Author: Kishan Gupta
| Jurisdiction: International |
Topics: International Institutions and Rules Powers of Arbitrators Practice and Procedure Time Limits |
INTRODUCTION
In recent times, those involved in international commerce have been greatly dissatisfied with the lengthy delays involved in obtaining an arbitral award. Complaints about the overly-sophisticated procedures suffocated by a plenitude of guidelines employed in international arbitration are not a new occurrence either. One of the few solutions that arbitral institutions have come up with to address these concerns is an Expedited Procedure (“EP”) provision.
EP provisions accelerate arbitral proceedings by shortening time limits and cutting down otherwise necessary procedures. The Singapore International Arbitration Centre (“SIAC”) incorporated EP in its arbitration rules in the year 2010 and subsequently amended it in 2013 and 2016. Rule 5 of the 2016 version (“the 2016 Rules”) lays down the circumstances that warrant its application. Over time, Rule 5’s provisions have significantly shifted the control over arbitral procedures from the parties to the SIAC Institution and the concerned SIAC appointed tribunal. As pointed out by Gary L. Benton, this shift in control has led to an upsurge in academic debates over whether it is necessary to give control to institutions and tribunals to enable them to save time and costs involved in arbitral proceedings.[1]
This post will briefly examine the extent of institutional control exercised during an expedited arbitral proceeding by SIAC and the tribunal constituted under its aegis. It will illustrate how exercises of discretion to combat costs and expedite proceedings can result in a loss of party autonomy which may lead to non-enforcement of the resulting award. To that end, it also highlights some international best practices which may help in achieving a balance between attaining efficiency and preserving the autonomy of parties.
SCOPE OF DISCRETION EXERCISED WHILE APPLYING EP UNDER SIAC 2016 RULES
The President of the SIAC Court determines whether to apply EP provisions on the request of a party, or both the parties, to the proceeding.[2] The President is not mandated to provide reasons for such a decision, unless the SIAC Court determines otherwise.[3] He takes various factors into consideration such as the overall quantum involved in the dispute, the parties’ agreement to its application, and whether the dispute is exceptionally urgent and complex to reach to a conclusion. While the first two factors demand an objective determination, the last two require subjective decision making by the President. The author is of the view that reliance should only be placed on the first two factors while deciding the application of EP and the practice of bestowing discretion to the President should be abandoned. Eliminating the exercise of subjective discretion would reduce the likelihood that an unhappy party would request to set aside an award in the enforcement stage. Other institutional rules like ICC 2017 Arbitration Rules, SCC Expedited Rules 2017 and the proposed ICSID Arbitration Rules[4] also try to eliminate subjectivity by either making EP mandatory for disputes falling within a given monetary threshold or by making parties’ consent to its application the guiding principle.
Secondly, the President has the right to decide the number of arbitrators, even if there is an explicit agreement between the parties in that regard.[5] This may become a ground for non-recognition of the resulting award under Article V of the New York Convention because parties’ agreement to the composition of the tribunal is crucial to the adjudication of their dispute.[6] Moreover, successful applications to set aside awards in various State courts on the same ground demonstrate the risk involved with limiting the parties’ autonomy.[7] Therefore, most institutional rules like the Swiss Rules 2012[8], the proposed ICSID Arbitration Rules[9] and the HKIAC’s fairly recent 2018 Arbitration Rules[10] have adopted a precautionary approach by not interfering with parties’ choice on the number of arbitrators.
Thirdly, as per Rule 5.2 (e) of the 2016 Rules, the tribunal has the option of not stating the reasons upon which the final award is based, even if the parties have agreed otherwise. Previously, the 2010 and 2013 editions of the Rules had made it obligatory for a tribunal to give the reasons for an award in summary form, unless the parties decided otherwise. The 2016 amendment was adopted to shorten the time it takes to render an award because the award-writing phase is one of the lengthiest parts of an arbitration proceeding.[11]
At first, the said amendment may appear as a legitimate exercise of making arbitrations time efficient. However, upon taking a closer look, it seems that eliminating the parties’ rights to a reasoned award is prejudicial to an award’s validity. The parties’ choice to have a reasoned award forms part of the mandatory provisions of most prominent arbitration seats around the world. For example, section 611(2) para 5 of the Austrian Code of Civil Procedure provides that a failure to provide decisive reasoning can be a ground for setting aside an arbitral award.[12] Similarly, section 31(3) of the Indian Arbitration Act, 1996 makes it mandatory for an award to state the reasons upon which it is based. Therefore, the author is of the view that the 2016 amendment has gone too far by making it optional for the tribunal to state the reasons, thereby compromising with the award’s enforceability.
