International Arbitration: Lecture 7

International Arbitration: Lecture 7
Dr. Matteo Zambelli
[email protected]
University of West London
School of Law
1
Overview
A. Arbitration Procedure and Evidence.
B. Expedited Procedures.
C. Hearing.
D. Before and after the Hearing.
E. Q&A.
2
Arbitration Procedure: overview
The tribunal is obliged to determine the disputes between the parties
fairly and efficiently, adopting procedures which are suitable for the
particular case; and ensuring that
costs and time are not expended
unnecessarily.
The tribunal’s procedural powers may extend to a huge range of topics,
such as
evidence, statements of case, hearings, security and
security for costs.
3
(cont.)
It is important to distinguish between the scope of the tribunal’s
jurisdiction and the scope of its powers.
The tribunal’s jurisdiction defines the substantive disputes which the
tribunal is empowered (and obliged) to determine. Where a tribunal
purports to act outside the scope of its jurisdiction, any step which it
takes (and any award which it makes) will be invalid and ineffective.
The tribunal’s powers are the procedural tools which it is entitled to use
to determine disputes within its jurisdiction. Where a tribunal purports to
take procedural steps which fall outside the scope of its procedural
powers, this will
not necessarily affect the validity of any award which
it makes.
4
Sources of the tribunal’s powers
The sources of the tribunal’s procedural powers fall into three
categories
: the arbitration agreement, arbitration rules, and the
applicable procedural law.
Arbitration agreement: the first place to look in order to determine the
scope of the tribunal’s powers is the arbitration agreement. The parties
are entitled to confer procedural powers by agreement. In some cases,
the arbitration agreement itself will contain provisions relevant to
procedure.
There are some limits to the parties’ power to agree procedure. Most
importantly where the
Arbitration Act 1996 applies the parties are not
entitled to exclude its mandatory provisions.
So, for example, the
parties would not be able to make an agreement that applied
procedures which involved unnecessary delay or expense.
5
(cont.)
Arbitration rules. Arbitration rules usually provide for a broad procedural
framework,
within which the parties or the tribunal have a substantial degree
of
discretion to determine the applicable procedure.
For example, the ICC Rules 2012, 2017 and 2021 require the tribunal to
draw up terms of reference (Article 23). The tribunal must hold a case
management conference at which it consults the parties on various case
management techniques, all of which are intended to increase the efficiency
of the arbitral procedure (Article 24.1).
The LCIA Rules 2020 contain lengthier procedural provisions, and set out the
powers of the tribunal in more detail. I.e., there are specific provisions
dealing with the written stage of the arbitration and its procedural time-table
(Article 15), hearings (Article 19), witnesses (Article 20), experts (Article 21)
and additional procedural powers (Article 22).
6
(cont.)
Procedural law. If the agreement and the arbitration rules fail to address
a particular procedural topic, the
gap will be filled by the applicable
procedural law
.
The Arbitration Act 1996 contains a variety of provisions conferring
procedural powers on the tribunal. These statutory provisions usually
apply only by default, where the parties have failed to address a
procedural topic themselves – either by express agreement, or by the
application of arbitration rules.
Some of the statutory powers apply only where the parties have
expressly agreed that they should. For example, the power to
consolidate separate arbitrations, or order concurrent hearings (section
35), and the power to make a provisional award (section 39) apply only if
the parties have expressly agreed in writing that such powers should be
available to the tribunal.
7
When and where any part of the proceedings is to be held
Unless the agreement or rules provide otherwise, section 34(2)(a) of the
Arbitration Act 1996 empowers the tribunal to decide when and where any
part of the proceedings is to be held. “Any part of the proceedings” would
include:
Hearings for the purpose of evidence or submissions.
Meetings of the tribunal and/or parties to discuss procedural or other matters.
Meetings of the tribunal for deliberations.
The venue of hearings or meetings does not necessarily need to be the same as
the seat of the arbitration.
