In a recent decision issued on 7 November 2011 on a request for annulment of a partial award on jurisdiction rendered by the Court of Arbitration for Sport (“TAS”), the Swiss Supreme Court recalled and applied its previous jurisprudence on the interpretation of pathological arbitration clauses (Case 4A_246/2011).

The case arose out of a contract between a football club and an agent relating to the transfer of a player. The contract contained a dispute resolution clause which provided that “[t]he competent instance in case of a dispute concerning this Agreement is the FIFA Commission, or the UEFA Commission, which will have to decide the dispute that could arise between the club and the agent.” After a dispute arose between the parties, the agent initiated arbitral proceedings before the FIFA Players’ Status Committee, a body tasked with adjudicating disputes arising from transfers of professional football players. However, on the basis of its internal rules, the Committee declined jurisdiction on the grounds that the agent was a legal person and not a natural person. The agent therefore requested the Zurich High Court (Obergericht) to appoint an arbitrator, which it did. However, the sole arbitrator subsequently found that he did not have jurisdiction on the grounds that the parties had agreed to submit disputes to arbitration under the rules of a sports arbitral institution.

Finally, the agent initiated arbitration before the CAS. In a partial award issued on 17 March 2011, the CAS ruled that it had jurisdiction over the dispute. However, the football club appealed to the Swiss Supreme Court pursuant to Article 190(2)(b) of the Swiss Private International Law Act (“PILA”) to annul the partial award on the ground that the CAS had erroneously held that it had jurisdiction, one of only two grounds available to a party to challenge a partial award (Article 190(3) PILA).

The football club first disputed that the Parties had even agreed to exclude the jurisdiction of the State courts. However, the Supreme Court, interpreting the Parties intentions according to the principle of normative consensus (“Vertrauensprinzip”), found that this was not the case (para. 2.3.1). The Court noted that while the dispute resolution provision did not expressly mention arbitration, the use of the terms “competent instance” and “decide the dispute” could be understood in good faith to mean that any disputes would be decided by one of the two football bodies in a binding manner, to the exclusion of the State courts. According to the Court, the provision did not give rise to doubts which would warrant a restrictive interpretation of the Parties’ alleged intention to exclude the jurisdiction of the State courts.

Of greater interest, however, is the manner in which the Court addressed the football club’s arguments that the arbitration clause was defective to the degree that it was impossible to apply, or alternatively that it had been extinguished by the decision of the FIFA Commission not to accept jurisdiction.

The Court began by setting out the approach in Swiss law to pathological provisions in arbitration agreements, which it defined as provisions which are incomplete, unclear, or contradictory (para. 2.2.3). As the Court explained, as long as such provisions do not relate to essential elements of the arbitration agreement, such as the binding submission of disputes to an arbitral tribunal, they will not in and of themselves lead to its invalidity. Rather, Swiss law requires courts and tribunals to look for a solution, either through interpretation or if need be by means of completing the contract, which respects the fundamental will of the parties to submit their dispute to arbitration. In this sense, Swiss law imposes a broad approach to interpretation of pathological arbitration clauses, once the parties’ intention to exclude State courts in favour of arbitration is established.

On this basis, the Court ruled that the fact that neither institution identified in the arbitration clause could have, according to their own rules, decided on a dispute between the parties, did not necessarily entail the nullity of the entire arbitration clause. According to the Court, the CAS had properly sought to determine whether the designation of the institutions was so essential to the arbitration agreement that the parties would not have agreed to submit their disputes to arbitration had they known that those institutions could not assert jurisdiction (para. 2.3.2). It further found that the CAS’s determination that the parties would nevertheless have agreed to submit their disputes to arbitration was not based on abstract considerations but rather on concrete indications arising from the facts of the case. In particular, the CAS considered that the parties’ designation of two alternative football associations in the arbitration clause indicated that they were not attached to one particular institution, and that, above all, they wanted to submit their dispute to an arbitral tribunal which was familiar with issues surrounding transfers of professional football players.

Having established that the institutions designated by the parties did not constitute essential conditions of their arbitration agreement, the Court turned to determining whether submitting the dispute specifically to the CAS was consistent with the Parties’ intentions. In doing so, the Court sought to correct the partial nullity of the arbitration clause, to the extent possible, by means of filling in the missing elements. The test applied by the Court was to ask what the parties would hypothetically have agreed to had they been aware of the defects in their arbitration clause (para. 2.3.3). After a review of the facts, the Court concluded that the parties would have agreed to submit any disputes directly to the CAS. In reaching its decision, the Court was particularly influenced by the fact that, by designating FIFA and UEFA, both of which are based in Switzerland, the parties indicated their intention to submit their disputes to an arbitral tribunal with seat in Switzerland, and that they intended such disputes to be decided by a sports organisation which was familiar with the football transfer market. In this context, the Court took into consideration that decisions of the FIFA Players’ Status Committee on transfers of players could in fact be appealed to the CAS.

In sum, the Supreme Court’s decision in case 4A_246/2011 is a good example of the broad and flexible pro-arbitration approach which has characterised the Court’s jurisprudence on pathological arbitration clauses in cases in which the parties’ intention to arbitrate is established. Despite being faced with an arbitration clause with clear references to two institutions which could not adjudicate the parties’ dispute, the Court did not find the clause to be invalid as a whole, but rather engaged in an exercise of filling in the missing elements in order to ensure that the fundamental intention of the parties to arbitrate their dispute was upheld. It is also noteworthy that in the first step of its analysis, namely establishing the intention of the parties to submit their dispute to arbitration, the Court did not consider the absence of the words “arbitration” , “arbitral tribunal”, “arbitrator”, or similar terms in the dispute resolution clause (which it itself acknowledged in para 2.3.1), to be decisive.

The declaratory award (on the tribunal’s jurisdiction) was made pursuant to an arbitration agreement contained in a bill of lading for the carriage of African Fertilizer’s cargo from Romania to Nigeria. The English court had given the claimant, Shipsnavo, leave to enforce the arbitration award and to enter judgment again the defendant, African Fertilizers.

The English court had previously issued an injunction restraining African Fertilizer from continuing an arbitration in Romania, as well an interim declaration that such arbitration proceedings, together with court proceedings commenced in Romania, were both in breach of the arbitration agreement.

Shipsnavo had sought an order for enforcement under s66 of the Arbitration Act 1996 because it was concerned that, should African Fertilizer be successful in its Romanian court proceedings, then it would seek to enforce that judgment under Article 34 of the Brussels Regulation 44/2001, notwithstanding the arbitration award. If Shipsnavo had already obtained an English judgment, then it could seek to resist the recognition of an irreconcilable judgment of the Romanian court.

African Fertilizers resisted the application on the ground that the English court had no jurisdiction to make such an order because the material terms of the award were in purely declaratory terms.

