New ICDR Arbitration Rules: A Stride Towards Efficiency
The International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association (AAA), has recently issued a revised set of International Dispute Resolution Procedures, effective from 1 June 2014 (Rules). Although the ICDR has modified its original rules since first issuing them in 1991 (1991 Rules), it has not undertaken a wholesale revision of them until now. Below we summarise and comment upon some of the more notable changes the ICDR has made.
A focus on efficiency and economy
The ICDR has tailored the Rules to ensure that parties can conduct arbitrations efficiently and economically. The Rules set out procedures designed to avoid any unnecessary delay or expense, and have also expanded both the arbitrators' powers and the parties' obligations in this regard.
- Conduct of proceedings (Article 20)
Article 20(2) states that the tribunal "shall conduct the proceedings with a view to expediting the resolution of the dispute." To this end, the tribunal can hold a preparatory conference with the parties to discuss and agree upon procedures and deadlines for any submissions. The Rules also invite the tribunal and the parties to consider how best to employ technology "to increase the efficiency and economy of the proceedings." In practice, these are steps that ICDR tribunals have frequently taken without them being referred to in the 1991 Rules.
Article 20(7) requires the parties to "make every effort to avoid unnecessary delay and expense in the arbitration" (emphasis added). Failure to do so can be damaging, as the tribunal "may allocate costs, draw adverse inferences, and take such additional steps as are necessary to protect the efficiency and integrity of the arbitration." Arbitral tribunals will likely exercise their discretion to draw adverse inferences only in the most extreme circumstances; doing so too readily might lead to awards being left open to challenge under the New York Convention.
- Exchange of information (Article 21)
Article 21(1) of the Rules requires the arbitral tribunal to "manage the exchange of information between the parties with a view to maintaining efficiency and economy." This mandate envisages an active case management role for the tribunal.
For example, requests for electronic documents must be "narrowly focused and structured to make searching for them as economical as possible" (Article 21(6)). The tribunal may – in response – "direct testing or other means of focusing and limiting any search." Similarly, if the parties cannot agree regarding pre-hearing exchanges of information, "the tribunal shall require the requesting party to justify the time and expense that its request may involve and may condition granting such a request on the payment of part or all of the cost by the party seeking the information" (Article 21(8)). Broad disclosure requests can be expensive exercises, and so it is likely that the tribunal's power to apportion costs in this way should encourage parties to adopt a considered approach to document requests. This may present a challenge in circumstances where the underlying documents are solely in the hands of one of the parties, and tribunals exercising this power will doubtless take these circumstances into account in making an award of costs under Article 34 of the Rules.
The ICDR's focus on ensuring that the parties exchange information efficiently is most starkly illustrated in Article 21(10) of the Rules:
"Depositions, interrogatories, and requests to admit as developed for use in U.S. court procedures generally are not appropriate procedures in obtaining information in an arbitration under these Rules."
The AAA's press release unveiling the Rules describes this provision as an "[e]xpress exclusion of U.S. litigation procedures," although the wording adopted does allow scope for the tribunal to determine otherwise (or the parties to so agree) in exceptional cases. The ICDR appears to have drafted this provision with a view to ensuring the Rules are in line with other arbitration rules focusing on international disputes, such as the ICC and LCIA rules.
The 1991 Rules provided simply that the award be made "promptly." This rather vague requirement has now been replaced by Article 30(1), which requires that unless the parties agree otherwise, "the final award shall be made no later than 60 days from the date of the closing of the hearing." This is a welcome change, providing parties with some degree of certainty regarding the timeframe for completion of the arbitral process. It remains to be seen how realistic such a short time frame will be in practice, but it is to be hoped that this rule will encourage tribunals to set aside sufficient time in the two months immediately after the hearing to prepare their awards, while the events of the hearing are still fresh in their minds.
In a novel step, the ICDR has incorporated a streamlined procedure into its rules for lower value claims. The International Expedited Procedures (Expedited Procedures) are a key component of the ICDR's emphasis on efficiency and economy. Article 1(4) provides that, unless the parties agree or the Administrator determines otherwise, the Expedited Procedures in Articles E-1 to E-10 apply in any case in which no claim or counterclaim exceeds $250,000 (exclusive of interest and costs). In addition, where no party's claim or counterclaim exceeds $100,000, there is a presumption that the dispute will be resolved by written submissions only.
A distinguishing feature of the Expedited Procedures is the nature of the Notice of Arbitration and the Answer. Under Article 2 of the Rules, the claimant is obliged in its Notice of Arbitration merely to set out "a description of the claim and of the facts supporting it." In contrast, Article E-2 in the Expedited Procedures requires the parties "to present detailed submissions on the facts, claims, counterclaims, setoffs, and defenses, together with all the evidence then available on which such party intends to rely, in the Notice of Arbitration and the Answer." Article E-2 clearly envisages the Notice of Arbitration and the Answer as being – as far as possible – a "one-stop-shop," and certainly far more detailed than the mere "description" required under Article 2 of the Rules.
Article E-6 provides for the appointment of a sole arbitrator by means of a pared-down version of the ICDR's "list method" (discussed further below). The arbitrator is required to issue a procedural order within 14 days of his or her appointment. In expedited proceedings based on written submissions only, all submissions are due within 60 days of the procedural order, unless the arbitrator determines otherwise. Any oral hearing must take place within the same timeframe, and must not exceed a day. Article E-10 provides that the award is to be made within 30 days of the oral or written submissions.
