Arbitration, Revived

This article originally appeared in the December 2014 edition of Commercial Dispute Resolution

For a PDF of this article click here.

ARBITRATION, REVIVED                

By Ben Rigby

EXCLUSIVE: The list of institutions offering alternatives to litigation increases, as an American ADR institution launches a speedier and cheaper set of US-administered international arbitration rules.

By launching a new set of arbitration rules, the US-based International Institute for Conflict Prevention and Resolution (CPR) aims to offer an alternative approach to that of other ADR institutions; one with the views of corporate counsel very much at heart.

CPR launched a new set of international arbitration rules, the Rules for Administered Arbitration of International Disputes” (the Rules) on 1 December 2014, specifically for use in cross-border business transactions.

Devised within the framework of the UNICTRAL Model Rules, which form the basis of most modern arbitral regimes, the Rules are aimed at addressing the most common complaints from corporate clients regarding international arbitration, chiefly, arbitrator impartiality, lengthy time frames to reach resolution, and burdensome and unpredictable costs.

READY TO LAUNCH

In a statement, John Kiernan, chair of CPR’s board of directors, and a partner at Debevoise & Plimpton in New York, said the new streamlined rules would “provide a unique blend of efficiency and cost effectiveness” for global businesses, who would “benefit from having this option available for use in cross border contracts.”

CPR’s CEO and president, the ex- general counsel of MasterCard, Noah Hanft, noted in the same statement that following a surge in cross-border dispute activity, there was a perceived need for “a clear set of rules that instil confidence in [international arbitration] and alleviate [its] perceived risks”.

Hanft said the Rules “are designed specifically to address the major concerns expressed by global businesses,” and were drafted by members of CPR’s arbitration committee, comprised of expert in-house and private practitioners.

They will be administered out of CPR’s New York City offices, offering clients an alternative to European or Asian arbitration; given efforts made by the state of New York to compete with London or Paris, the development will be one welcomed by the city’s arbitral elite, which includes firms like WilmerHale, Covington & Burling, Shearman & Sterling, and Skadden Arps.

CONSTRUCTIVE CHANGE

Hanft, in his statement, said: “With the addition of these rules, CPR will build on its heritage of innovation and offer the full range of both non-administered and administered options.”

CPR is best known to CDR readers for its work with corporate counsel in promoting mediation as one form of ADR, and for encouraging corporate take-up accordingly, both in the US and more recently in Europe.

Having had a set of rules for non-administered arbitrations in place, the Rules are aimed both at increasing the quality of arbitrations, as well as increasing efficiency and lowering costs – again, with corporate counsel in mind.

Keen to ensure the quality of the user experience, CPR has introduced a ‘screened’ selection process for arbitrators.

This, Hanft tells CDR, “is intended to offer the benefits, while avoiding some of the drawbacks, of having party-appointed arbitrators”.

Hanft says: “On the one hand, parties are able to designate arbitrators whom they consider to be well-qualified to sit on the tribunal. On the other hand, any tendency (subtle, or otherwise) of party-appointed arbitrators to advocate the position of the parties who appointed them is avoided, because those arbitrators are approached and appointed by CPR (rather than the parties), and are not told which party designated each of them.”

Neutral arbitrators can be selected in the normal way from CPR’s global panels, while allowing selection of arbitrators of choice outside the institute’s roster. As befits a USbased organisation, it offers both global, and cross-border panels as well as national, and regional panels familiar with US issues, or industry-aware sectoral panels.

IMPARTIAL AND INDEPENDENT

To stiffen any doubts about impartiality, the Rules stress an existing ongoing duty of disclosure by arbitrators to avoid challenges to independence and impartiality.

In support of cheaper, quicker, and more efficient arbitration, the parties may also select how much – or how little – administrative support they require, as well as setting strict time limits. CPR must approve any extensions beyond one year from the constitution of the tribunal – giving parties a clear incentive to progress matters. Costs are also capped by CPR at no more than USD 34,000, save in special circumstances.

In keeping with CPR’s mediation heritage, Hanft does not row back from his view that “mediation will continue to be the best initial option to resolve disputes in most circumstances” but also feels “the Rules will garner widespread international popularity”.

Indeed, the new Rules provide for tribunals proactively suggesting settlements and to initiate mediation if necessary, at any stage of proceedings. Such a development mirrors that of Singapore’s “Arb-Med-Arb” process which combines the virtues of both modes of dispute resolution, introduced by the Singapore International Mediation Centre last month.

Likewise, interim or emergency appointments are also possible – a development encouraged by jurisdictions like the Swedish Chamber of Commerce, for example. Hanft says CPR was among the earliest providers to offer a ‘Special Arbitrator’ for this purpose, and is familiar with turning such requests around.

IN CONVERSATION

As a former corporate counsel, Hanft, who is known for his straightforward style in discussing such issues, makes it clear the client experience of arbitration is important.

Speaking exclusively to CDR, Hanft said that CPR’s sole aim was to devise “fair, fast, flexible and cost-effective procedures which will benefit sophisticated users”, building on the best of previous developments.

He says: “The Rules focus on addressing the problems and complaints often associated with arbitration, ranging from the efficiency of the process to cost and duration;” which means being “as flexible, non-intrusive and non-bureaucratic as possible”.

While aware of the competition between arbitral institutions for such work, he says CPR’s Rules “provide highly desirable alternatives to the arbitration community that address concerns with cost, timing and flexibility”.

The Rules were created “with a view towards explicitly addressing those three criticisms”, he argues. Duration, he says, is controlled by encouraging decisions within 12 months save where extenuating – and justifiable – proceedings allow. Cost, he adds, is addressed by the institute’s flat fee structure and capped fees, in all but rare cases. Complexity, he concludes, can be addressed “by enabling parties to control the process by providing only those administrative functions needed”.

He says “simplicity is one of the hallmarks of the new Rules. This is accomplished in part by placing control of the proceedings [to the arbitrators], providing them with a short 12 month time frame for delivery of the award, a mandate for a pre-hearing scheduling conference to address issues up front in a timely fashion, and the flexibility to oversee disclosure that is both expeditious and cost-effective”.

Costs penalties can be used by arbitrators, if appropriate, Hanft says, to take into consideration the parties’ conduct in the arbitration thereby discouraging dilatory tactics. CPR’s protocols, says Hanft, also allow for streamlined arbitrations by utilising features such as “the ‘hot-tubbing of experts,’ [by which experts consider relevant evidence mutually], the early disposition of appropriate issues, early consideration of damages, and other processes”.

CHASING PACK

Commenting, Rob Smit, co-chair of New York-based Simpson Thacher & Bartletts international arbitration practice, observes that the new Rules were “tailored to international disputes, just the right balance of administrator involvement in the proceedings, and procedures designed to ensure a cost efficient arbitration.”

Other arbitral institutions have also modernised their rules, with the London Court of

Arbitration the most recent UK body to do so, while revised rules were issued by the Paris-basedInternational Chamber of Commerce (ICC) in late 2012.

Asian jurisdictions have been on the frontline of such change, with Hong Kong reforming itsarbitration law and rules last year, Singapore carrying out major reform of the Singapore International Arbitration Centre in 2013 and Japan following suit.

Lastly, the International Centre for Dispute Resolution (ICDR), the international arm of the American Arbitration Association, announced amendments this month to its own dispute resolution procedures (including its mediation and arbitration rules).

In common with others, the ICDR has sought greater process efficiencies in reforming their rules as well as introducing new procedures. With CPR’s entry into the market, competition between institutions has got tighter-and tougher.