First, it argued that enforcement of an award of a purely declaratory nature is not possible (notwithstanding the ruling – albeit on appeal – in West Tankers). Second, it argued that a judgment entered under s66 of the 1996 Act does not constitute a judgment within the meaning of Article 34 of the Brussels Convention, relying on the ECJ case Solo Kleinmotoren v Boch.

The first limb raised questions of the distinction between “recognition” and “enforcement” in the context of New York Convention awards. African Fertilizers argued that the West Tankers decision was incorrect, that Shipsnavo really intended simply “recognition” of their award in order to defend any adverse Romanian court judgment, and enforcement was not appropriate. The court disagreed, aligning itself with the West Tankers decision and giving primacy to the party’s right to the benefit of the award. The court preferred the plain meaning of “enforce” in s66 of the Act, and cited both textbooks and case law in support of its jurisdiction to enforce a declaratory award.

The second limb was also rejected. The court distinguished the Solo Kleinmotoren decision as being a case about a court approved settlement, in which the ECJ held that a settlement agreement recorded in a court order is not a judgment for the purposes of Article 34(3). Beatson J commented that a settlement is essentially contractual, and while the “submission to arbitration is consensual, the outcome of the arbitration and contents of the award are not”. Further, there were public policy considerations. Citing Briggs on Civil Jurisdiction, Beatson J noted that an English court could not give “leave to enforce an arbitral award and then be required to recognise and enforce a foreign judgment which undermined or contradicted that arbitral award”.

However, there are public policy considerations not considered by the court. Shipsnavo’s objective in seeking to enforce the declaratory award was to pre-empt the enforcement of any irreconcilable judgment that may be given by the Romanian court. What happens if the Romanian courts do find in favour of African Fertilizers? The parties could each have irreconcilable judgments from England and Romania, arising from the same agreement.

While the pro-arbitration stance of the English courts is welcome, this approach can result in inconsistent judgments within Europe. It may be that the current proposals to reform the Brussels Regulation will go some way to temper this risk. The European Parliament’s Legal Affairs Committee (LAC) has proposed maintaining the arbitration exception to the Regulation, but with clarifications for the interface between arbitration and the courts. The first reading of the LAC’s report is reported to take place on 18 April 2012 and the process can take several years to pass through the European parliament. Are those reforms appropriate? And meanwhile, are there risks for the health of the inter-twining systems of justice that are arbitration and litigation?

The background is as follows:

To build a golf course in Moscow, a Russian company (the “Russian Borrower”) had borrowed 22 million Swedish Crowns from a Swedish bank (the “Swedish Bank”) under a loan agreement entered into on 24 January 1990 (the “Loan Agreement”). The Loan Agreement included an arbitration clause providing for arbitration under the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”).

On 19 December 2008 the Swedish bank requested arbitration against the Russian Borrower seeking repayment of a certain capital amount under the Loan Agreement. The Russian Borrower rejected the claim and argued, inter alia, that the Loan Agreement violated then mandatory currency regulations in the former Soviet Union and that the dispute was therefore not arbitrable.

The SCC decided that the seat of the arbitration proceedings should be Stockholm.

The sole arbitrator held in the award, inter alia, that the Russian Borrower had not proved that the Loan Agreement violated then mandatory currency regulations in the former Soviet Union or in Russia and the Russian Borrower was ordered to pay a certain capital amount with interest thereon and compensation for costs.

The Russian Borrower turned to the Svea Court of Appeal and requested, inter alia, a declaration that the award was invalid on the basis that the award included the review of an issue which is regulated in mandatory currency regulations. Hence, the Russian Borrower argued that the issue was not arbitrable and the award should therefore be declared invalid. In the alternative the Russian Borrower requested annulment of the award on the basis that the arbitration agreement was not valid and binding as it violated mandatory currency regulations.

The Russian Borrower argued as follows: Rigorous currency regulations were in force in the beginning of the 1990s, both in Sweden and in the Soviet Union. Import or export of currency without authorization from the proper authorities was not allowed. Nor was the reduction of a loan amount or granting a respite for payment. In Sweden this followed from the Exchange Control Act (Sw: valutalagen (1939:350)) and the Exchange Control Regulation (Sw: valutaförordningen (1959:264)). The provisions were sanctioned by penalty and any currency could be forfeited. Since the Loan Agreement violated these provisions the Loan Agreement was invalid.

Further, the parties could not before or after a dispute had arisen “heal” the invalidity of the Loan Agreement. It was not amenable to settlement. Hence, issues arising out of the Loan Agreement were not arbitrable and no dispute under the arbitration clause could be referred to arbitration. This in turn meant that the arbitration agreement was invalid. The relevant point in time for assessing whether an issue is arbitrable is when the arbitration agreement is entered into.

The Swedish Bank disputed that the award was invalid or that it should be annulled. The issue tried in the award – whether the Russian Borrower had a payment liability under the Loan Agreement – is arbitrable. Further, the question whether an arbitration agreement is valid and binding has to be tried separately. The arbitration agreement is valid and binding under Swedish law which is the governing law of the arbitration agreement. Even though the main agreement may be invalid (which the Swedish Bank disputed) this does not mean that the arbitration agreement is invalid. The currency regulations are of no relevance for the validity of the arbitration agreement.

The Svea Court of Appeal held as follows:

Since the arbitration proceedings had been held in Stockholm it was clear that the arbitration agreement was governed by Swedish law. The question whether the dispute was arbitrable was therefore to be tried under Swedish law and under the Arbitration Act only disputes in respect of which the parties may reach a settlement may be referred to arbitration.

An arbitral award is invalid if it includes the determination of an issue which, in accordance with Swedish law, may not be decided by arbitrators (lack of arbitrability). However, the fact that there is mandatory legislation in a certain area of the law does not automatically mean that disputes in this area are not arbitrable. With respect to international disputes which involve foreign legislation it has to be decided on a case-by-case basis whether the foreign law is such that a voluntary settlement of the dispute before a Swedish court would not be accepted. With regard to economical-political regulations in a foreign state there is often no reason why the mandatory provisions should affect the possibility to settle in Sweden and, hence, the arbitrability under Swedish law. This view is in accordance with an international trend to accept that an international dispute may be settled by arbitration although a corresponding national dispute would not be arbitrable.

The relevant point in time for assessing whether the dispute in question is arbitrable is when the Loan Agreement was entered into, i.e. on 24 January 1990. At that time the parties should be able to foresee the consequences of any lack of arbitrability.

When the Loan Agreement was entered into, Sweden as well as the Soviet Union had mandatory currency regulations. The Swedish Exchange Control Act and Exchange Control Regulation included restrictions on the import and export of foreign currency and securities. The same applied to the purchase and sale of foreign currency and foreign claims. However, there were no restrictions for a Swedish legal entity to enter into a loan agreement whereby a foreign legal entity became indebted. The currency regulations were not aimed at disallowing a creditor-debtor relation as such; but concerned the making of payments cross the borders.

