The Arbitration Act 1996 provides parties with the framework for arbitrations with their seat in
Parties often choose arbitration because of the flexibility the procedure provides, as well as the confidentiality of the process. For international arbitrations, the expertise and neutrality of the decision makers are also important and the enforceability of the arbitral award is crucial. However, arbitration is rarely chosen in the belief that it is faster or cheaper than litigation — arbitration has become expensive and, in some instances, can be slower than litigation before national courts.
The increased cost and delays to arbitral proceedings are often caused by excessive requests for disclosure, unnecessary witness statements dealing with peripheral issues and rival expert reports which, instead of narrowing the issues, push the parties further apart. In some cases, it may well be in the interest of one party to ensure the proceedings are drawn out but, increasingly, clients expect their legal representatives to conduct their arbitral proceedings in a cost-effective manner so as to reduce the overall costs of the arbitration.
There are two stages when the costs of arbitration can be influenced (and, therefore, reduced): in the drafting of the arbitration agreement and during the arbitral proceedings themselves.
Arbitration agreements are usually part of a simple clause in a substantive contract. Surprisingly, however, very little attention is given to the content of the arbitration agreement and lawyers experienced in arbitration proceedings are rarely consulted at this stage. As such, although the parties can shape their dispute resolution mechanism before disputes arise, parties generally ignore this opportunity.
With litigation in
In terms of the arbitration agreement itself, the tendency is for parties to say little (if anything) about how any future proceedings might be conducted. In practice, reliance is often simply placed on a set of arbitration rules such as the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA) or United Nations Commission on International Trade Law (UNCITRAL) rules which will work alongside any procedural laws (such as the Arbitration Act if the arbitration has its seat in London). Yet there is nothing which would prevent, for example, the parties specifying the number of arbitrators in advance rather than relying on the ICC or the LCIA to take the decision for them once a dispute has arisen (where the parties have not otherwise agreed, the ICC and the LCIA will decide whether one or three arbitrators should be appointed). It is self evident that the appointment of one arbitrator will be less expensive than the appointment of three — only one arbitrator needs to be paid and it should be easier to find an early hearing date for one arbitrator than it would be for three. Also, there is nothing which would prevent the parties agreeing at the outset that there should be a fast-track procedure for any arbitration, which the tribunal — once appointed — would have to enforce, yet rarely is such a provision seen in an arbitration agreement. The reason these issues are rarely addressed is often said to be the uncertainty of the type of dispute or the value of a claim which will arise. However, that may be the very reason why it should be addressed in the contract at the outset.
Once arbitration proceedings have commenced, there are many techniques available to control time and costs. There may still be scope at this stage to agree a sole arbitrator but, if that is not possible, at the very least the parties should make every effort to select arbitrators with sufficient time and early slots in their diaries for hearing dates (here, interviewing prospective arbitrators can be very important). However, the most important issue will be the selection of proactive arbitrators with strong case management skills, particularly in a situation where it is feared that your opponent might wish to slow down or extend the proceedings if possible.
While the courts in
Techniques for controlling costs during the proceedings may well include restricting disclosure (the International Bar Association rules on taking evidence in international commercial arbitration are commonly adopted since they only require disclosure of those documents upon which a party intends to rely or those narrowly and specifically requested by its opponent), limiting the number of factual witnesses to be examined and appointing tribunal experts or, at the very least, requiring joint expert reports to be produced in which the party-appointed experts are obliged to set out the areas of agreement between them as well as the areas of disagreement. Each of these techniques can save both time and costs but they require careful application so as to ensure the case to be put to the tribunal is kept clear.
Thought should also be given to separating out parts of the case and allowing the tribunal to decide issues on a preliminary basis or on the basis of documents alone. These techniques are very common in arbitrations (and indeed court proceedings) which take place outside
The final hearing date should be fixed by the tribunal as early as possible and, save in exceptional circumstances, should not be postponed. The length of the hearing should be fixed at the same time so the parties, at the final hearing, will know precisely how much time has been allocated to them (if necessary, using the ‘chess clock’ principle) and each party can decide how it wishes to use its time. Lastly, provided the parties have prepared detailed briefs (or additional written opening submissions), there should be little need to make any oral submissions at the final hearing and those hearings should be reserved for the taking of evidence alone.
While arbitration is expensive, adopting simple — and some might say obvious — techniques to reduce time and cost should not be difficult. If the cost or arbitration proceedings are not controlled by the parties and their representatives, it should come as little surprise to practitioners in this field if tribunals exercise their discretion as to the allocation of costs in a more robust manner in the future.
Gordon Bell is a partner at Pinsent Masons.
LitigationJuly2008
