2005 CPR Rules for Non-Administered Arbitration of International Disputes
(Effective June 15, 2005)
1992 CPR published Non-Administered International Arbitration Rules & Commentary.
1996 CPR published Mediation Procedure for Business Disputes in Europe, Minitrial Procedure for Disputes
in Europe, and Dispute Resolution Clauses for Business Contracts in Europe.
1998 Bibliography updated.
2000 CPR Rules for Non-Administered Arbitration of International Disputes and Commentary revised.
2005 CPR Rules for Non-Administered Arbitration of International Disputes and Commentary updated.
CPR name changed from CPR Institute for Dispute Resolution to International Institute for Conflict
Prevention and Resolution, Inc.
The International Institute for Conflict Prevention and Resolution (“CPR”) brings a distinct viewpoint to the field of domestic and international dispute resolution. Its tenets:
1. Most disputes are best resolved privately and by agreement.
2. Principals should play a key role in dispute resolution and should approach a dispute as a
problem to be solved, not a contest to be won.
3. A skilled and respected neutral third party can play a critical role in bringing about agreement.
4. Efforts should first be made to reach agreement by unaided negotiation.
5. If such efforts are unsuccessful, resolution by a non-adjudicative procedure-such as mediation,
should next be pursued. These procedures remain available even while litigation or arbitration is
6. If adjudication by a neutral third party is required, a well-conducted arbitration proceeding usually
is preferable to litigation.
7. During an arbitration proceeding the door to settlement should remain open. Arbitrators
may suggest that the parties explore settlement, employing a mediator if appropriate.
8. Arbitration proceedings often can be conducted efficiently by the Arbitral Tribunal without
administration by a neutral organization, or limiting the role of such an organization to assistance
in arbitrator selection or ruling on challenges to arbitrators, if necessary.
The CPR Rules for Non-Administered Arbitration of International Disputes reflect these tenets.
STANDARD CONTRACTUAL PROVISIONS
The International Rules may be adopted by parties wishing to do so by using one of the following standard provisions:
A. Pre-Dispute Clause
"Any dispute arising out of or relating to, this contract, including the breach, termination or validity thereof, shall be finally resolved by arbitration in accordance with the International Institute for Conflict Prevention and Resolution Rules for Non-Administered Arbitration of International Disputes, by (a sole arbitrator) (three arbitrators, of whom each party shall appoint one) (three arbitrators, none of whom shall be appointed by either party). Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. The seat of the arbitration shall be (city, country). The arbitration shall be conducted in (language). The Neutral Organization designated to perform the functions specified in Rules 5, 6 and 7 shall be (name of CPR or other organization)."
B. Existing Dispute Submission Agreement
"We, the undersigned parties, hereby agree to submit to arbitration in accordance with the International Institute for Conflict Prevention and Resolution Rules for Non-Administered Arbitration of International Disputes (the "International Rules") the following dispute:
We further agree that the above dispute shall be submitted to (a sole arbitrator) (three arbitrators, of whom each party shall appoint one) (three arbitrators, none of whom shall be appointed by either party). We further agree that we shall faithfully observe this agreement and the International Rules and that we shall abide by and perform any award rendered by the arbitrator(s). Judgment upon the award may be entered by any court having jurisdiction thereof. The seat of the arbitration shall be (city, country). The arbitration shall be conducted in (language). The Neutral Organization designated to perform the functions specified in Rules 5, 6 and 7 shall be (name of CPR or other organization)."
A. GENERAL AND INTRODUCTORY RULES
Rule 1: Scope Of Application
1.1 Where the parties to a contract have provided for arbitration under the International Institute for Conflict Prevention and Resolution ("CPR") Rules for Non-Administered Arbitration of International Disputes (the "International Rules"), they shall be deemed to have made these International Rules a part of their arbitration agreement, except to the extent that they have agreed in writing, or on the record during the course of the arbitral proceeding, to modify these International Rules. Unless the parties otherwise agree, these International Rules, and any amendment thereof adopted by CPR, shall apply in the form in effect at the time the arbitration is commenced.
1.2 These International Rules shall govern the conduct of the arbitration except that where any of these International Rules is in conflict with a mandatory provision of applicable arbitration law of the seat of the
arbitration, that provision of law shall prevail.