The parties’ claim and debt under the Loan Agreement could not be deemed subject to mandatory legislation in such way that this undertaking was not amenable to settlement. Hence, the parties could reach a settlement regarding this. The issue tried in the award was the debt undertaking; not how any payment should be made. The dispute was thus arbitrable.

Since the mandatory currency regulations did not mean that a non-arbitrable issue was tried in the award the arbitration agreement was valid and binding. This is regardless of whether said currency regulations may entail that parts of the Loan Agreement were invalid.

The ruling of the Svea Court of Appeal seems quite arbitration friendly and is in line with the international trend to maximize the scope of application of an arbitration agreement. The restrictions in the previous currency control regulations in Sweden were narrowly interpreted and the doctrine of separability was firmly adhered to. The currency regulations in the former Soviet Union were not analyzed at all by the Court of Appeal. However, the Court of Appeal seemed convinced that the issue in dispute – whether there is a payment liability under a loan agreement – was not subject to any mandatory currency regulations. Further, the Court of Appeal did not expressly address whether the Swedish law test for arbitrability – that the dispute must be amenable to settlement – should be determined under Swedish substantive law or the lex causae. It has been suggested in Swedish legal doctrine that the question whether the parties are capable of settling the dispute should normally be assessed under the law governing the main contract. If the governing law is foreign law the outcome of that test under foreign law is decisive for the question of arbitrability. In this case it is unclear whether lex causae was Swedish law or any foreign law. The reason why this was not dealt with by the Court of Appeal might be that it had no relevance here as the previous currency regulations, both in Sweden and Russia, did not prohibit debt undertakings per se.

Leave to appeal was granted by the Court of Appeal² and the Russian Borrower has appealed the judgment to the Supreme Court.

Below is a checklist for when someone – a business client, my boss, or a legal department colleague – has informed me that an arbitration is possible, likely, or has just been filed.

1. Check for any pre-arbitration procedures and assess whether to comply with them

Of course, the first thing any litigator will do when presented with a contractual dispute is to check the contract’s dispute resolution and governing law clauses (assuming they were included). But what if the contract requires certain procedures before a claimant may initiate arbitration? For example, there may be a cooling-off period to negotiate, mediate, or escalate disputes to senior management; or the contract may provide that issues are deemed to be waived unless raised within a certain time period. In addition to investigating how best to comply with these procedures, a party may ask whether to comply. A claimant concerned about the clock (and time bars) may prefer to proceed directly to arbitration if doing so will not have unduly adverse consequences.

2. Consider sending letters before action

In his negotiation best-seller, Getting Past No, William Ury describes the value of keeping an objective distance in negotiations over hotly contested issues. He quotes American humorist Ambrose Bierce, “Speak when you are angry and you will make the best speech you will ever regret.”

This is also true of letters, especially those exchanged by parties just before their dispute reaches an arbitration. It can be useful to try to calm the waters with a balanced and well-reasoned letter that summarizes the dispute, avoids any inflammatory language or characterizations, and makes clear exactly what you are requesting and whether you are open to resolving the dispute through negotiation or mediation before arbitration.

Consideration should also be given to sending the letter under the signature of the party rather than counsel, absent a “without prejudice” disclaimer. Even if it does not unblock negotiations, the letter will still make a better exhibit in the arbitration than the nasty correspondence that may have preceded it.

3. Mitigating risks of internal and external communications on the issues in dispute

When a dispute arises, it is natural for the people involved to speculate about the possible causes and potential consequences, often via e-mail. They should be warned that their informal internal communications may be produced in an arbitration (even if they would not have been subject to production in litigation in the party’s own country). Directing communications to the attention of counsel, or at least keeping counsel informed, may help preserve arguments of privilege, where such documents may be subject to production.

While it may not be feasible to cease corresponding with the opposing side, relevant people in the party’s organization should be advised of the importance of conferring in advance with counsel. This may seem common sense, yet often witnesses will be surprised when see their e-mails or faxes produced by the other side in the arbitration. This does not necessarily mean counsel must take over the drafting process, although sometimes they must do so. Even with minimal involvement, counsel can help avoid having letters sent MS Word file that contain meta data with the identity of each person who contributed to the draft.

4. Document retention notices

Although some jurisdictions (mainly the USA) require lawyers to take positive steps to avoid the deletion of relevant documents (spoilation), it generally makes sense to advise all involved in a dispute to preserve their documents. In an international arbitration, documents will often be more important than any witnesses. Once employees have been advised to retain their documents, they can be gathered and reviewed at a future date.

For small and large organizations, a Document Retention Notice (DRN) can be a simple e-mail to employees believed to have documents (“custodians”) explaining the existence of the dispute, the nature of the documents that should be preserved, and how to preserve them. Some companies use software programs that will automatically send DRNs, update them periodically, and flag for human resources any custodians who may be about to exit the company.

5. Identifying and notifying key employees and witnesses

A good reason for preferring the civil-law style of arbitration over the common law is the preference for contemporaneous documents over witness testimony as evidence. This makes obvious sense for most business disputes, where there will generally be a written record of the parties’ course of dealings. (Given recent research on the unreliability of witness testimony, the preference for documentary evidence probably makes sense for most or all forms of dispute resolution, but that’s beyond the scope of this post….)

Where witness testimony is anticipated, it would be wrong to assume that employee-witnesses will be readily available by the time of an arbitration hearing. They may no longer be with the company (or even alive), and those do remain may feel overburdened or reluctant. Thus, it is important to reach out not only to potential witnesses to help set their expectations, but also to human resources and supervising managers who can take steps to ensure they will be available at the time an arbitration hearing takes place.

6. Notifying insurers or prior owners

This may seem obvious to others, but I include this step on my list because it is too easy to overlook despite its importance. Even when there is doubt over insurance coverage, there is no downside to preserving the right to claim coverage later. Many insurance policies require notification within a short time period after the party becomes aware of a covered event, giving the insurer the opportunity to assume the defense and appoint counsel. Notice can usually be short and skeletal, with just enough detail to explain why coverage may exist.

The same is generally true of a seller’s indemnity. Because business acquisition agreements tend to be more restrictive than insurance policies in the scope and timing of what may be claimed, it is advisable to review and carefully follow any contractual requirements for notifying claims.

7. Preparing for any media inquiries

Despite what one may read about concerns over confidentiality in international commercial arbitration, the truth is that only the parties themselves will have any interest in most contract disputes. Investment arbitration, where broader public interests will often be at stake, is an entirely different matter. For cases that generate public attention and interest, parties should be careful about litigating in the media.