Parties with higher value claims may also choose to use the Expedited Procedures. They would be particularly appropriate for high-value cases in which the issues between the parties are relatively straightforward, and do not require either lengthy submissions or oral evidence, or any substantial exchange of information. For example, a dispute over a discreet point of contractual interpretation might be dealt with efficiently within the framework of the Expedited Procedures. Conversely, disputes involving relatively small claims may nevertheless be extremely complex, in which case the parties might not consider the Expedited Procedures to be appropriate.
Whatever the circumstances, parties should consider carefully whether the Expedited Procedures are likely to be suitable for their purposes, and therefore whether they should exclude the Expedited Procedures in their agreement to arbitrate.
- Express provision for the appointment of arbitrators via the ICDR "list method"
The ICDR's "list method" has been used in practice for many years, despite not being mentioned in the 1991 Rules. Article 12(6) of the Rules sets out the procedure in detail, and this applies where the parties have neither selected an arbitrator nor agreed upon another appointment method:
"The Administrator shall send simultaneously to each party an identical list of [potential arbitrators] … [if] the parties are unable to agree upon an arbitrator(s), each party shall have 15 days from the transmittal date in which to strike names objected to, number the remaining names in order of preference, and return the list to the Administrator … in accordance with the designated order of mutual preference, the Administrator shall invite an arbitrator(s) to serve. If the parties fail to agree on any of the persons listed … the Administrator shall have the power to make the appointment without the submission of additional lists."
The above balances the need both to allow parties to have a say in a key aspect of the arbitral process, and to guard against the difficulties that can arise from solely party-driven appointments. As stated in the introduction to the Rules, they are intended to "provide a balance between the autonomy of the parties to agree to the dispute resolution process they want and the need for process management by mediators and arbitrators." Sophisticated commercial parties, however, may consider the ICDR's list method to be too proscriptive. If parties want to have untethered discretion to nominate an arbitrator, they should consider opting out of the list method, and agreeing an alternative appointment method in their arbitration agreement.
- Parties may be encouraged to mediate their dispute
The introduction to the Rules states that they "are designed to provide a complete dispute resolution framework for disputing parties, their counsel, arbitrators, and mediators." This is reflected in the incorporation into the Rules of the ICDR's International Mediation Rules (the "Mediation Rules"). Article 5 provides that, following the time for submissions of an Answer, the Administrator may invite the parties to mediate in accordance with the Mediation Rules. Unless the parties agree otherwise, any mediation may be scheduled concurrently with the arbitration, thus avoiding any delay in the arbitration proceedings.
- Impartiality and independence
Article 13(2) requires arbitrators to sign a Notice of Appointment (NOA) affirming that they are independent and impartial, and have availability to take the appointment. Arbitrators are required to "disclose any circumstances that may give rise to justifiable doubts as to the arbitrator's impartiality or independence and any other relevant facts the arbitrator wishes to bring to the attention of the parties." This strict and continuing obligation is designed to protect the parties from any appearance of partiality or bias on the part of the tribunal.
Parties are, however, also obliged to protect their own interests in this regard. If a party neglects to raise any doubts it may have concerning an arbitrator's impartiality or independence, it runs the risk of being prevented from doing so pursuant to Article 13(5), which states:
"Failure of a party to disclose any circumstances that may give rise to justifiable doubts as to an arbitrator's impartiality or independence within a reasonable period after the party becomes aware of such information constitutes a waiver of the right to challenge an arbitrator based on those circumstances."
There is no clarification as to what period is reasonable, and this will inevitably involve a case by case analysis. There may be some conflict between this provision and Article 28, which states: "A party who knows of any non-compliance with any provision or requirement of the Rules or the arbitration agreement, and proceeds with the arbitration without promptly stating an objection in writing, waives the right to object." If Article 28 applies to an arbitrator's disclosure obligations under Article 13(2) (which is certainly arguable), then parties may well find themselves estopped from challenging an arbitrator if they do not do so "promptly" – perhaps a shorter timeframe than "within a reasonable period." Whatever the position, parties should adopt a prudent approach by acting as quickly as they feasibly can – and thereby avoid running the risk of losing the right to do so at all.
The ICDR has introduced a new method of handling parties' applications to consolidate two or more arbitrations. Under Article 8 of the Rules a party can ask the Administrator to appoint a "consolidation arbitrator", who has the power – in certain specified circumstances – to consolidate into a single arbitration two or more pending arbitrations administered by the AAA or ICDR. If the parties cannot agree on a procedure for the appointment within 15 days of being notified of the Administrator's intention to appoint a consolidation arbitrator, then the Administrator will make such an appointment without further reference to the parties.
Conduct of party representatives – watch this space
Article 16 states that party representatives must conduct themselves in accordance with such guidelines as the ICDR may issue on the subject. This is a "placeholder" provision, allowing the ICDR to finalise its review of guidelines as to party representation, at which time the ICDR may choose to include all or part of such guidelines in the Rules.
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The ICDR's new emphasis on efficiency in international arbitration is to be welcomed. In these increasingly cost-conscious times, parties expect dispute resolution mechanisms to be drafted with commercial imperatives in mind. The Mediation Rules and Expedited Procedures should assist parties to resolve disputes quickly and at minimum expense, while the increased case management powers granted to arbitrators will certainly challenge them to play a more active role in shaping arbitrations towards a more streamlined model.
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