This post will offer further considerations for driving efficiency into the arbitration process, following my prior post on the topic. The previous article highlighted differences between (1) emergency and expedited arbitration, (2) ad hoc and institutional proceedings, (3) virtual arbitration and arbitration by documentary submission, while also offering ideas on how to leverage final offer arbitration.
In this piece, let's examine additional options for driving efficiency into arbitration, including the increased use of mediation and negotiation, leveraging motion practice and understanding the potential benefits of dispute boards.
Mediation to Streamline Arbitration
Mediation and arbitration are often categorized as separate and distinct fields for good reason. Arbitration is an adjudicative process; mediation, on the other hand, is more accommodating, dependent on negotiation among parties. There is a formality attached to arbitration that one usually does not find in mediation. While the arbitration process is prescribed by rules, the mediation experience is created by the parties and the mediator to fit the needs of a particular dispute.
Nevertheless, parties, advocates and arbitrators would do well to take lessons from the mediation forum in the preparation for, practice and perhaps resolution of arbitrated disputes.
Opportunities to streamline or dissolve the arbitration process exist throughout. Although a formal process has been initiated and invested in, it is often sensible to explore opportunities for settlement outside the arbitration process.
Arbitration does not foreclose the opportunity for mediation. Whether the jurisdiction or local practice permits traditional arb-med, or parties initiate a mediation that is separate from the arbitration process, mediation may be leveraged to secure a resolution crafted by parties instead of arbitrators.
Having trouble getting your counterpart to agree to mediation once arbitration is underway? Have a look at the CPR Institute Mediation Best Practices Guide for In-house Counsel (available to members). The guide provides a comprehensive review of how to get to mediation, choose the best mediator for your case, and then structure the process so it's primed for success.
Negotiation & Arbitration
From crafting an efficient and enforceable arbitration clause, to tribunal dynamics and the opportunity for exploring mutually agreeable settlement terms…. The opportunities to leverage creative negotiation in order to encourage arbitration efficiency abound. Here are a few ideas:
Negotiating the Clause:
Arbitration clauses seem to get lengthier each day. From considerations over the extent of hearing, arbitrator qualifications, information exchange protocols, appellate processes and carefully crafted nuances to established institutional rules…. Parties’ appetite to create bespoke arbitrations is a growing trend.
The problem here is that many clauses are nearly impossible to act on when the dispute finally arises. The requirements are so specific or, at times in conflict, that they are often nearly impossible to adhere to. Moreover, many of the provisions inserted into contracts are already addressed in institutional rules.
Making time at contract initiation to understand a business partner’s interest in tailoring the dispute resolution clause will save future colleagues the time and expense in subsequently re-negotiating for terms that are workable. Concerns over varied approaches to arbitration are especially understandable where parties hail from different jurisdictions.
Addressing the potential for concerns over the arrangement of arbitral proceedings should be addressed upfront with candor. This may be accomplished by simply listening to the concerns of business partners relating to arbitration, asking clarifying questions to better understand their perspective and holding open dialogues to craft arbitration processes that meet both parties’ goals.
Negotiation Within the Tribunal:
Open and collaborative communications among the tribunal are a necessity for a seamless process. While each member of the panel holds this responsibility, it is ultimately the chair who is best positioned to foster a collegial environment within the panel. In some respects, the chair almost assumes the role of quasi-mediator, listening to the concerns and opinions of the panel on the structure of the process and the manner in which party requests are granted or denied. This is perhaps most critical at the award drafting stage, when panelists’ views of the solution may differ.
For more detail, please visit the Kluwer Arbitration Blog entry entitled, "Negotiation in the Context of Arbitration," which outlines considerations for parties, advocates and arbitrators to consider negotiation techniques in managing the arbitration process - from clause drafting to arbitrator/chair selection and how to craft a plan for negotiation within arbitration.
Motion Practice to Promote Efficiency
At last year's ICC Annual Conference in New York, I participated in a panel discussion entitled, "Radical Proposals for Dispute Resolution: An Efficiency Revolution." Here, motion practice was introduced as a tool for encouraging efficiency. At the conference, we posited that "arbitration should more routinely include motions similar to those used in U.S. litigation (e.g., motions to dismiss on the pleadings or for failure to state a claim, motions for summary judgment and motions in limine to exclude evidence at the hearing)." Roughly 44% of the audience agreed with this idea.
However, if managed properly and closely by the panel from the outset of the proceedings, motion practice has the potential to offer parties a more streamlined process. Historically, there was some confusion among arbitration users as to whether motion practice was permitted under the ICC Rules. However, in a 2017 Alexis Mourre, President of the ICC International Court of Arbitration, explained:
One of the techniques that may be used by arbitral tribunals in order to streamline the proceedings is the immediate disposal of manifestly unmeritorious claims. Such decisions may be taken when a party, at the appropriate stage of the proceedings, has entirely failed to substantiate a claim or a defense, and when disposing of it immediately would enhance the efficiency of the arbitration. It is entirely possible, under the ICC Rules, for an arbitral tribunal to dispose of a manifestly unmeritorious claim on an expeditious basis. Due to the existing misconception that such dispositive motions would not be permitted in ICC arbitrations, it was necessary to add additional guidance in the ICC Note to Parties and Arbitral Tribunals.
In the 2017 Rules Update and Note to Parties and Tribunals, ICC made clear that summary disposition of claims is permissible under the Rules and that specifically Article 22, which provides that “in order to ensure effective case management, the arbitral tribunal, after consulting the parties, may adopt such procedural measures as it considers appropriate, provided that they are not contrary to any agreement of the parties.”
The note specifically explains that a party may request that the tribunal consider expeditious resolution of one or more claims or defense, on the grounds that such claims are manifestly devoid of merit or outside the tribunal’s jurisdiction.
Dispute boards, also known as standing neutrals or adjudicatory boards, are panels set up to accompany the formation or performance of a contract. They also assist in avoiding or overcoming disagreements and disputes by ensuring that there is a neutral, or panel of neutrals, readily available to assist parties when a problem arises.
The dispute board is perhaps most well known for use in construction projects. However, dispute boards are also utilized as a tool in ensuring that there is a member of a corporate board who is attuned to anticipating and resolving conflicts within the board, with shareholders or corporate officers. Dispute boards are also used to address issues as they arise in mergers and acquisitions, joint ventures, and in other commercial contexts.
A variety of ADR institutions offer rules to inform how these systems can be set up in various contexts, including AAA and CPR. Many of the rules are targeted towards the construction industry, but can be adapted by parties agreement of the parties to accommodate other industries.
The ICC Dispute Board Rules, which are not limited to construction, provide for three different types of dispute boards
Dispute Adjudication Boards (DABs) issue decisions that must be complied with immediately.
Dispute Review Boards (DRBs) issue recommendations that are not immediately binding on the parties. However, become so if no party objects within 30 days.
Finally, Combined Dispute Boards (CDBs) offer an intermediate solution between DRB and DAB. They normally issue recommendations but may also issue decisions if a party so requests and no other party objects or the DB so decides on the basis of criteria set out in the Rules. There is a contractual obligation to comply with recommendations and decisions—when so required—by disallowing objections on the merits as a defense to non-compliance and through explicit use of the terms “final” and “binding.”
While this consideration mostly resides outside the arbitration process, it does offer parties the opportunity to craft a process for preventing and/or resolving disputes that can include elements of arbitration.
The ideas shared in this post are offered for your consideration as ways to streamline arbitration. In the wake of Covid-19, parties' need for efficiency in dispute resolution is particularly heightened, so it is my hope this will clarify some of the options available that are available to you.