First, they should disabuse themselves of any notion that the media will tell the story as they believe it should be told. Good journalists will always want to have the arguments of the other side to present (no matter how ridiculous they may sound to you), and less qualified journalists will just want to present the dispute, ignoring reality. Second, asserting an aggressive position in the media may constrain the other party to escalate in kind, forcing each side to adopt rigid and extreme positions in public that will undermine any settlement efforts.

Where media inquiries are expected, it usually makes sense to have ready a short, general statement (sometimes called a “holding statement”). This can summarize the party’s position, or simply acknowledge the existence of dispute and the parties’ intention not to comment on it.

8. Briefing management (or the client)

When a dispute is about to reach the point of arbitration, counsel cannot over-communicate about its consequences to the party, including to a company CEO or division president. Counsel should be prepared to field questions of what the arbitration will be about, why the parties have been unable to resolve their dispute, how long the arbitration will take, what it is expected to cost, and what the outcomes could be.

9. Conducting an Early Case Assessment (ECA)

Many companies, my own included, consider an ECA to be an essential tool at the onset of a significant dispute, to be completed within a reasonably short time period and updated periodically as the arbitration progresses. The ECA, which is typically (but not always) performed by external counsel, should include a review of relevant documentation, interviews with witnesses, and discussions with potential experts. It should give a party an early sense of probable outcomes and costs of the arbitration, which may also force more realistic and informed negotiations to take place.

In the words of a wise general counsel for whom I used to work, “what the business leader wants to know is whether the deal I can get today is better than the result that I’ll end up with in arbitration.” A good ECA will do exactly this. Many lawyers lose respect and even client relationships because they limit themselves to saying “it depends”. If you have the courage and competency to translate the uncertainty of an arbitration into terms that a business leader can use, you will have a friend for life.

10. Exploring informal resolution options (negotiation and mediation)

The best resolution of a dispute, at least from a party’s perspective, will usually be no dispute at all. There are often multiple paths to attempting a settlement before reaching the arbitration with the usual default being another round of negotiations between the parties. This may be effective at times, but it may also waste an opportunity to engage in mediation at a critical moment.

If mediation is an option, counsel will want to begin preparing the foundation for it almost immediately. The party itself (its employees and management) will need to understand the process, the reasons for proposing mediation, and have reasonable expectations for an outcome.

A frequently asked question is, when is the right time to propose mediation to the other side? In most cases, the answer is the sooner the better. There is a common misperception among some litigators that mediation is effective only after the case has been sufficiently developed. From an in-house counsel’s perspective, this just sounds like a request to spend more of the client’s money before settling.

As with most checklists, it is likely that important items have been omitted, and hopefully these will be pointed out here so the list can be improved. I should note that my checklist purposely does not include appointing external counsel. The issue merits a separate checklist of its own, which should be for another post….
Note: a version of this checklist appears in International Arbitration and Mediation: A Practice Guide (Kluwer 2010), where it is enhanced and improved by my co-author, John Savage.

It has also been correctly stated that “[w]hether or not concerns about international arbitral efficiency are exaggerated, the international arbitration community must face this discontent and, more importantly, take steps to maintain its legitimacy with its users.”³

The problems of cost and delay in high value disputes are not, however, new subjects. In 1989 Lord Mustill posed the following (largely rhetorical) questions with respect to high value commercial arbitrations:

Do the parties work together to achieve a result which is fair and sensible in commercial terms, or do they not rather seek out every procedural advantage to ensure that they win, regardless of the merits? Do the parties really want a speedy decision, or will not the defendant spin out the arbitration for as long as possible? Are the proceedings any longer imbued by informality, or do they not have all the elephantine laboriousness of an action in court, without the saving grace of the exasperated judge’s power to bang together the heads of recalcitrant parties⁴

Building on the foundations laid in the 1985 UNCITRAL Model Law,⁵ the major sets of arbitral rules have gradually evolved over the last 20 years to clarify: (i) the extent to which parties are obliged to conduct arbitrations in a timely and cost efficient manner; and (ii) the circumstances in which arbitral tribunals may in fact be empowered to bang parties’ heads together.⁶

The most recent step in that evolution was the publication of the revised ICC Rules on September 12, 2011, which come into effect from January 2012.

Article 22(1) of the new ICC Rules states:

The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute.

Article 22(1) thus contains an explicit contractual obligation on the parties to conduct their arbitration in a ‘proportionate’ manner. More often than not, however, when large sums of money are at stake and experienced counsel are engaged on both sides, at least one of the parties has a rational incentive to ‘intensively litigate’ the dispute, thus increasing costs and causing delays.

Once a dispute has arisen, it is unrealistic to expect either party to act contrary to its self-interest in pursuit of the ‘higher ideal’ of arbitral efficiency. In such situations, time and costs are best kept in check by empowering tribunals to take ‘proportionality’-based case management decisions. The existence of such a power is common to most modern sets of rules, and is contained in Article 22(2) of the new ICC Rules:

The innovation with regard to case management in the new Rules is Article 24, which makes it mandatory for the tribunal to convene an initial “case management conference to consult the parties on procedural measures” which may be held “in person, by video conference, telephone or similar means of communication”. Article 24 also suggests that the tribunal may adopt one or more of the case management techniques described in Appendix IV.

Appendix IV contains a useful summary of case management techniques (such as bifurcation, limiting document requests, and limiting the length and scope of written submissions and witness evidence). It also emphasizes that “[a]ppropriate control of time and cost is important in all cases. In cases of low complexity and low value, it is particularly important to ensure that time and costs are proportionate to what is at stake in the dispute.”

While the case management techniques set out in Appendix IV will be familiar to all experienced arbitration practitioners, the ‘codification’ fulfils at least two important functions. First, it can reasonably be expected that the explicit encouragement to use such techniques will increase their use by less experienced arbitrators. Second, the explicit enunciation of case management techniques serves further to legitimize their use and hence to insulate awards from challenge on due process grounds.

One member of the CCIAG has suggested that “[t]o fix arbitration, practitioners must return the process to its original state as a streamlined option for dispute resolution.”⁷ In practice, it is likely impossible to reverse the trend by which arbitration has absorbed certain features of litigation, but it remains realistic to hope that tribunals (which, unlike the national court judge, will see through a case from beginning to end) will use their case management powers to ensure that the procedure is as streamlined a possible.

Paul Friedland and Paul Brumpton, White & Case LLP

Decision

X (a Turkish company) and Y (a Polish company) were in dispute over the question of which party was responsible for the delays in the execution of the contractual work. The dispute was brought before an ICC tribunal seated in Zurich. With respect to the disputed question, each party submitted to the arbitral tribunal a technical expert report.