Rule 2: Notices
2.1 Notices or other communications required under these International Rules shall be in writing and delivered to the address specified in writing by the recipient or, if no address has been specified, to the last known business or residence address of the recipient. Notices and communications may be given by registered mail, courier, telex, facsimile transmission, or any other means of telecommunication that provides a record thereof. Notices and communications shall be deemed to be effective as of the date of receipt. Proof of transmission shall be deemed prima facie proof of receipt of any notice or communication given under these International Rules.
2.2 Time periods specified by these International Rules or established by the Arbitral Tribunal (the "Tribunal") shall start to run on the day following the day when a notice or communication is received, unless the Tribunal shall specifically provide otherwise. If the last day of such period is an official holiday or a non-business day at the place where the notice or communication is received, the period is extended until the first business day which follows. Official holidays and non-business days occurring during the running of the period of time are included in calculating the period.
Rule 3: Commencement Of Arbitration
3.1 The party commencing arbitration (the "Claimant") shall address to the other party (the "Respondent") a notice of arbitration.
3.2 The arbitration shall be deemed commenced as to any Respondent on the date on which the notice of arbitration is received by the Respondent.
3.3 The notice of arbitration shall include in the text or in attachments thereto:
a. The full names, descriptions and addresses of the parties;
b. A demand that the dispute be referred to arbitration pursuant to the International Rules;
c. The text of the arbitration clause or the separate arbitration agreement that is involved;
d. A statement of the general nature of the Claimant's claim;
e. The relief or remedy sought; and
f. The name and address of the arbitrator appointed by the Claimant, unless the parties have agreed
that neither shall appoint an arbitrator.
3.4 Within 30 days after receipt of the notice of arbitration, the Respondent shall deliver to the Claimant a notice of defense. Failure to deliver a notice of defense shall not delay the arbitration; in the event of such failure, all claims set forth in the demand shall be deemed denied. Failure to deliver a notice of defense shall not excuse the Respondent from notifying the Claimant in writing, within 30 days after receipt of the notice of arbitration, of the arbitrator appointed by the Respondent, unless the parties have agreed that neither party shall appoint an arbitrator.
3.5 The notice of defense shall include:
a. Any comment on items (a), (b), and (c) of the notice of arbitration that the Respondent may deem
b. A statement of the general nature of the Respondent's defense; and
c. The name and address of the arbitrator appointed by the Respondent, unless the parties have
agreed that neither shall appoint an arbitrator.
3.6 The Respondent may include in its notice of defense any counterclaim within the scope of the arbitration clause. If it does so, the counterclaim in the notice of defense shall include items (a), (b), (c), (d) and (e) of Rule 3.3.
3.7 If a counterclaim is asserted, within 30 days after receipt of the notice of defense, the Claimant shall deliver to the Respondent a reply to counterclaim which shall have the same elements as provided in International Rule 3.5 for the notice of defense. Failure to deliver a reply to counterclaim shall not delay the arbitration; in the event of such failure, all counterclaims set forth in the notice of defense shall be deemed denied.
3.8 Claims or counterclaims within the scope of the arbitration clause may be freely added or amended prior to the establishment of the Tribunal and thereafter with the consent of the Tribunal. Notices of defense or replies to amended claims or counterclaims shall be delivered within 20 days after the addition or amendment.
3.9 If a dispute is submitted to arbitration pursuant to a submission agreement, this International Rule 3 shall apply to the extent that it is not inconsistent with the submission agreement.
Rule 4: Representation
4.1 The parties may be represented or assisted by persons of their choice.
4.2 Each party shall communicate the name, address and function of such persons in writing to the other party and to the Tribunal.
B. RULES WITH RESPECT TO THE TRIBUNAL
Rule 5: Selection Of Arbitrators By The Parties
5.1 Unless the parties have agreed in writing on a Tribunal consisting of a sole arbitrator or of three arbitrators not appointed by parties, the Tribunal shall consist of two arbitrators, one appointed by each of
the parties as provided in International Rules 3.3 and 3.5, and a third arbitrator who shall chair the Tribunal, selected as provided in International Rule 5.2.
5.2 Within 30 days of the appointment of the second arbitrator, the two party-appointed arbitrators shall appoint a third arbitrator, who shall chair the Tribunal. In the event the party-appointed arbitrators are unable to agree on the third arbitrator, the third arbitrator shall be selected as provided in International Rule 6.
