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Making good on arbitration’s promise: is expedited arbitration the answer?

The promise of arbitration has traditionally centred upon a faster, more efficient, and less costly way of resolving commercial disputes. The reality of arbitration proceedings, however, does not always deliver on this promise.

Surveys conducted in recent years suggest that cost and delay are some of the negative and discouraging characteristics of international arbitration. They also show a commercial imperative to simplify the arbitral processes, including in particular for lower-value claims.

The findings, whilst perhaps not entirely surprising, have alarmed the arbitration community. Helpfully, however, a number of arbitration institutions have taken up the challenge by analysing how arbitration rules and proceedings can be tailored to increase efficiency and decrease the cost of arbitration. The concept of expedited arbitration is one way in which arbitral institutions have responded.  

In this Insight we consider the benefits and suitability of expedited arbitration and comment on some recent developments in this space.

Over the last decade, several arbitration institutions have released versions of their arbitration rules that simplify the procedural steps and institute strict time limits to complete the arbitration quickly and at a reduced cost. They are commonly referred to as ‘expedited’ arbitration rules. Like one commentary notes, they were intended to respond to parties’ concerns about increasing costs and time spent in arbitration.

However, while expedited arbitration is attractive to users, the process is not suitable for all disputes. Expedited arbitration historically was understood narrowly as only appropriate for disputes below a certain monetary value and with a low level of complexity. The majority of institutions accordingly apply expedited rules where the amount in dispute is below a certain threshold amount.

The International Chamber of Commerce (ICC) Expedited Procedure Rules can be chosen by parties where the amount in dispute does not exceed US$3 million, while users can apply to Australian Centre for International Commercial Arbitration (ACICA) for the application of Expedited Rules for disputes of less than A$5 million.

This traditional view is now being revisited. In 2019, a working group responsible for the development of dispute resolution rules at the United Nations Commission on International Trade Law (UNCITRAL) – otherwise known as UNCITRAL Working Group II – commenced working on a version of the UNCITRAL arbitration rules designed specifically for expedited proceedings.  

At its last session in late 2020, the working group approved a draft expedited provision that does not include a monetary threshold for referral to expedited arbitration, which would enable parties to select expedited arbitration rules regardless of the value of their dispute.   

The fact that the express party agreement is all that would be required for referral to expedited arbitration would distinguish UNCITRAL from other institutional arbitration rules. This shift, in turn, indicates a renewed focus on the core principles of party autonomy and flexibility in arbitration.  

Following the UNCITRAL model, contracting parties may consider expedited arbitration for any dispute they wish to be resolved quickly and less expensively, and otherwise adapt the arbitration rules to their particular circumstances.

We consider below the factors that parties should consider when contemplating expedited arbitration.  We also provide an overview of the current draft of the UNCITRAL expedited procedure rules.

How is expedited arbitration different?

There are a number of ways in which expedited arbitration rules seek to simplify the arbitration procedure. They include the following.

  • Sole arbitrator: Expedited arbitration procedures generally provide for one arbitrator to decide the dispute (like the ICC Expedited Procedure Rules[1]). Some institutions give flexibility for parties to agree to a three person tribunal (like the Hong Kong International Arbitration Centre (HKIAC) Expedited Procedure Rules[2]) or defer the decision to the President of the Institution (like the Singapore International Arbitration Centre (SIAC) Expedited Arbitration Rules[3]). This differs from the standard three-person tribunal where the parties have not specified the number of arbitrators, as provided for in the UNCITRAL Model Law that applies to international commercial arbitrations in Australia.[4]

  • No oral hearing: It is common for expedited arbitrations to be conducted without an oral hearing and decided on the basis of documents and written submissions. ACICA and HKIAC set documents-only arbitration as the default method unless otherwise determined by the arbitrator,[5] while other institutions allow the arbitrator to decide after consulting with the parties.[6] This is in contrast with non-expedited arbitration where parties are generally able to determine the procedure to their liking and some institutional rules require oral hearings when requested by one of the parties.[7]

  • Shorter timeframes and truncated procedure: A core feature of expedited arbitration is shorter timelines for procedure, including the appointment of the arbitrator and the communication of the statement of defence. It is also common to limit amendments to the statement of claim or defence and grant the tribunal discretion on whether to allow further written statements. This comes with the benefit of avoiding deleterious conduct by one party to the arbitration, which necessarily increases costs.  

Is expedited arbitration suitable for a particular dispute?

The above features are well-suited to many disputes, but parties should bear in mind possible downsides as well.   

The key concern lies in striking the right balance between speedy resolution of the dispute and respect for due process.  

The following considerations are important when contemplating expedited rules.

  • The benefit of a sole arbitrator is that it avoids delays typically associated with parties appointing their chosen arbitrator and agreeing on a chairperson, and makes the award process more efficient. However, it removes the ability for both parties to appoint an arbitrator of their choice and limits the award to the opinion of one person.