In an award of 30 September 2010, the arbitral tribunal dismissed X’s claim. It partially granted Y’s counterclaim and ordered X to pay to Y EUR 6,587,442.70. In the award, the arbitral tribunal dealt with the submitted expert reports and found the expert report submitted by Y more persuasive than X’s expert report. It held X responsible for the delays in the execution of the contractual work.

X appealed against the award to the Swiss Federal Supreme Court. It argued that the arbitral tribunal, in its award, only dealt with the expert opinion submitted by Y thereby “completely suppressing” the expert opinion submitted by X. Moreover, according to X, the arbitral tribunal should have appointed an expert to receive the technical expertise necessary for the assessment of the decision-relevant questions. By not doing so, the arbitral tribunal violated X’s right to equal treatment and its right to be heard (Article 190(2)(d) PILA) as well as the public policy (Article 190(2)(e) PILA)*.

The Supreme Court dismissed the appeal. It found X’s complaint that the tribunal only dealt with the expert opinion submitted by Y and thereby “completely suppressed” the expert opinion submitted by X unfounded because, before the Supreme Court, X admitted that the arbitral tribunal on pages 96-114 of its award explained in detail why it did not follow the expert opinion submitted by X but gave preference to the opinion submitted by Y.

Also, in the arbitration, X submitted its comments on the expert report filed by Y without at the same time submitting a request that the tribunal appoint an expert to receive the technical expertise necessary for the assessment of the decision-relevant questions. Confirming its constant practice, the Supreme Court held that, if X, at that time, considered that its right to be heard or its right to equal treatment had been violated, it should have communicated its objection promptly.

Comment

This decision touches on an interesting issue, namely, when is an arbitral tribunal obliged to appoint an expert. In the present case, the tribunal did not have to decide this question (the appeal was rejected because the appellant had not pursued this request in a timely manner during the arbitration).

However, it is worthwhile recalling that the position of the Supreme Court on this point is clear. The parties have a right to the appointment of an expert by the tribunal (such right being a part of their right to submit evidence and be heard) if the following preconditions are met: (i) the party who intends to rely on this right must have expressly requested the appointment of an expert; (ii) the request must be made in proper form and in a timely manner; (iii) if required by the tribunal, the requesting party must advance the costs of such expertise; (iv) the expert evidence must relate to facts relevant for rendering of the award; and (v) the expert evidence must be necessary and proper for proving such relevant facts.

This last precondition is met where the facts concern technical issues or matters which in some other way require special knowledge and cannot be proven otherwise, and where the arbitrators do not have such special knowledge (decision 4P.320/1994 of 6 September 1996).

Where these preconditions are met, and unless its members possess the necessary technical or other special knowledge, an arbitral tribunal violates the right of the parties to be heard if it rejects a request for the appointment of a tribunal-appointed expert (decision 102 Ia 493, unpublished note 8; decision 4P.23/1991 of 25 May 1992 note 5b).

_____
* Article 190(2) of the Swiss Federal Statute on Private International Law (PILA) permits a final award to be set aside for a limited number of reasons. Under Article 190(2)(d) PILA, an award can be set aside if the parties’ right to equal treatment or their right to be heard was violated and, under Article 190(2)(e) PILA, an award can be set aside if it violates public policy.

Georg von Segesser / Petra Rihar

In 2000, UEG Araucária, a Brazilian energy company, entered into a series of agreements with several Bechtel entities for the engineering and construction of a $210 million power plant in Araucária, Brazil. Three of the contracts contained identical arbitration and choice of law clauses. The arbitration clause provided that “[a]ny dispute, controversy, or claim arising out of or relating to the Contract, or the breach, termination or validity thereof . . . shall be finally settled by arbitration” under the ICC rules, “except as these rules may be modified herein.” Each of the contracts also had multiple New York choice-of-law clauses, one of which provided that “[t]he law governing the procedure and administration of any arbitration instituted pursuant to [the arbitration clause] is the law of the State of New York.”

In January 2008, the power plant’s steam-turbine generator failed. That September, UEG Araucária submitted a Request for Arbitration to the ICC, claiming breach of contract, negligence, and fraud by Bechtel.

Bechtel responded by filing an action in the New York state court seeking to stay the arbitration and dismiss the claims, claiming that UEG Araucária’s claims were time-barred under New York and Brazilian law. Notwithstanding the arbitration agreement between the parties, as a basis for the state court’s jurisdiction, Bechtel cited section 7502(b) of the New York Civil Practice Law and Rules, which states:

“If, at the time that a demand for arbitration was made or notice of intention to arbitrate was served, the claim sought to be arbitrated would have been barred by limitation of time had it been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration on an application to the court.”

UEG Araucária removed the action to federal district court and filed a counter-application to compel arbitration of the timeliness question. The district court denied UEG Araucária’s motion to compel, finding that the contracts between UEG Araucária and Bechtel evidenced “the parties’ clear intent to select New York law for arbitration procedure . . . including the rule limiting the power of arbitrators to hear preliminary questions of timeliness.” The district court found the claims were indeed time-barred and granted Bechtel’s request for a permanent stay of the arbitration.

UEG Araucária appealed the ruling to the Second Circuit, which reversed the district court’s decision while acknowledging that “the question is a close one.” The court said its task was “to divine whether the parties intended at the time of contracting to have issues of timeliness determined by the arbitrator.” Its analysis would also be informed by the requirement under the Federal Arbitration Act to “construe the parties’ intentions ‘generously’ in favor of arbitrability.”

The appellate court acknowledged an apparent tension between the arbitration clause and the choice-of-law clauses in the contracts between the parties. The arbitration provision “tends to support the view that any disagreements about the contract—which would include disputes about whether a relevant statute of limitations bars arbitration, as well as disputes about who should decide the statute of limitations issues—shall be decided by arbitration.” However, the choice-of-law provisions “cut the other way, suggesting that, because, under New York law, a party can assert a statute of limitations in court as a bar to arbitration, . . . a party is permitted to have a court decide timeliness issues.”

The panel concluded that “the contracts in this case are at least ambiguous as to whether Bechtel and UEGA agreed to permit recourse to C.P.L.R. 7502(b).” As opposed to the broad arbitration clause, the choice-of-law provisions “make no mention of timeliness disputes or of any right of the parties to resort to the courts in any circumstances.” Moreover, as the U.S. Supreme Court recognized in Mastrobuono v. Shearson Lehman Hutton, Inc., “general choice-of-law clauses . . . may be read to address only ‘substantive rights and obligations, and not the State’s allocation of power between alternative tribunals.’” The court concluded that the contracts between UEG Araucária and Bechtel evidenced “no clear statement that a statute of limitations defense should be withheld from the arbitrator.” Lacking such clear intent, the panel resolved the ambiguity in favor of arbitration, and held that the arbitrator, not the district court, should decide the timeliness issue.

