Ensuring Efficiency in International Arbitration Proceedings: Tips for Asian Users
Reporter: Andrew Chin/Eugene Thong/Edern Coent (DLA Piper, Hong Kong)
Hong Kong Arbitration Week 2018 kicked off with a seminar hosted by Latham & Watkins entitled “Ensuring Efficiency in International Arbitration Proceedings: Tips for Asian Users”, which consisted of two roundtable discussions. The speakers shared their experiences and tips on making arbitration more time and cost efficient on expedited procedures, early dismissal of claims and defences, page limits and managing the tension between efficiency and enforceability of the award.
The first roundtable featured Mr. Bernard Hanotiau and Mr. Ng Jern-Fei QC, and was moderated by Mr. Philip Clifford QC.
Mr Hanotiau said that quality can never be compromised, and questioned what it means to have a speedy arbitration if both sides agreed to have six months to serve memorials. While many arbitral institutions provide for expedited arbitration, he has not had much experience with it. Mr. Ng agreed that the users choose expedited arbitrations for speed, but he also noted that they are not necessarily simpler. His experience is that an expedited arbitration is like a typical arbitration crammed into a shorter timeframe, which usually leads to an extension of the six-month time limit.
Mr. Ng considered that powers of early dismissal of claims or defences that are manifestly unmeritorious and/or over which the tribunal lacks jurisdiction is a useful tool that gives comfort to arbitrators to summarily deal with such cases without breaching a party’s right of due process, particularly in cases of respondents who run unmeritorious defences to filibuster the arbitration.
Mr. Hanotiau also shared his personal tips on arbitral efficiency. Whilst telephone conferences save travelling time and costs, in-person meetings are often helpful to defuse tensions. He also tends to impose page limits on submissions, having once received a post-hearing brief of 3,000 pages.
On whether there should be shorter awards, Mr. Hanotiau emphasised that the main objective in investment treaty arbitrations is to ensure that an award is not annulled. He shared that one of his 280-page award was challenged because he did not deal with one argument. Mr. Ng agreed and shared that a well-reasoned award is “therapeutic” for the losing party, who will want to know why it lost and provides reassurance that it had a full and fair hearing.
On whether there should be more sole arbitrator tribunals, Mr. Ng likened arbitrators to elephants who move better in herds. While there is no universal approach, collective wisdom and experience can be drawn on with a three member tribunal.
The second roundtable featured Ruth Stackpool-Moore (Harbour Litigation Funding) and Wang Wenying (CIETAC HK, CMAC).
Ms. Wang shared some innovations in the CIETAC Arbitration Rules (2012 edition) to promote efficiency, such as expedited procedures, mechanisms such as joinder and consolidation for multi-party arbitrations and med-arb procedures which have found favour with CIETAC users.
Ms. Stackpool-Moore expressed optimism for the third party funding landscape in Hong Kong as the draft Code of Practice was, at the time of the seminar, already available for consultation (the Code of Practice has since been issued on 7 December 2018 and the legislative provisions which allow third party funding for arbitration came into effect in Hong Kong on 1 February 2019). Meanwhile, third party funding has been available in Singapore for 18 months and the future looks bright. Ms. Stackpool-Moore also agreed that arbitrations must be efficient as this affects when the third party funder can recover its investments. The key factor for third party funders in deciding whether to fund cases is detailed information about the merits of the case. A funder will not base its decisions on the pleadings alone. The funder will analyse the chances of success and prepare a budget for the case. Although a funder does not normally dictate how a case is run, it will usually advise on strategy.
The identity of the lawyers involved is also important. As the funder cannot actively control the case, the funder will expect competent lawyers on board, otherwise they could decide not to fund the case or they may engage co-counsel.
Expedited arbitration rules are part of the latest revisions of institutional arbitration rules in Asia, i.e., CIETAC, HKIAC, ICC and SIAC. The first panel identified two typical issues with expedited procedures.
First, they are still not frequently used, even though they have been around for some time now. As expedited arbitrations are triggered by default when the disputed amount falls below a fixed sum, it can be inferred that a majority of cases should be conducted by expedited procedures, but the parties have opted out.
Second, expedited procedures are not necessarily simpler. A low disputed amount in dispute is no guarantee of simplicity. Institutions are interested in attracting more cases by providing services tailored to smaller disputes. Users are also keen generally to see straightforward issues decided rapidly, but this could depend on how experienced the arbitrator is. Yet institutions will usually use smaller disputes to give new arbitrators experience and increase the pool of arbitrators, but it might take an experienced arbitrator to conduct an expedited procedure efficiently.
Early Dismissal and Long Awards
Another tool for increasing efficiency is early dismissal, which is provided for in the latest versions of the HKIAC and SIAC rules. The early dismissal mechanism does not mean that efficiency will necessarily be improved. By analogy to experience in emergency arbitrations, the manifestly unmeritorious nature of a claim/defence or the tribunal’s evident lack of jurisdiction is never so obvious that it can be promptly dealt with. Parties will make extensive and exhaustive arguments and arbitrators will want to ensure that they address every argument.
This procedural economy resonates with another point made by the panels with respect to the length of awards. A shorter award might be delivered to the parties more quickly, in that the time taken for the tribunal’s drafting and the institution’s scrutiny will be reduced, but can efficiency be measured by speed here? The parties will of course want to present every possible argument that might improve their case, tribunals will have to tackle and address all of them and institutions will make sure that they do. At the end of the day, the award has to resolve the dispute and it has to be enforceable in order to do so. For all involved, the question is not really to balance efficiency and quality, but to maximize both qualities.
Institutions and Third Party Funders
Parties and tribunals have to work towards a combination of efficiency and quality, and other players in the field can help them achieve that. It is apparent from these two panels that institutions are providing new procedural devices to meet their users’ needs and market expectations. Third party funders provide a budget and advice on choice of counsel and strategy, which will ensure that such procedural devices are used where appropriate. Although speed is important, so is an enforceable award.
Hence, familiar questions arise. Do parties push for unreasonably long pleadings and proceedings? Are arbitrators too busy or conservative? Should institutions and/or funders be more or less hands-on, or are they too close to the action? These issues are likely to be debated in the foreseeable future. All in all, this session was a good kick-off to the Hong Kong Arbitration Week.