Lastly, and most importantly, Rule 5.3 of the 2016 Rules ensures institutional control over EP. It strengthens the rules and procedures mentioned under Rules 5.2, as discussed above, by giving them an over-riding effect over any contrary agreement of the parties. This control was absent in earlier editions of the SIAC Rules and has recently been added because of party autonomy concerns raised in the AQZ v. ARA case, a discussion of which is outside the scope of this abbreviated post.[13] Thus, a clause in the arbitration agreement specifying the number of arbitrators or a mandatory reasoned award will not be enforced if the President or the tribunal, as the case may be, exercise discretion in accordance with Rule 5.2 to override the parties’ choice.
CONCLUSION
While it is impractical to conduct an expedited proceeding without conferring certain powers upon the institution and the concerned tribunal, this control should be given only to the extent that it does not curtail the autonomy of parties to decide the procedure for arbitration. Accordingly, the SIAC 2016 reform appears to have overvalued the need for non-party discretion by inserting Rule 5.3 in its Arbitration Rules. Lucja Nowak argues[14] that it is the parties’ choice which grants an institution and a tribunal the power to over-ride any contrary agreement of the parties, as they consciously incorporate institutional rules in their arbitration agreement. This argument, however, ignores the perceived tension between the parties’ selection of institutional rules containing EP and their desire to preserve an agreement for specific procedures, such as for an agreed-to number of arbitrators. That being the case, what ultimately needs to be answered is whether an arbitration agreement opting for EP without agreeing to the over-riding nature of the rules will be respected by the SIAC institution and the concerned tribunal.
Author’s Note
In light of the above-mentioned considerations, it is apparent that the choice of arbitration rules is significant given the diverse procedures adopted by different institutions in an attempt to expedite arbitration. For ease of reference, a comparative analysis of various institutional rules vis-à-vis EP can be found here.
[1] Sacchit Joshi & Brijesh Chhatrola, Expedited Procedure Vis-à-Vis Party Autonomy, Enforceable?, Kluwer Arbitration Blog (May 12, 2018), http://arbitrationblog.kluwerarbitration.com/2018/05/12/expedited-procedure-vis-vis-party-autonomy-enforceable/.
[2] Arbitration Rules of the Singapore International Arbitration Centre art. 5.2 (2016).
[3] Arbitration Rules of the Singapore International Arbitration Centre art. 40.1 (2016).
[4] Proposals for Amendment of the ICSID Rules- Working Paper rule 69 (Vol. 3, 2018).
[5] Arbitration Rules of the Singapore International Arbitration Centre art. 5.2(b) (2016).
[6] The Convention on the Recognition and Enforcement of Foreign Arbitral Awards art. V(1)(d).
[7] Sacchit et al., supra note 1.
[8] Swiss Rules of International Arbitration art. 42.2 (b) (2012).
[9] See supra note 4, rule 70.
[10] HKIAC Administered Arbitration Rules art. 42.2 (a) (2018).
[11] Singapore International Arbitration Centre, SIAC Announces the Official Release of the SIAC Rules 2016 (Jun. 30, 2016), http://www.siac.org.sg/images/stories/press_release/SIAC%20Announces%20the%20Official%20Release%20of%20the%20SIAC%20Rules%20%202016_30June2016.pdf.
[12] Sebastian Lukic & Anne-Karin Grill, Austrian Supreme Court Establishes New Standards as Regards the Decisive Underlying Reasoning of Arbitral Awards, Kluwer Arbitration Blog (Dec. 24, 2016), http://arbitrationblog.kluwerarbitration.com/2016/12/24/austrian-supreme-court-establishes-new-standards-as-regards-the-decisive-underlying-reasoning-of-arbitral-awards/.
[13] Lucja Nowak & Nata Ghibradze, The ICC Expedited Procedure Rules – Strengthening the Court’s Powers, Kluwer Arbitration Blog (Dec. 13, 2016), http://arbitrationblog.kluwerarbitration.com/2016/12/13/reserved-for-13-december-the-icc-expedited-procedure-rules-strengthening-the-courts-powers/.
[14] Id.