The Bechtel decision illustrates how laws like New York’s C.P.L.R. 7502(b), which carve out a particular role for courts in otherwise arbitrable disputes, are of very limited use given the capabilities of arbitrators and the expansive pro-arbitration reach of the FAA. In purporting to provide for an initial judicial role in arbitrable disputes, New York’s § 7502(b) is reminiscent of a former provision in the English Arbitration Act that allowed a claimant that had entered into an arbitration agreement to nonetheless obtain summary judgment in court before the matter was referred to arbitration. That provision, which created an unnecessary judicial barrier to resolution of claims through arbitration, was sensibly deleted in the 1996 revision of the Act. Likewise, it is unclear why a law like § 7502(b) should carve out the particular question of timeliness for a court to review, when a claim as a whole is subject to arbitration. Arbitrators are no less capable of addressing whether a claim is time-barred than they are of resolving any other legal issue.

Moreover, under the FAA as interpreted by the Second Circuit, the applicability of § 7502(b) is so narrow as to render it virtually meaningless. If any choice-of-law provision would seem to allow for application of § 7502(b), the one between Bechtel and UEG Araucária would be it: the agreements provided that New York law would govern not only the parties’ substantive legal rights, but also “the procedure and administration of any arbitration” between the parties. But the court still found that because there was no clear statement that a court should be able to resolve the timeliness issue in particular, the issue was for only the arbitrator to decide.

The Bechtel panel’s reasoning thus raises the question of what, exactly, is left for laws like § 7502(b) to do if even choice-of-law provisions that apply to the arbitral process itself do not allow for resort to them. According to the Second Circuit, for § 7502(b) to apply, the contracts would have had to provide expressly that a court could resolve a limitations question. However, if a contract had such an explicit provision, then § 7502(b) likely would not be necessary at all. After all, even if § 7502(b) did not exist, parties could still draft contractual language that generally provides for arbitration of disputes, but expressly allows a court to resolve any timeliness questions. If parties to an otherwise broad arbitration agreement really want to allow a court to resolve limitations questions, nothing is stopping them from writing that into the agreement without reference to § 7502(b). Thus, laws like § 7502(b) add little; Bechtel’s narrow construal of when § 7502(b) applies effectively limits its application to instances where its existence is unnecessary. This is probably just as well, as any broader application of such a provision might well run afoul of the FAA (although New York state courts have held in the past that § 7502(b) is not facially preempted by the FAA).

More broadly, the Bechtel decision implicates the question whether certain aspects of an arbitration agreement can broaden the judicial role in a dispute. The Second Circuit’s assessment of whether § 7502(b) applied in the dispute between UEG Araucária and Bechtel is something of a mirror image to the question before the U.S. Supreme Court in its 2008 decision in Hall Street Associates, L.L.C. v. Mattel, Inc. In Hall Street, the Court addressed whether parties can agree to expand the scope of post-award judicial review beyond that expressly permitted by the FAA (the answer was no); Bechtel addressed whether a court may adjudicate certain aspects of a claim before the arbitration commences if the governing law of the arbitration agreement provides for it. In both instances, the courts limited the scope of the judicial role considerably, although not to the same degree. Unlike in Hall Street, the Bechtel panel found that parties could, theoretically, agree to have a court adjudicate part of a claim before it is referred to arbitration. This is because federal law does not restrict pre-award adjudications by courts where the underlying arbitral agreements allow for it – unlike the way the FAA, under Hall Street, does confine the bases on which courts may review final arbitral awards, even if the governing arbitration expressly purports to expand such grounds.

Bechtel illustrates that, although the scope of pre-award adjudication is not nonexistent, it is very narrow and requires clear intent by the parties. As Bechtel confirmed, a law like § 7502(b) is only applicable where it is expressly invoked in an agreement; it otherwise is not enforceable as a default rule under a particular governing law. Parties that do want to allow for the possibility of judicial involvement in certain aspects of disputes otherwise subject to arbitration would be well advised to make their particular intentions extremely clear in their agreements.

Finally, the Bechtel panel’s rejection of the application of § 7502(b) could also cause certain observers to sigh with relief. Because of New York’s economic importance and its well developed commercial law, a New York choice-of-law clause is a very common feature of international commercial agreements. When parties draft agreements that contain both New York choice-of-law clauses and arbitration clauses, it is unlikely that they are cognizant of § 7502(b) in particular. It is even less likely that many of them expect and want to supplant the arbitrator’s jurisdiction if timeliness issues ever come up in a dispute between the parties. A contrary ruling in Bechtel might have caused corporate contract drafters to think twice before reflexively choosing New York’s as the governing law of the contract. Thus, the Bechtel panel, in rendering a particular provision of New York law virtually nugatory, might ironically have been doing a favor to New York law more generally.

By Gary Born and Adam Raviv

In AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647, the claimant was a Kazakh subsidiary of a US energy company and operator under a concession agreement with the Kazakh owner, a company deriving its rights from the State. In an earlier dispute, the Kazakh Supreme Court had ruled that the arbitration clause (providing for a seat in London) contained in the concession was invalid, and the owner sought to rely on this in subsequent proceedings which it brought before the Kazakh courts seeking information as to the value of the concession assets. The operator then sought and obtained from the English High Court an anti-suit injunction to prevent the owner from bringing proceedings covered by the arbitration agreement in the Kazakh courts.

There were four issues on appeal before the Court of Appeal. Of these, the first and most comprehensively examined was what was called the “jurisdictional issue”, i.e. whether the court had jurisdiction to grant the anti-suit injunction in a situation where no arbitral proceedings were afoot. At its heart was the inter-relationship between the UK’s Arbitration Act of 1996, and the broad, general powers of the courts to issue injunctive relief under the Supreme Court Act 1981. The Court described the issue as having been “floating around, recognised or unrecognised, for some time”.

The Arbitration Act (under its section 44) gives the courts powers to issue injunctive relief, such as anti-suit injunctions, “for the purposes of and in relation to arbitral proceedings”. The lower courts rejected the operator’s argument that this included a power to issue anti-suit injunctions where no actual or intended arbitration was underway, and by the time of the appeal it was common ground between the parties that the Arbitration Act contained no such power.

Instead, the parties’ disagreement centred around whether the Arbitration Act was the sole basis by which the court might award anti-suit injunctions to uphold the arbitration agreement, or whether the courts’ broader powers under the Supreme Court Act might provide a basis for the injunction.

The opening section of the Arbitration Act sets down a provision that encapsulates one of the main principles of the Act, namely that the court should not intervene except as provided in the relevant part of the Act. The owner argued accordingly that the court’s general powers were inapplicable. As often happens when courts are asked to limit the extent of their jurisdiction, the Court of Appeal, however, was unconvinced. It conceded that in situations where section 44 did apply, use of powers under the Supreme Court Act would be “wrong as a matter of principle”. But, as the parties had agreed, section 44 did not apply where no arbitral proceedings were ongoing or even in prospect. If the Arbitration Act provided that the court should not intervene except as provided in the Act, one could ask – “intervene in what?”. Since there were no arbitral proceedings to intervene in, the Court had little difficulty in finding that its own broader powers allowed it to issue the injunction.