5.3 If the parties have agreed on a Tribunal consisting of a sole arbitrator or of three arbitrators none of whom shall be appointed by either party, the parties shall attempt jointly to select such arbitrator(s) within 30 days after the notice of defense provided for in International Rule 3.4 is due. The parties may extend their selection process until one or both of them have concluded that a deadlock has been reached. In this event, the arbitrator(s) shall be selected as provided in International Rule 6.
5.4 Where the arbitration agreement entitles each party to appoint an arbitrator but there is more than one Claimant or Respondent to the dispute, and either the multiple Claimants or the multiple Respondents do not jointly appoint an arbitrator, the Neutral Organization shall appoint all of the arbitrators as provided in International Rule 6.4.
Rule 6: Selection Of Arbitrator(s) By Neutral Organization
6.1 Whenever (i) a party has failed to appoint the arbitrator to be appointed by it; (ii) the parties have failed to appoint the arbitrator(s) to be appointed by them acting jointly; (iii) the party-appointed arbitrators have failed to appoint the third arbitrator; (iv) the parties have provided that one or more arbitrators shall be appointed by a Neutral Organization agreed on by the parties; or (v) the multi-party nature of the dispute calls for the Neutral Organization to appoint all members of a three-member Tribunal pursuant to International Rule 5.4, the arbitrator(s) required to complete the Tribunal shall be selected as provided in this International Rule 6, and either party may request the Neutral Organization in writing, with copy to the other party, to proceed pursuant to this International Rule 6. In the event the parties have not agreed on a Neutral Organization, CPR shall serve as the Neutral Organization.
6.2 The written request may be made as follows:
a. If a party has failed to appoint the arbitrator to be appointed by it, or the parties have failed to
appoint the arbitrator(s) to be appointed by them through agreement, at any time after such failure
b. If the party-appointed arbitrators have failed to appoint the third arbitrator, as soon as the procedure
contemplated by International Rule 5.2 has been completed.
c. If the arbitrator(s) are to be appointed by the Neutral Organization, as soon as the notice of
defense is due.
6.3 The written request shall include complete copies of the notice of arbitration and the notice of defense or, if the dispute is submitted under a submission agreement, a copy of the agreement supplemented by the notice of arbitration and notice of defense if they are not part of the agreement.
6.4 Except where a party has failed to appoint the arbitrator to be appointed by it, the Neutral Organization shall submit to the parties a list of not less than five candidates if one arbitrator remains to be selected, and of not less than seven candidates if two or three arbitrators are to be selected. If either party shall so request, such candidates shall be of a nationality other than the nationality of the parties. Such list shall include a brief statement of each candidate's qualifications. Each party shall number the candidates in order of preference, shall note any objection it may have to any candidate, and shall deliver the list so marked to the Neutral Organization which, on stipulation of the parties, shall circulate the delivered lists to them. Any party failing without good cause to return the candidate list so marked within 10 days after receipt shall be deemed to have assented to all candidates listed thereon. The Neutral Organization shall designate as arbitrator(s) the nominee(s) willing to serve for whom the parties collectively have indicated the highest preference and who appear to meet the standards set forth in International Rule 7. If a tie should result between two candidates, the Neutral Organization may designate either candidate. If this procedure for any reason should fail to result in designation of the required number of arbitrators or if a party fails to participate in this procedure, the Neutral Organization shall appoint a person or persons whom it deems qualified to fill any remaining vacancy, and whom, if either party shall so request, shall be of a nationality other than the nationality of the parties.
6.5 Where a party has failed to appoint the arbitrator to be appointed by it, the Neutral Organization shall appoint a person whom it deems qualified to serve as such arbitrator, taking into account the nationalities of the parties and any other relevant circumstances.
Rule 7: Qualifications, Challenges And Replacement Of Arbitrator(s)
7.1 Each arbitrator shall be independent and impartial.
7.2 By accepting appointment, each arbitrator shall be deemed to be bound by these International Rules and any modification agreed to by the parties, and to have represented that he or she has the time available to devote to the expeditious process contemplated by these International Rules.