The ICC Rules permit the tribunal, after consultation with the parties, to conduct
hearings and meetings “at any location it considers appropriate unless otherwise
agreed by the parties” (Article 18.2, ICC Rules 2021).
8
(cont.)
Under Article 16.3 of the LCIA Rules 2020, the tribunal may hold hearings “at any
convenient geographical place in consultation with the parties” and its
deliberations “at any geographical place of its own choice”.
Article 18.1 of the UNCITRAL Rules (2010 and 2013) provides that if the parties
have not previously agreed on the place of arbitration, it will be determined by the
tribunal having regard to the circumstances of the case. Article 18.2 entitles the
tribunal to meet at any location it considers appropriate.
As with all procedural questions, you are entitled to make submissions to
the tribunal on the questions of when and where the arbitration should
take place. This can be done at a preliminary hearing, or in writing.
9
Language
The language in which the arbitration will proceed can have an important bearing
on the costs of the proceedings. It can also affect the parties’ relationships with
the tribunal, and the impact of witness evidence. It is quite common for the
arbitration agreement to incorporate a provision governing the language to be
used in the arbitration.
The ICC Rules 2012, 2017 and 2021 provide that, in the absence of agreement by
the parties, the tribunal is to determine the “language or languages” of the
arbitration, “due regard being given to all relevant circumstances, including the
language of the contract” (Article 20).
Under the LCIA Rules 2020, the initial language of the arbitration (until the
formation of the tribunal) will be the language or “prevailing language” of the
arbitration agreement. However, the tribunal (in the absence of any agreement of
the parties) may on its formation, determine the language of the arbitration after
considering submissions made by the parties. Article 17.5 of the LCIA Rules 2020
expressly empower the tribunal to order the provision of translated documents.
10
Statements of case and amendments
Statements of case (or “pleadings”) are crucial documents in most arbitrations.
They set out the parties’ arguments before any hearing, identifying the issues that
the tribunal has to determine and ensuring that the parties do not take each other
by surprise by introducing new arguments without the tribunal’s permission.
Disputes about amendments to the statements of case are relatively common.
The ICC Rules 2012, 2017 and 2021 provide for the parties to set out their cases
in the Request for Arbitration (Article 4) and the Answer to the Request (Article 5).
After considering these, the tribunal draws up “Terms of Reference” (Article 23)
which include a list of issues for determination. The tribunal may authorise the
introduction of new claims after the Terms of Reference have been finalised
(Article 23).
The LCIA Rules 2020 provide for the claimant’s Statement of Case to be
submitted within 28 days of notification that the arbitral tribunal has been formed
(Article 15.2). The defendant’s Statement of Defence (and cross-claim if any
(which may include the counterclaim if any)) must be submitted within 28 days of
receipt of the Statement of Case, or written notice from the claimant that it elects
to treat the Request as its Statement of Case (Article 15.3).
11
(cont.)
The claimant must submit a Reply and any Defence to cross-claim within 28 days
of receipt of the defendant’s Statement of Defence (and cross-claim if any) (Article
15.4). Each statement must be accompanied by all essential documents. Article
22.1(i) expressly empower the tribunal to admit amendments to statements of
case.
Articles 20 and 21 of the UNCITRAL Rules (2010 and 2013) contain detailed
provisions concerning the service of Statement of Claim and Statement of
Defence. Article 22 of the Rules address amendments, though parties may not
introduce claims which fall outside the scope of the tribunal’s original jurisdiction,
by amendment.
If there is no relevant agreement in the arbitration agreement or in applicable
arbitration rules, then section 34(2)(c) of the Arbitration Act 1996 empowers the
tribunal to decide:
Whether written statements of claim and defence are to be used. In the vast
majority of arbitrations, the tribunal will require the use of statements of case.
12
(cont.)
The extent to which the statements of case can be amended, disputes about
amendments are relatively common, and the factors which the tribunal will
consider in deciding whether to admit amendments are similar to those which
would apply in court proceedings.
So, for example, a very late amendment will usually be refused if the parties
do not have time to prepare to deal with it adequately.