In reaching its decision, the Court was clearly influenced by practical considerations of time and cost. In a previous decision, Vale do Rio Doce Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] EWHC 205 (Comm), the High Court had held that declaratory relief was a matter within the arbitral tribunal’s substantive jurisdiction and it would be proper for the tribunal to form and determine the application for relief itself, in accordance with the provision in the Arbitration Act that it is primarily for a tribunal to rule on its own substantive jurisdiction. According to the Court of Appeal however, since the Supreme Court Act gave the court jurisdiction to grant the injunction anyway, requiring the operator to commence arbitration merely to put to the tribunal a question of its own substantive jurisdiction would be “far-fetched and unrealistic” – especially so when a tribunal is not obliged to rule on its own jurisdiction.

So is the decision pro-, or anti-arbitration? There’s a case for both. On the one hand, it could be argued that the courts have seen fit to limit the principle behind section 1 of the Arbitration Act, that they should not intervene in matters governed by the Act. But, on the other hand, they did so to uphold an arbitration agreement in circumstances to which it was considered (by both parties) that the Act did not in fact extend. The Supreme Court judgment in Dallah Real Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46 is cited in the judgment, and relied upon to underscore the Court of Appeal’s view that disputes on jurisdiction are likely to come before the court at some point in any event, so why put the parties to the trouble and expense of initiating arbitral proceedings simply for the purpose of determining jurisdiction. The agreement was between two Kazakh entities, for performance in Kazakhstan, but the arbitration clause provided for a seat in London. The English courts were prepared to uphold and enforce an English arbitration agreement, even if the parties themselves were not prepared to bring an arbitration to do so.

Andrew Cannon is a Senior Associate at Herbert Smith LLP

This issue was relevant to the appeal because the anti-discrimination legislation in place included in its definition of “Employment” the words “a contract personally to do work“. One obvious way of escaping the legislation would be if there is no contract in place between the arbitrators and parties in the first place. Both the Commercial Court and the Court of Appeal were willing to find that there was a contract in place without resolving the academic debate surrounding this issue. Also none of the parties before the Supreme Court were willing to delve into the issue.

In their 1989 second edition of Commercial Arbitration Mustill and Boyd were the main proponents of the argument that the nature of the relationship between the arbitrator and the parties could derive from the arbitrator’s status. They identified some key problems with the alternative contractual analysis. For example, how did the contractual analysis fit with the powers of the court in relation to removal of an arbitrator? That the parties may jointly agree to the removal may be consistent with the termination of a contract, but an application may also be made by one party to a national court in certain circumstances. Some of these circumstances may be categorised as instances of repudiatory breach of contract by the arbitrator (i.e. failure to conduct the arbitration proceedings properly) but even then there may be limitations such as an additional requirement that the action, or inaction, of the arbitrator causes substantial injustice. Some of the other circumstances which justify removal may not so readily fit into a contractual analogy. For example justifiable doubts as to the impartiality of the arbitrator do not necessarily equate with the arbitrator being in breach. What about the arbitrator’s obligation to act fairly? Mustill and Boyd pointed out that although the parties benefit from this obligation, it is more of a general obligation to act in accordance with public policy concerns. Often this obligation will be provided for in the national law. The broader nature of this obligation may be said to take it outside the realms of a private contractual duty. Also what about the limited liability of the arbitrator who often has immunity from suit in a similar way to a judge? This is an uncomfortable restriction on the ability of the parties to sue the arbitrator in accordance with the usual remedies which would be available to them under contractual theory.

Mustill and Boyd’s answer to these difficulties with the contractual analysis was that the nature of the relationship between arbitrator and parties could be derived solely from the status of the arbitrator. They noted: “it seems legitimate to regard the office of arbitrator as involving some degree of permanent status: and this prompts the idea that status alone is all that is needed by way of theoretical underpinning for the mutual rights of the arbitrator and the parties. The Court would simply assert, essentially on grounds of public policy, that certain rights and duties are conferred on the arbitrator by the very fact of his having assumed that office.”

However, the pure status theory has since been broadly rejected by most commentators (even Mustill and Boyd accepted that there was scope for consensual terms alongside status). The trouble is that contractual theory neatly explains the finer details of the relationship. An arbitrator may be entitled to reasonable fees under national laws, but often there is an agreed rate of remuneration. The arbitrator will also generally be bound to conduct the arbitration in accordance with the parties’ agreement (although this may be limited by national law provisions providing that the arbitrator must adopt procedures suitable to the circumstances of the case). The parties may also jointly agree to remove an arbitrator. These issues are best accommodated by contractual theory. At a broader level it is also not hard to support a contractual analysis as underlying the relationship. When an arbitrator accepts an appointment he or she agrees to resolve the dispute between the parties and the parties in turn agree to remunerate the arbitrator for this.

Is there any room left for the pure status theory? It may be possible for the relationship between an arbitrator and the parties to be governed solely by the national law, without recourse to contractual theory. For example, under the English Arbitration Act the arbitrator has a statutory duty under section 33 to provide a fair resolution of the matters falling to be determined and the parties are under a statutory obligation to comply with the arbitrator’s directions under section 40. An arbitrator can also enforce his right to remuneration under section 28.

The trouble is that it will be rare that an arbitration proceeds without any agreement which is capable of contractual analysis. Even the English Arbitration Act expressly defaults to the parties’ agreement in certain circumstances. For example, the parties may agree to restrict the powers of the arbitrators under section 38 and may agree procedural and evidential matters under section 34. Arbitrations will generally incorporate institutional rules which form the basis of an agreement about certain procedural and other issues. Even an ad hoc arbitration will proceed on the basis of the parties’ agreement.

However, it is equally rare that the relationship between the arbitrator and parties is solely capable of a private contractual analysis for the reasons already suggested by Mustill and Boyd. Its no surprise therefore that many jurisdictions have interpreted the relationship as a hybrid one. The English Court has said that it has found it impossible to divorce the contractual and status considerations and that: “in truth the arbitrator’s rights and duties flow from the conjunction of those two elements.” Many jurisdictions have adopted this approach, recognising that there is a contract in place but that it is a sui generis contract – a contract which is overlaid with a special adjudicatory function which is public in nature. Research conducted in May 2006 by an ICC working committee involving representatives from over 20 countries concluded that the majority view was that arbitrators and parties are seen to be bound by a ‘special contract’.