7.3 Each arbitrator shall disclose in writing to the Tribunal and the parties at the time of his or her appointment and promptly upon their arising during the course of the arbitration any circumstances that might give rise to justifiable doubt regarding the arbitrator's independence or impartiality. Such circumstances include bias, interest in the result of the arbitration, and past or present relations with a party or its counsel.
7.4 No party or anyone acting on its behalf shall have any ex parte communications concerning any matter relating to the proceeding with any arbitrator or arbitrator candidate, except that a party may advise a candidate for appointment as its party-appointed arbitrator of the general nature of the case and discuss the candidate's qualifications, availability, independence and impartiality with respect to the parties, and a party may confer with its party-appointed arbitrator regarding the selection of the chair of the Tribunal.
7.5 Any arbitrator may be challenged if circumstances exist or arise that give rise to justifiable doubt regarding that arbitrator's independence or impartiality, provided, that a party may challenge an arbitrator whom it has appointed only for reasons of which it becomes aware after the appointment has been made.
7.6 A party may challenge an arbitrator only by a notice in writing to the Neutral Organization, with copy to the Tribunal and the other party, given no later than 15 days after the challenging party (i) receives notification of the appointment of that arbitrator, or (ii) becomes aware of the circumstances specified in International Rule 7.5, whichever shall last occur. The notice shall state the reasons for the challenge with specificity.
7.7 When an arbitrator has been challenged by a party, the other party may agree to the challenge or the arbitrator may voluntarily withdraw. Neither of these actions implies acceptance of the validity of the challenge.
7.8 If neither agreed disqualification nor voluntary withdrawal occurs, the challenge shall be decided by the Neutral Organization, after providing the non-challenging party and each member of the Tribunal with an opportunity to comment on the challenge.
7.9 In the event of death, resignation or successful challenge of an arbitrator not appointed by a party, a substitute arbitrator shall be selected pursuant to the procedure by which the arbitrator being replaced was selected. In the event of the death, resignation or successful challenge of an arbitrator appointed by a party, that party may appoint a substitute arbitrator; provided, however, that should that party fail to notify the Tribunal and the other party of the substitute appointment within 20 days from the date on which it becomes aware that the opening arose, that party's right of appointment shall lapse and the Tribunal shall promptly request the Neutral Organization to appoint a substitute arbitrator forthwith.
7.10 In the event that an arbitrator fails to act or is de jure or de facto prevented from duly performing the functions of an arbitrator, the procedures provided in International Rule 7.9 shall apply to the selection of a replacement. If the parties do not agree on whether the arbitrator has failed to act or is prevented from performing the functions of an arbitrator, either party may request the Neutral Organization to make that determination forthwith.
7.11 If the sole arbitrator or the chair of the Tribunal is replaced, the successor shall decide the extent to which any hearings held previously shall be repeated. If any other arbitrator is replaced, the Tribunal in its discretion may require that some or all prior hearings be repeated.
Rule 8: Challenges To The Jurisdiction Of The Tribunal
8.1 The Tribunal shall have the power to hear and determine challenges to its jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement. This authority extends to jurisdictional challenges with respect to both the subject matter of the dispute and the parties to the arbitration.
8.2 The Tribunal shall have the power to determine the existence, validity or scope of the contract of which an arbitration clause forms a part. For the purposes of challenges to the jurisdiction of the Tribunal, the arbitration clause shall be considered as separable from any contract of which it forms a part.
8.3 Any challenges to the jurisdiction of the Tribunal, except challenges based on the award itself, shall be made not later than the notice of defense or, with respect to a counterclaim, the reply to the counterclaim; provided, however, that if a claim or counterclaim is later added or amended such a challenge may be made not later than the response to such claim or counterclaim.
C. RULES WITH RESPECT TO THE CONDUCT OF THE ARBITRAL PROCEEDINGS
Rule 9: General Provisions
9.1 Subject to these International Rules, the Tribunal may conduct the arbitration in such manner as it shall deem appropriate. The chair shall be responsible for the organization of arbitral conferences and hearings and arrangements with respect to the functioning of the Tribunal.
9.2 The proceedings shall be conducted in an expeditious manner. The Tribunal is empowered to impose time limits it considers reasonable on each phase of the proceeding, including without limitation the time allotted to each party for presentation of its case and for rebuttal. In setting time limits, the Tribunal should bear in mind its obligation to manage the proceeding firmly in order to complete proceedings as economically and expeditiously as possible.