Similarly, the tribunal will usually order costs caused by amendments to be
paid by the amending party. If late amendments necessitate the adjournment
of a scheduled hearing, the tribunal may make a punitive costs order (for
example, costs on an indemnity basis).
13
Disclosure and production of documents
The extent and timing of disclosure and production of documents can
have a significant effect on the overall costs and duration of the arbitral
proceedings. In almost every arbitration, the tribunal will need to make
orders relating to disclosure.
The ICC Rules 2012, 2017 and 2021 envisage the production, with the
Request and Answer to Request, of the documents on which the party
relies. Thereafter, the tribunal has a general power to establish the facts
of the case “by all appropriate means” (Article 25.1), which would include
the power to order disclosure of documents. In practice, however,
English-style disclosure of every relevant document is extremely
uncommon.
The LCIA Rules 2020 require the production of “all essential documents”
with the statements of case, statements of defence and statements of
reply.
14
(cont.)
The UNCITRAL Rules (2010 and 2013) require a copy of the contract or
other legal instrument out of or in relation to which the dispute arises,
and the arbitration agreement, to be annexed to the statement of claim.
As far as possible, the statement of claim and statement of defence
should be accompanied by all documents or other evidence relied upon,
or contain references to them (Articles 18 and 19). Article 27.3
empowers the tribunal to require the parties to produce “
documents,
exhibits or other evidence
“.
Where there is no applicable provision in the arbitration agreement or in
arbitration rules, section 34(2)(d) of the Arbitration Act 1996 provides that
the tribunal has the power to determine “
whether any and if so which
documents or classes of documents should be disclosed between and
produced by the parties and at what stage
“. The scope and extent of
disclosure of documents need not mirror court practice.
15
(cont.)
In practice, the position on disclosure can be summarised as follows:
There is no general obligation of disclosure in arbitration. Unless and until the
tribunal orders disclosure, the parties are not obliged to disclose any document.
In most cases, the tribunal will require disclosure of some documents. Sometimes
this will take the form of documents appended to statements of case. In other
cases, disclosure of documents will follow exchange of statements of case, and
may involve the exchange of lists of documents (as it would in court). Each case
will differ, depending on the circumstances.
One should take the initiative in relation to the scope of disclosure of documents.
Whether at a preliminary meeting or in correspondence, one should formulate a
clear idea of the scope of disclosure which appears appropriate, and explain why.
If the party’s opponent has failed to disclose documents which are necessary to
the fair determination of the case, one should apply to the tribunal for an order
requiring disclosure. This can be done in correspondence, or at a preliminary or
procedural meeting.
Although there are interesting theoretical questions concerning the extent to which
rights of privilege apply in arbitration proceedings, in practice it would be extremely
unusual for a tribunal to require the production of documents which are privileged
or without prejudice.
16
Rules of evidence
Where the Arbitration Act 1996 applies, the tribunal is given broad
discretion to decide whether to apply technical rules of evidence, relating
to the admissibility, relevance or weight of oral or written evidence.
Article 27.4 of the UNCITRAL Rules (2010 and 2013) provide that the tribunal
shall determine the admissibility, relevance, materiality and weight of the
evidence offered
“.
Article 22.1(vi) of the LCIA Rules 2020 provide that the tribunal may decide
whether to apply any strict rules of evidence (or any other rules) “
as to the
admissibility, relevance or weight of any material tendered by a party on any issue
of fact or expert opinion
“.
17
Factual witnesses
Witness evidence is commonly presented in arbitrations. Sometimes
witnesses are called to give their evidence at a hearing, with the
opportunity for cross-examination. Sometimes an oral hearing will involve
disproportionate costs and delays, and the tribunal will consider the
content of written witness statements instead. How witness evidence is
to be presented will be decided by the tribunal.
The ICC Rules 2012, 2017 and 2021 provide that the tribunal may
decide to hear witnesses “
in the presence of the parties, or in their
absence provided they have been duly summoned
” (Article 25.3).
