration was valid in seeking to refer disputes to LCIA arbitration under two distinct contracts (and thus two separate arbitration agreements).
The Commercial Court held that Article 1 of the 2014 LCIA rules requires a party wishing to commence an arbitration under the LCIA rules to submit a written request for arbitration. As such, a single request for arbitration under the LCIA rules was held not to be valid to refer disputes under more than one arbitration agreement. This issue makes LCIA arbitration potentially more expensive than other institutions which permit single requests for arbitration (i.e., ICC (Art 9), SIAC (Rule 6), SCC (Art 14), etc.) as parties with multiple, related contracts containing LCIA arbitration agreements will be exposed to the £1,750 filing fee for each request, in addition to administration fees and legal costs associated with drafting individual requests, followed by the costs associated with an application to consolidate the proceedings. It would thus not be surprising if the LCIA took action to revise its rules sooner rather than later in this regard in order to stay competitive.