While there may be a broad acceptance of the contractual theory, there are many more competing theories relating to how precisely the relationship between the arbitrator and parties work. Is it an agency agreement or an agreement for the provision of services? Both analyses have been said to ignore the adjudicative role of the arbitrator. Does the arbitrator become a party to the original arbitration agreement between the parties or is there a new and separate agreement which arises when the arbitrator is appointed? Is the contractual analysis affected by the introduction of an institution into the equation? Views differ but it does seem that the pure status theory is dead and buried. It was certainly not a viable escape route out of the anti-discrimination legislation in Jivraj.

Matthew Gearing and Angeline Welsh, Allen & Overy

One good example is A Few Words on the Tension Between Efficiency and Justice, posted here on June 2, 2011 by José Astigarraga. While accepting in principle that “the arbitral process generally has become too much like litigation, and needs to be more efficient and less costly,” he argues that lengthy evidentiary hearings, at which the testimonial skills and character of witnesses are tested, are often needed to counter the cognitive biases of arbitrators. He is concerned that in the “zeitgeist focusing on the need for efficiency and speed in arbitration,” there is a risk of over-correction that will result in reduced hearing time.

The post is philosophically in the same vein as a broad defense of the status quo offered by William (Rusty) Park, in Arbitrators and Accuracy, 1(1) Journal of International Dispute Settlement 25 (2010). The article makes the case that parties and tribunals should ultimately place a greater premium on the truth-seeking function of the arbitral process than on the amount of time taken to arrive at a decision. Each of these authors reaches the same conclusion, which José aptly sums up with a metaphor. “Good justice is like fine wine,” he writes, “it takes time.”

From Oenology to Rapid Transit
The defenses of the status quo make useful points about the delivery of justice. To contrast the vinification of arbitration with a metaphor taken from my current trip, however, I would say they have nonetheless missed the train with respect to what the efficiency trend has been about and where it is heading next.

First, I am not aware of any proposals to eliminate hearings or witness examinations, nor suggestions to take efficiency to the point of denying parties a fair opportunity to make their case or establish their defense. Granted, those of us in-house counsel wanting reform may not be rocket scientists (actually, I know an in-house lawyer who was a nuclear engineer in a previous career, so I should speak for myself), but we’re certainly not going to advocate change that goes against our interests. Tossing a coin would be a speedy and efficient form of resolving commercial conflicts, but we would not last long in our jobs if we included it in contractual dispute clauses.

Indeed, there has been much more nuance and sophistication in the efficiency trend than simply “arbitrators being encouraged to move things along,” as José referred to it. Most calls for change, and the results they have produced so far, would do nothing of the sort. One notable reform, for example, would be for tribunals to dispose of key issues early in a case, when doing so would be appropriate before an evidentiary hearing. An example is an important legal issue that requires no factual evidence to be decided, such as the validity of a contractual limitation of liability. Resolving early whether the maximum recoverable damages are $500,000 or $20 million would have significant consequences for how – and whether – the parties continue to litigate the remainder of a case.

Other calls for reform have included placing restrictions on the time it takes a tribunal to issue an award after the close of hearings, limiting the amount of documentary disclosure, streamlining the number of written submissions, and focusing hearing time on issues that are actually material to the resolution of the case.

The responses have been initiatives such as the ICC’s revised Arbitrator Statement of Acceptance, Availability and Independence; the International Center for Dispute Resolution (ICDR) Guidelines for Arbitrators Concerning Exchanges of Information; Rules for the Facilitation of Settlement in International Arbitration issued by the Centre for Effective Dispute Resolution (CEDR); and Protocols for Expeditious, and Cost-Effective Commercial Arbitration from the College of Commercial Arbitrators (CCA). In addition, the International Institute for Conflict Prevention and Resolution (CPR) is currently finalizing its Guidelines on Early Disposition of Issues in Arbitration.

True, there are also some notable new fast track rules, but the possibility of expedited procedure has always been available to parties and so is nothing new. Significantly, none of the other above-mentioned reforms, if implemented by tribunals, would require arbitrators to “move things along” by shortening of hearings or total case time. Instead of getting in-house counsel sacked for recommending them, they should have the opposite effect of making it more commercially palatable for us to recommend arbitration.

Second, the key phrase here is “if implemented by tribunals”. The emerging issue is not whether arbitration should be more efficient, but who is making it so, and how they are doing it. And this brings me to my current trip from Milan.

The Efficiency Trend’s Next Destination
The Milan Chamber of Arbitration has issued a new arbitration rule, CAM Rule 8, providing for the publication of arbitration awards together with guidelines for doing so in an anonymous format, in both domestic and international proceedings.

What would be disclosed under CAM’s guidelines? Except for what would render the dispute or the parties “recognizable” (in most cases just their names), pretty much everything: the identity of the arbitrators and their method of appointment, the seat of arbitration, the applicable law, the arbitration agreement, the administering institution, the substantive dates of the proceeding (start, close, issuance of an award), and, of course, the nature and type of controversy and the legal reasoning supporting the tribunal’s decision. I should note that Rule 8 allows a party to object to publication, and the guidelines provide a safety mechanism whereby details would be withheld if they were deemed to be “identifying information”.

With access to awards published under these guidelines, parties would be able to assess both the quality of an arbitrator’s legal reasoning and the degree of efficiency he or she applied in the conduct of past proceedings. Simply by observing the key dates leading up to the issuance of awards, parties could decide for themselves whether to appoint an arbitrator who had acted promptly to issue their award after the close of proceedings or one who let the evidence ferment for months or years before doing so.

It would also make it easier for those who share José Astigarraga’s concerns about cognitive biases to identify and nominate suitable arbitrators. Indeed, José’s argument is, at bottom, an updated version of the long-running debate about whether common law or civil law procedures produce better justice, and there are plenty of advocates for each side.

Those biased towards the common law argue, as does José, for the primacy of witness evidence in providing a “fuller appreciation of what really happened.” Those with a preference for civil law procedures, where documentary evidence is given greater weight, might cite recent research on the human brain suggesting that people, when acting as witnesses, are particularly inept at recalling past events accurately, or, as decision-makers, can be easily influenced by factors that have nothing to do with a witness’s propensity to speak the truth. And there are many others who accept that there are advantages and disadvantages to each of the common law and civil law approaches, and position themselves somewhere in the center.

The point is that the publication of awards would be an ideal tool for parties to identify where an arbitrator sits on this spectrum. Whether he or she has strong or weak views about using one procedural approach or the other is exactly the sort of information that would surface.

In short, efficiency is about a lot more than just speed for the sake of speed. If the new CAM rule and guidelines are an indication of the direction the trend will next take, it is towards disclosure of information that will make it easier for parties to distinguish which arbitrators are likely to conform to their own notions of justice.

It remains to be seen how practitioners will respond to this initiative now that the efficiency trend has left the station.