The LCIA Rules 2020 contain a detailed provision which sets out a
detailed procedure for the presentation of witness statements and the
cross-examination of witnesses (Article 20). In addition, the tribunal has
the power to determine the “time, manner and form” for the exchange
and presentation of any material tendered on any question of fact or
expert opinion (Article 22.1(vi)).
18
Experts
The tribunal’s power to make orders relating to expert evidence is similar to that
relating to factual witness evidence. The tribunal has a broad discretion to decide
whether to admit such evidence and, if so, how it should be presented.
The ICC Rules 2012, 2017 and 2021 provide that the tribunal may decide to hear
experts appointed by the parties … in the presence of the parties, or in their
absence provided they have been duly summoned
” (Article 25.3).
Article 20 of the LCIA Rules 2020 contain detailed provisions governing the
presentation of factual and expert witness evidence. In addition, the tribunal may
decide the time, manner and form in which any material tendered “on any matter
of … expert opinion” should be exchanged and presented (Article 22.1(f)).
Article 27 of the UNCITRAL Rules (2010 and 2013) contains provisions governing
the presentation of witness evidence, including expert witnesses.
19
(cont.)
In practice, one or more of the parties will identify a particular issue on which it
wishes to present expert evidence, and will seek the permission of the tribunal to
do so.
The tribunal must permit the other parties to make submissions on whether expert
evidence is necessary or appropriate, and on the proper scope of that evidence.
These submissions will often be made at a preliminary meeting, but may also be
made in writing. The tribunal will then make an order or direction defining the
issues on which expert evidence may be called, and setting a timetable for
exchange of experts’ reports.
Although court rules do not apply in arbitration, in practice you must ensure that
any expert you rely on is, and is seen to be, independent and properly qualified. If
you do not, the tribunal is likely to place little weight on the expert’s evidence.
20
Expedited Procedures
Under the 2020 LCIA Rules the parties may, in case of exceptional urgency, apply
to the LCIA Court for the expedited formation of the tribunal (Article 9A).
In addition, under Article 9B, at any time before the formation, or expedited
formation, of the tribunal, in case of emergency, parties may apply to the LCIA
Court for the appointment of an emergency arbitrator to grant emergency relief.
On 1 March 2017, the ICC Rules 2017 (retained under the 2021 Rules) entered
into force containing new expedited procedures in Article 30 and Appendix VI. The
expedited procedures apply automatically to arbitration agreements entered into
after 1 March 2017 and to disputes up to US$2 million (subject to the ICC Court’s
discretion). The expedited procedures contains a number of provisions aimed at
increasing efficiency, including the appointment of a sole arbitrator (Article 2(1),
Appendix VI) who may decide the case on a documents-only basis (Articles 3(4)
and 3(5), Appendix VI).
21
Hearing
One of the most important decisions, from the point of view of costs and delays, is
whether or not a hearing is necessary and, if so, how that hearing should be
structured. In theory, an arbitrator is required to avoid all unnecessary delays and
expenses, by his duty under section 33 of the Arbitration Act 1996.
The ICC Rules 2012, 2017 and 2021 provide that the tribunal “shall hear the
parties together in person if any of them so requests or, failing such a request, it
may of its own motion decide to hear them
” (Article 25.2).
Article 19.1 of the LCIA Rules 2020 provides that “any party has the right to a
hearing before the Arbitral Tribunal on the parties’ dispute at any appropriate
stage of the arbitration (as decided by the Arbitral Tribunal), unless the parties
have agreed in writing on a documents-only arbitration
“.
22
(cont.)
Article 19 provides for the tribunal to fix the date, time and place of hearings, and
also empowers it to require that the parties address a list of questions or issues
arising from the parties’ dispute (Article 19.2).
Article 17.3 of the UNCITRAL Rules (2010 and 2013) similarly provides that the
tribunal shall hold hearings for the presentation of witness evidence if either party
so requests.