  • Discrepancies between the chosen arbitration rules and the arbitration agreement should be avoided as they may lead to the award being unenforceable. There is case law illustrating the difficulties that may arise at the point of enforcement when the parties choose expedited arbitration rules which envisage the appointment of a sole arbitrator in all circumstances (such as the SIAC rules), while providing in their arbitration agreement for a three-member tribunal.

  • Documents-only arbitrations clearly offer a less expensive and quicker arbitration process, with parties avoiding the substantial costs and delay involved with oral hearings. However, there are circumstances in which a party may benefit from an oral hearing, such as:

    • a key issue relating to witness credibility or recollection requires adjudication of oral evidence;

    • highly technical expert evidence needs detailed explanation to the tribunal to ensure complete understanding; and

    • there is a lack of written evidence related to the facts of the case.

  • Short deadlines and truncated procedure may limit the parties’ ability to present their best case before the tribunal where the subject matter or circumstances of the arbitration are complex. They may also impact the enforceability of the award. Expedited arbitrations require a fine balance between providing the efficiency that is desired by parties, while not encroaching on due process and broader concepts of natural justice.

UNCITRAL’s approach to expedited arbitration

The current working draft of the UNCITRAL expedited arbitration rules includes 18 draft provisions.  Their key features include the following.

  • No monetary threshold: As noted, party consent is currently contemplated as the sole requirement for an arbitration to be governed by the expedited rules, with parties able to modify the rules at their discretion.[8]  This emphasises party autonomy and allows parties to agree on the application of the expedited rules at any time before or even after the dispute has begun.[9]

  • Party autonomy, subject to tribunal discretion: It is contemplated that the arbitral tribunal will have the power to determine that expedited rules no longer apply in exceptional circumstances.[10] The tribunal must take into account a number of factors, including the urgency and complexity of the dispute, stage of the proceedings and anticipated amount in dispute.

  • Fast-paced initiation of the dispute: The first steps in the procedure are to take place expeditiously and within a month. The claimant must serve the statement of claim together with the notice of arbitration, and the respondent has 15 days to respond.

  • Constitution of the tribunal: Expedited arbitrations are to be conducted by one arbitrator unless otherwise agreed by the parties.[11] The sole arbitrator will be appointed jointly by the parties, or by the appointing authority if there is no party agreement. The appointing authority is the Secretary General of the Permanent Court of Arbitration, unless agreed otherwise.

  • Hearings: The tribunal will have the power to decide against holding an oral hearing and make a determination solely on the basis of documents, but must allow the parties to make submissions before making a determination.[12]

  • Award: The award is to be rendered six months from the constitution of the tribunal, although the period may be extended in exceptional circumstances.

The draft rules will continue to be refined by the UNCITRAL Working Group II, with its next session due to take place in March 2021. We will continue to report on the future evolution of the rules.

Seek advice on tailoring arbitration procedures to meet commercial needs

The recent work of the UNCITRAL Working Group II on expedited arbitration provides a renewed focus on the potential for expedited arbitration to be utilised by commercial parties.  

Expedited arbitration can deliver an effective path towards a less expensive, faster and more efficient dispute resolution. It should not be overlooked in appropriate circumstances. However, it should also not be employed at the expense of due process or securing an enforceable award.  Advice should be sought before agreeing to expedited rules.

Expedited arbitration may be particularly well-suited where disputes are less complex and may not require an oral hearing or three-person tribunal, and where there is a commercial need for a faster and less expensive resolution.

Whatever the nature of the dispute or the underlying commercial transaction, it is critical to ensure that the expedited arbitration rules allow parties to modify the rules of procedure and tailor them to their particular dispute. It is the ability of parties to adopt custom procedures tailored to a given set of circumstances and dispute that realises the true benefits of arbitration.


[1]  See Art 2(1).
[2]  See Rule 41.2(a).
[3]  See Rule 5.2(b).
[4]  International Arbitration Act 1974 (Cth) sch 2, art 10(2).
[5]  See ACICA Expedited Arbitration Rules, Rule 13.3; HKIAC Expedited Procedure, Rule 41.2(e).
[6]  See, eg, SIAC Expedited Arbitration Rules, Rule 5.2(c); ICC Expedited Procedure Rules, Art 3(5).
[7]  ACICA Arbitration Rules, Rule 21.4; ICC Arbitration Rules, Art 26(1).
[8]  UNCITRAL Draft provisions on expedited arbitration, Note by the Secretariat, UN Doc A/CN/9/WG.II/WP.214, 23 July 2020 (Available here) (UNCITRAL Draft provisions on expedited arbitration) at [8]; UNCITRAL, Report of Working Group II (Dispute Settlement) on the work of its seventy-second session (Vienna, 21-25 September 2020), UN Doc A/CN/9/1043 (Ava liable here) (UNCITRAL Report of Working Group II) at [16]-[19].
[9]  UNCITRAL Draft provisions on expedited arbitration at [11].
[10] UNCITRAL Draft provisions on expedited arbitration at [19].
[11] UNCITRAL Report of Working Group II at [75].
[12] UNCITRAL Draft provisions on expedited arbitration at [97].


Authors

PAFFEY Joshua SMALL
Joshua Paffey

Head of Arbitration


Tags

Arbitration

This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.

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