In the autumn of this year I had the dubious pleasure of celebrating the 10th Anniversary of the publication of the Terms of Reference in an administered arbitration, which is still lumbering towards its own uncertain conclusion. At the time of our appointment as lawyers for one of the parties, which was shortly after the issue of the Terms of Reference, I toyed with the idea of proposing to my client a fixed fee for taking the case to conclusion. It seemed to me that this was quite a “cutting edge” concept at the time and I thought to myself that whilst the risk of such a course of action taken at the outset of hostilities could be very high, I mused that following close of pleadings and the crystallisation of the issues in dispute within the Terms of Reference, the task of assessing the likely future costs would not be beyond the whit of the reasonably experienced lawyer. I therefore felt that the risk of taking a bath on the fixed fee would not be that great. However, some little voice within me clearly counselled caution and as a result I did not make that proposal. Whilst this has saved me from a personal embarrassment and possible lynching by my partners, nevertheless my client has suffered because the case has taken a course which nobody could have predicted at the time when the Terms of Reference were agreed.
Regrettably this sort of situation is not an isolated occurrence. In another non administered arbitration, there was a thirteen month delay between the conclusion of the Hearing and the issue of a Partial Award which, although eagerly anticipated proved somewhat of a disappointment since it merely ordered the appointment of a Tribunal Expert to deal with all the difficult issues which had in any event been before the tribunal at the original hearing. As a consequence the Tribunal Expert effectively had to replicate a substantial part of the original evidential hearing, leading to further delay and increased cost.
The reason behind both of the above examples was essentially arbitrator unavailability. It was therefore with a gladdening heart that I read the recent ICC press release on the issue of their new Statement of Acceptance Availability Independence for ICC Arbitrators. This now requires prospective arbitrators not only to sign a statement of independence but also a statement confirming that they “can devote the time necessary to conduct this arbitration diligently, efficiently and in accordance with the time limits in the rules”. The statement reminds prospective arbitrators that the conduct of the arbitration and its duration will be taken into account when fixing the arbitrators fees. Thus the ICC can now impose financial penalties upon recalcitrant arbitrators and, as a last resort, can require the removal of such arbitrators.
Whilst the statement of the ICC and its sanctions are to be welcomed, it remains the case that it is the long suffering client who has to foot the bill for an extended hearing or, worse still, the delay and disruption caused by the removal of an arbitrator. However one must not cavil unreasonably since the ICC are clearly endeavouring to cure a particular ill and they have armed themselves accordingly. My musings then took a different turn to wonder to what extent parties give consideration to the legal relationship which they establish when they incorporate into their contract a clause which names an Arbitral Institution as the body which will appoint their tribunal in default of agreement and oversee and manage the dispute resolution process. In my experience it is rare for parties even to get remotely exercised in the content of the arbitration clause generally let alone to devote time considering the somewhat esoteric concept of the legal relationship which they are entering into with the appointing body. This is unfortunate and such issues should be addressed before contract signature.
If the relationship is one of contract, what are its terms and what are the obligations on each party? More importantly what are the immunities which the Institution may enjoy by law? Under English law, such immunities are limited and reflect, broadly, insofar as the appointment process is concerned, the type of immunity enjoyed by arbitrators themselves. But query what if there is a failure by an Institution, such as the ICC, properly to police the conduct of the arbitration or indeed to avail itself of the sanctions with which it has expressly equipped itself to overcome delay. Loss will be suffered by the parties, is the Institution’s failure actionable by the parties to recover that loss? If so, what would be the extent of any immunity from suit?
The answers to these questions may be found in the rules of the Institutions concerned but the essential point which I want to emphasis is that parties and their advisors should at least ask themselves certain questions before they simply incorporate a clause which grants to an Institution a hugely significant role in the processing and resolution of disputes. A properly considered and drafted dispute resolution clause in a contract will always pay dividends. It will be a disincentive to the party who wishes to embark upon proceedings simply to delay a matter or to achieve another non project specific strategic objective. Equally a poorly drafted dispute resolution cause and a failure properly to have regard to the role of the Institution whose function is of such critical importance, could lead to parties waiting ten years or more for their disputes to be resolved. The choice is that of the client and its advisors. I urge parties and their lawyers to give these matters careful attention at the contract preparation stage and I would counsel caution before surrendering control over the dispute resolution process by simply cutting and pasting into your contract, a standard institutional clause.