Sometimes a tribunal may order a documents-only arbitration; sometimes it will
order a full hearing.
Where issues of fact are likely to depend on witness evidence, a hearing will
usually be appropriate. In any event, you are entitled to make submissions on
whether or not a hearing is necessary – either at a preliminary meeting, or in
correspondence.
23
(cont.)
A Guide to the nature of hearings can be found in the UNCITRAL Notes
on Organizing Arbitral Proceedings.
Prior to the hearing pre-hearing briefs will be circulated. The typical
hearing shall consist of:
(a) Opening statements from both parties.
(b) Cross-examination of witnesses.
(c) Cross-examination of experts.
(d) Closing arguments.
24
Joinder of third parties – Consolidation
Article 22.1(viii) of the LCIA Rules 2020 provide that the tribunal may allow the
joinder of one or more third parties, but only upon the application of one of the
existing parties to the arbitration, and only if the applicant and the third party have
both consented in writing to the joinder. Following such joinder, the tribunal may
either make a single final award, or may make separate awards in respect of all
the parties. The effect of joinder is the same as consolidation.
Article 22.1(ix) of the LCIA Rules 2020 empowers the tribunal to order, with the
approval of the LCIA Court, the consolidation of the arbitration with one or more
other arbitrations into a single arbitration if all the parties agree to this in writing.
Article 22.1(x) empowers the tribunal to order the consolidation of the arbitration
with other arbitrations commenced under the same arbitration agreement or
compatible arbitration agreement” between the same parties, prior to the
formation of another arbitral tribunal. The LCIA Court retains the same power
under Article 22.6.
25
Concurrent Hearings
Section 35 of the Arbitration Act 1996 recognises that the parties’
agreement is necessary if the tribunal is to be permitted to order
consolidation or concurrent hearings. There is no power to make such
orders compulsorily.
A concurrent hearing means that two separate arbitrations are heard by
two separate tribunals at the same time. The tribunals may make orders
permitting the evidence to stand as evidence in both arbitrations.
However, each tribunal will make a separate award in relation to the
issues which arise in its own arbitral reference.
A consolidation means that two separate arbitrations become one. There
will be a single tribunal which will hear all the evidence and determine all
the issues between all the parties.
26
Legal and expert advisers
In some cases, it may be desirable for the tribunal to appoint independent
advisers to report to it, and the parties, on technical or legal issues.
For example, the appointment by the tribunal of a single expert to deal with issues
of technical expert evidence will often be cheaper and quicker than permitting the
parties to appoint their own expert witnesses. Similarly, where an issue of foreign
law arises, it may be preferable for the tribunal to appoint a single foreign law
expert to provide a report which will provide the background to the parties’
dispute.
The ICC Rules 2021 permit the tribunal “after having consulted the parties” to
appoint one or more experts, define their terms of reference and receive their
reports (Article 25.4). The parties may question such an expert at a hearing,
should either party request it.
Article 21 of the LCIA Rules 2020 allows the tribunal, “after consultation with the
parties
” to “appoint one or more experts to report in writing to the Arbitral Tribunal
and the parties on specific issues in the arbitration
“. The parties may crossexamine such experts.
27
Security for costs
Security for costs is usually a crucial tactical and practical issue.
Some arbitration rules expressly permit the tribunal to order the provision of
security for costs. For example, Article 25.2 of the LCIA Rules 2020 confers power
on the tribunal to make such orders.
If no such rule applies, then section 38(3) of the Arbitration Act 1996 permits the
tribunal to order a claimant to provide security for costs. This power can be
excluded by agreement, though it would be rare for the parties to do so. Under the
Arbitration Act 1996, the court has no power to make any orders relating to
security for costs: the sole power to do so rests in the tribunal.
Under the power conferred by section 38(3), the tribunal may order the provision
of security for the “
costs of the arbitration“. These include:
The arbitrators’ fees and expenses.
The fees and expenses of any arbitral institution concerned.
The legal or other costs of the parties.
