"Automatic Arbitration. To obtain a verdict: put a penny in the slot. No more exorbitant fees! No more law! No more trials!" (Punch)
The Arbitration Act 1996 did not go quite as far as this mid-nineteenth century Punch cartoon, but it did give arbitrators formidable new procedural powers to minimise costs and delay.
These powers should transform the practice of English arbitration. But, in the hands of an inexperienced tribunal they need to be exercised with caution. This is true above all when the tribunal is asked by the claimant to adopt a shortened procedure because the respondent's defence is weak. Halki Shipping Corporation v Sopex Oils Ltd (, 3 All ER 833) has confirmed that, now with rare exceptions, claimants can no longer apply to the courts for summary judgment on the grounds that there is not, in fact, any dispute, but must refer all disputes to arbitration.
The task for the claimant is to persuade the tribunal to make full use of their powers. But, with an eye on ensuring that any award he obtains is unenforceable, the claimant will have an interest in not allowing the respondent to be treated unfairly. Here is a checklist of points for the claimant to consider.
Check the wording of the clause
Some clauses do not cover "all and any disputes arising out of or in connection with this agreement ...", but are limited to certain categories of dispute. If the clause does not cover the claim in question, the claimant should start court proceedings in any event since, without the respondent's agreement, any arbitral tribunal would lack jurisdiction.
Check the rules
The tribunal must conduct the proceedings in accordance with the procedure agreed by the parties. This includes the provisions of any institutional rules that may apply. If the tribunal fails to do so, the award may be challenged on the ground of serious irregularity under section 68. The claimant will not, therefore, be in a position to ask the tribunal to adopt procedures which are inconsistent with any such rules.
Further, some rules contain fast-track procedures which the parties can elect to follow. Most respondents will be unlikely to agree, but it is always worth considering an approach. If the parties are still doing business with each other they may look favourably on any process which will save time and money.
Consider a sole arbitrator
A sole arbitrator is not suitable for every dispute, but for a quick result, one should have the advantage over three. The appointment process is faster; procedural directions can be made without the need for consultation; and there should be greater flexibility in fixing a hearing date.
By section 15(3) of the 1996 Act, if the clause is silent, the tribunal will consist of a sole arbitrator. Even if the clause requires three arbitrators, there is nothing to stop the parties amending their agreement and deciding to appoint one alone.
It is especially important that a sole arbitrator is competent and experienced since he will not be subject to the checks and balances inherent in a tribunal of three.
The following is an overview of the duties of the tribunal and the procedures a claimant can ask it to adopt.
The section 33 duty
Section 33(1)(b) of the 1996 Act requires the tribunal to:
"...adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense ..."
Formerly, tribunals were loathe to adopt summary procedures because of the threat of misconduct. But the 1996 Act imposes on them a duty in suitable cases to adopt procedures that will expedite the proceedings.
Determining how far the proceedings can be truncated requires careful judgment. The means must be fair and the tribunal must act impartially. And, if the respondent is not given a reasonable opportunity to put his case, he may be able to challenge any award on the section 68 ground of serious irregularity. The claimant must take care not to allow a well-intentioned, but inexperienced, tribunal to overstep the mark.
The claimant should suggest an early preliminary hearing to give the tribunal an opportunity to consider what procedures are suitable. He can explain the circumstances of the case and make procedural proposals on which the respondent may comment. The procedures then adopted will be less likely to run the risk of being held unfair.
The section 34 powers
Section 33 does not limit the procedures which the tribunal can adopt, but section 34(2) does list some of the matters that are for the tribunal to decide, subject to the parties' right to make their own arrangements.
- Limitations on submissions By section 34(2)(c), the tribunal has the power to:
It will rarely be right to dispense with submissions altogether, but the express power to limit their number should encourage the less experienced tribunal to stand up to the bullying respondent who shouts "unfair" and "misconduct" unless he is allowed yet another bite at the cherry.
- dispense with formal submissions altogether;
- restrict their form and number;
- restrict the scope for amendments;
- impose a timetable for the parties' submissions.
- Restricting discovery Full discovery in court proceedings is one of the greatest causes of delay and expense. But in arbitration proceedings there is no automatic right to it. Under section 34(2)(d), the tribunal may not only limit its scope, but can also refuse it altogether. It is the practice in many international arbitrations for the parties to disclose only those documents on which they wish to rely. If the other party feels that further documents should be produced, the burden is on him to establish that disclosure is necessary. The interests of justice will sometimes require full discovery, but in straightforward cases the claimant should impress on the tribunal that such a direction is likely to lead to unnecessary delay and expense.
- Witness evidence Under paragraphs (f) and (h) of section 34(2), the tribunal has the power to admit hearsay evidence and to direct the time, manner and form in which evidence should be exchanged and presented. The tribunal may not have the power to exclude the right to serve witness statements, but the claimant can ask the tribunal to limit their number or even, in principle at least, to direct that the evidence should be presented in writing only. Limiting the number of witnesses (both expert and factual) will be a useful tool in keeping hearings short, but the step of dispensing with oral evidence should probably be limited to cases where there is no dispute on the facts. Where the facts are disputed, the claimant will usually have to accept that oral evidence will be allowed, but should ask the tribunal to limit the time for cross-examination. He may also request that the witnesses' written statements stand as their evidence-in-chief.
- Documents-only hearings Section 34(2)(h) is radical. It enables the claimant to ask the tribunal to direct that the hearing should be on documents only, even if the respondent objects. But only exceptionally should the tribunal deny an oral hearing to a respondent who requests one. This could be a failure to give him a reasonable opportunity of putting his case, which would enable him to challenge any award. It is generally preferable to try to persuade the tribunal to fix an early hearing date and to limit its length. It is particularly important to check any applicable rules on this point. For example, Article 15(2) of the UNCITRAL rules provides that, if either party requests, the tribunal must hold hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral argument. This gives either party the right to insist on an oral hearing, and a refusal by the tribunal would probably amount to a failure to conduct the proceedings in accordance with the agreed procedure.
Awards on different issues
Respondents with weak defences commonly seek to muddy the waters by raising peripheral issues. When this happens the claimant can assist the tribunal by identifying and suggesting that an initial award or awards is made on these issues in accordance with the tribunal's powers under section 47. The Departmental Advisory Committee, in its Report of February 1996, said that this power was an aspect of the tribunal's duty to adopt procedures suitable to the case and it encouraged arbitrators to adopt this approach where it appeared that time and money would be saved.
Provisional orders - interim payment
The tribunal has no power to make provisional orders under section 39, unless the parties have so agreed. But where the arbitration clause does give it this power, the claimant should give serious consideration to seeking, for example, an interim payment order. Such orders can have a significant psychological impact on the respondent and may have the effect of bringing the proceedings to an early close.
The claimant's goal is not just to obtain an award, but to obtain an award that is enforceable. Arbitrators who exercise their new powers with care can expect the support of the English courts, but there will be greater uncertainty where the award is to be enforced abroad. Article V.2(b) of the New York Convention on the recognition and enforcement of foreign arbitral awards allows enforcement to be refused where enforcement would be contrary to public policy. The claimant should, therefore, seek to ensure to the extent possible that any procedures adopted by the tribunal are also not only fair under English law, but are not contrary to public policy under the law of the country where enforcement will be sought.
This article was first published in International Arbitration Law Review.