28
Interim or conservatory orders
The power to make orders preserving property which is the subject of dispute, or
evidence which may be vital in determining a dispute, can be extremely helpful.
For example:
Where the parties dispute the ownership of property, any award may be frustrated if the
property has been lost or damaged in the meantime.
Where the parties are in dispute about the condition of goods or property (for example,
where one party alleges that faulty goods have been supplied under a contract of sale), it
will usually be extremely helpful to the tribunal if the goods themselves are preserved,
intact, so that their actual condition can be assessed.
Cases where there is reason to believe that a defendant may not be able to satisfy an
award
.
Interim or conservatory measures are often required as a matter of urgency. In
many cases, by the time all members of the tribunal have been appointed, it will
be too late. Most arbitration rules, and the Arbitration Act 1996, recognise that it is
necessary to permit local courts to intervene in such cases as a matter of
practicality, in order to make the necessary orders before it is too late.
29
(cont.)
The term “interim measure” covers a wide range of orders. Most interim measures
are granted at an early stage in the proceedings, with a view to preserving the
status quo, or preventing the dissipation of assets or evidence pending the
resolution of the arbitral dispute. Interim measures are often requested without
notice and usually ordered on a provisional basis, that is, they are subject to later
adjustment or setting aside by the tribunal. Interim measures are sometimes
referred to as “interim measures of protection” or “provisional relief”. An interim
measure which aims to preserve evidence or assets is sometimes called a
“conservatory” measure.
Not all interim measures are conservatory. For example, in Merck Sharp & Dohme
(IA) C v Republic of Ecuador (PCA Case No 2012-10), an UNCITRAL tribunal
granted interim measures restraining enforcement of any local court judgment
against the claimant.
In Sergei Viktorovich Pugachev v Russian Federation (UNCITRAL), an
UNCITRAL tribunal granted interim measures requiring Russia to suspend
proceedings to extradite the respondent (on the basis that such extradition would
prejudice his ability to take part in the arbitration), but refused to make orders
restraining other criminal and civil proceedings.
30
(cont.)
The ICC Rules 2012, 2017 and 2021 the tribunal to make “any interim or
conservatory measure it deems appropriate
” and before a tribunal is established,
the parties may apply to any competent judicial authority for interim or
conservatory measures (Article 28). Also there are provisions for the appointment
of an emergency arbitrator, empowered to grant interim relief before a tribunal is
established (Article 29).
Article 25.1 of the LCIA Rules 2020 permits the tribunal to: (a) order the provision
of security for any amount in dispute, to order the preservation, storage, sale or
other disposal of any property or thing under the control of any party and relating
to the subject matter of the arbitration; and (b) make orders on a provisional basis.
Article 25.3 makes clear that this is without prejudice to any party’s right to apply
to any court or judicial authority before the formation of the arbitral tribunal, or, in
exceptional cases, after it.
The UNCITRAL Rules (2010 and 2013) contain detailed provisions governing the
grant of interim measures, including (at Article 26.3) the test that should be
satisfied in respect of certain applications. The tribunal may modify, suspend or
terminate interim measures, and may require the applicant to provide security.
31
(cont.)
If both the court and the arbitral tribunal have the power to grant interim measures, to
whom should you apply? If a tribunal has not yet been constituted, can (or should)
you apply for the assistance of an emergency arbitrator or should you apply to the
court? In some cases, it will be preferable, for practical reasons, to make your
application to the court. Consider the following:
Is the tribunal constituted? Interim measures are usually most helpful and
effective when sought at a very early stage in the proceedings. Often an arbitral
tribunal has not yet been constituted, and therefore is unable (yet) to act. In such
cases, unless the applicable arbitral rules contain emergency arbitrator provisions,
an application to court is necessary.
Do the applicable arbitral rules provide for the appointment of an emergency
arbitrator? Most of the major arbitral rules provide for the appointment of an
emergency arbitrator who will have wide powers to order urgent interim relief.
However, any such order or award will be subject to the tribunal’s scrutiny and will
have to be made on notice to the other party. It will also probably be necessary to
provide security for the relief sought.
32
(cont.)
Will the tribunal’s order be enforceable? Where a tribunal grants interim
measures, its decision will be contained in either a procedural order or an award.
Whether and how it can be enforced will depend on the law of the seat of the
arbitration or the law of the country in which you are seeking to enforce the order
or award. As a matter of English law, if the decision takes the form of an order,
then it cannot be enforced. If the decision takes the form of an award, then it is
enforceable in principle, but may be subject to prior scrutiny by the courts or
challenge in the court. In either case, enforcement of interim measures granted by
a tribunal is likely to be considerably less straightforward than enforcement of a
court order.
Will it be necessary to enforce the order? An arbitral tribunal has no power to
compel compliance with any interim measures which it orders. This problem is
likely to be particularly acute where the order affects third parties (as, for example,
in the case of freezing injunctions). By contrast, a court can compel compliance
(both by the parties to the arbitration, and non-parties such as banks) by imposing
sanctions (for example, for contempt of court).
33
(cont.)
Will the application be made without notice? An arbitral tribunal is likely to be
reluctant to grant interim measures where these are applied for without notice to
the other party. This is a significant disadvantage of applying for measures from
the arbitral tribunal. In many cases, notice of the application gives the party an
opportunity to dissipate the evidence or assets which is the subject of the
application: by the time the tribunal makes an order, it is too late. By contrast,
most courts will permit an applicant to proceed without notice in urgent cases.
This usually happens where an application is made for a freezing injunction.
Will the tribunal be willing to grant relief? More generally, an arbitral tribunal may
well be reluctant to grant interim measures which might be seen in some way as
prejudging the issues in the arbitration.
Therefore, although the pros and cons of every case must be assessed carefully,
in many cases (and in particular, where a freezing injunction is sought) an
application to court will represent the best option.
34
(cont.)
The tribunal cannot compel compliance with any order which it makes. It may be
able to impose sanctions for non-compliance. For example, if the English
Arbitration Act 1996 applies to the arbitration, section 41(5) of the Act enables the
arbitrator to make a peremptory order requiring compliance within a prescribed
period of time. If the party is refusing to comply with an order to provide security,
then breach of the peremptory order entitles the tribunal to dismiss the claim.
Section 41(7) sets out a range of other (limited) sanctions for non-compliance with
a peremptory order.
Even though the tribunal cannot enforce compliance itself, it may make adverse
inferences where a party refuses to comply with its order. Such conduct may also
affect and impact its subsequent deliberations on the merits of the claims referred
to arbitration as well as any subsequent costs allocations and decisions.
It may be possible for the tribunal’s orders to be enforced by a national court. For
example, under section 42 of the Arbitration Act 1996, the court has power to
enforce the tribunal’s peremptory orders. However, in many cases this will be too
slow of a process to be effective.
35
(cont.)
If a tribunal’s decision is contained in an award, it can be enforced like any other.
Again, however, the process of enforcement is likely to be too slow to be of
practical benefit.
You will need to decide which national court is best placed to act effectively. This
may be, for example:
The court in the country where the relevant assets or evidence is to be found.
The court in the country where the defendant is resident or domiciled.
The court in the country where the arbitration is seated.
36
(cont.)
The powers conferred on the tribunal by the Arbitration Act 1996 overlap with the
supportive powers of the court. The court will step in and act where the tribunal is
unable to act effectively.
Section 38(4) provides that “The tribunal may give directions in relation to any
property which is the subject of the proceedings or as to which any question
arises in the proceedings, and which is owned by or is in the possession of a party
to the proceedings – (a) for the inspection, photographing, preservation, custody
or detention of the property by the tribunal, an expert or a party, or (b) ordering
that samples be taken from, or any observation be made of or experiment
conducted upon, the property
.”
Section 38(6) provides that: “The tribunal may give directions to a party for the
preservation for the purposes of the proceedings of any evidence in his custody or
control
.”
Any factual assertion (for example, as to the location and nature of the property or
evidence concerned) should be backed by evidence.
37
After the hearing
In most cases, the parties will serve written submissions (including submissions
as to costs) after the hearing.
The submission of post-hearing briefs does not necessarily close the record,
however, because the arbitrator may still require input from the parties. For
example, the briefs may:
Fail to address a critical issue affecting the outcome.
Raise new issues on which the parties did not submit evidence.
In that event, the arbitrator should give the parties a further opportunity to take a
position on an issue or provide further explanation by either:
Asking for further submissions.
Scheduling oral argument.
Post hearing briefs are often of critical importance. In decision 4A_360/2011, the
Swiss Supreme Court held that a party’s right to be heard had been breached,
where the sole arbitrator did not take into account that party’s post-hearing brief,
and did not address in his award two of the arguments set out in the brief, which
were material to the outcome of the dispute.
38
Costs in international arbitration
Costs generally include:
The costs of the arbitration, including:
tribunal fees and expenses;
fees charged by the tribunal’s secretary or assistant;
fees charged by arbitral institutions;
room hire;
translations; and
transcripts.
The legal costs (including legal fees, fees paid to expert witnesses and witness
costs).
This definition of costs can be compared with the definition of costs at Article 40 of
the UNCITRAL Arbitration Rules 2010 and 2013).
39
(cont.)
Where there is no appointing authority, the tribunal members each have a
contract of appointment with the parties, which usually sets out the arbitrator’s
level and terms of remuneration. Where the parties choose to be governed by the
rules of an institutional body, the institutional body appoints the arbitrators itself
(usually following a procedure by which the parties may make nominations)
according to its established fee structure.
In ad hoc arbitrations, it is sensible to agree the arbitrator’s fees before his or her
appointment and to set out the relevant terms in an appointment contract. This
provides certainty and means that the arbitrator cannot alter their fees later on.
Parties may also want to consider insuring the life of the arbitrator, especially if
the arbitration is likely to last a long time or if the case is of a particularly high
value since, if an arbitrator needs to be replaced, the costs would increase
dramatically. This measure must also be discussed in advance of the arbitrator’s
appointment as the arbitrator may need to supply some personal medical
information to enable the insurance to be taken out.
40
(cont.)
The parties are generally jointly liable for the tribunal’s fees and expenses.
Therefore, even though one party may be forced to pay all of the arbitrators’ fees
up front, to start the arbitration (under the ICC Rules 1998, 2012, 2017 and 2021)
or to obtain the award, this can be corrected so costs between the parties are
shared in the final award or by agreement between the parties.
Where the parties have engaged an institution to administer the arbitration, this
institution requires the payment of certain fees. The rules of each institution
stipulate what fees need to be paid and when. These costs may be paid up front
but still must be allocated in the award at the end of the proceedings.
The ICC charges an initial non-refundable administrative fee of US$5,000 payable
by the claimant when filing the Request for Arbitration. The advance on costs to
be paid for the future fees of the tribunal is established on an ad valorem basis
(that is, fixed by reference to the sums in issue).
41
(cont.)
A tribunal may determine the allocation of costs at the same time as it makes a
ruling on the substantive elements of the case. If so, the tribunal will include its
ruling on costs in its main award. However, in international arbitration, the costs
involved are likely to be substantial and the tribunal is likely to reserve the issue of
costs and then have a separate hearing, leading to a separate costs award. This
is mainly as a measure of pragmatism, since many hearings would become
unwieldy or unmanageable if the parties and tribunal sought to deal with costs
submissions and valuations alongside the substantive issues in the case.
Costs orders are not necessarily made just at the conclusion of the proceedings
but could be made following interlocutory applications. In practice, these costs are
rarely determined on an interlocutory basis and are frequently left for
determination in an overall costs award at the end of the proceedings. In that
case, at each interlocutory stage, the tribunal simply reserves the issue of costs
relating to that stage until later.
42
Q&A
Any Questions?
43