9.3 The Tribunal shall hold an initial pre-hearing conference for the planning and scheduling of the proceeding. Such conference shall be held promptly after the constitution of the Tribunal, unless the Tribunal is of the view that further submissions from the parties are appropriate prior to such conference. The objective of this conference shall be to discuss all elements of the arbitration with a view to planning for its future conduct. Matters to be considered in the initial pre-hearing conference may include, inter alia, the following:
a. Procedural matters (such as the timing and manner of any required disclosure; the desirability of bifurcation or other separation of the issues in the arbitration; the desirability and practicability of consolidating the arbitration with any other proceeding; the scheduling of conferences and hearings; the need for and costs of translations; the scheduling of pre-hearing memoranda; the need for and type of record of conferences and hearings, including the need for transcripts; the amount of time allotted to each party for presentation of its case and for rebuttal; the mode, manner and order for presenting proof; the need for expert witnesses and how expert testimony should be presented; and the necessity for any on-site inspection by the Tribunal);
b. The early identification and narrowing of the issues in the arbitration;
c. The possibility of stipulations of fact and admissions by the parties solely for purposes of the arbitration, as well as simplification of document authentication;
d. The possibility of appointment of a neutral expert by the Tribunal; and
e. The possibility of the parties engaging in settlement negotiations, with or without the assistance of a mediator.
After the initial conference, further pre-hearing or other conferences may be held as the Tribunal deems appropriate.
9.4 In order to define the issues to be heard and determined, the Tribunal may, inter alia, make pre-hearing orders for the arbitration and instruct the parties to file more detailed statements of claim and of defense and pre-hearing memoranda.
9.5 Unless the parties have agreed upon the seat of arbitration, the Tribunal shall fix the seat of arbitration based upon the contentions of the parties and the circumstances of the arbitration. The award shall be deemed made at such place. The Tribunal may schedule meetings and hold hearings wherever it deems appropriate.
9.6 If the parties have not agreed otherwise, the language(s) of the arbitration shall be that of the documents containing the arbitration agreement, subject to the power of the Tribunal to determine otherwise based upon the contentions of the parties and the circumstances of the arbitration. The Tribunal may order that any documents submitted in other languages shall be accompanied by a translation into such language or languages.
Rule 10: Applicable Law(s) And Remedies
10.1 The Tribunal shall apply the substantive law(s) or rules of law designated by the parties as applicable to the dispute. Failing such a designation by the parties, the Tribunal shall apply such law(s) or rules of law as it determines to be appropriate.
10.2 Subject to International Rule 10.1, in arbitrations involving the application of contracts, the Tribunal shall decide in accordance with the terms of the contract and shall take into account usages of the trade applicable to the contract.
10.3 The Tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties have authorized it to do so in writing or on the record.
10.4 The Tribunal may grant any remedy or relief, including but not limited to specific performance of a contract, which is within the scope of the agreement of the parties and permissible under the law(s) or rules of law applicable to the dispute pursuant to International Rule 10.1, or, if the parties have expressly so provided pursuant to International Rule 10.3, within the Tribunal's authority to decide as amiable compositeur or ex aequo et bono.
10.5 Unless the parties agree otherwise, the parties expressly waive and forego any right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner. This provision shall not limit the Tribunal's authority under International Rule 16.3 to take into account a party's dilatory or bad faith conduct in the arbitration in apportioning arbitration costs between or among the parties.
10.6 A monetary award shall be in the currency or currencies of the contract unless the Tribunal considers another currency more appropriate, and the Tribunal may award such pre-award and post-award interest, simple or compound, as it considers appropriate, taking into consideration the contract and applicable law.
Rule 11: Disclosure
The Tribunal may require and facilitate such disclosure as it shall determine is appropriate in the circumstances, taking into account the needs of the parties and the desirability of making disclosure expeditious and cost-effective. The Tribunal may issue orders to protect the confidentiality of proprietary information, trade secrets and other sensitive information disclosed.
Rule 12: Evidence And Hearings
12.1 The Tribunal shall determine the manner in which the parties shall present their cases. Unless otherwise determined by the Tribunal or agreed by the parties, the presentation of a party's case shall include the submission of a pre-hearing memorandum including the following elements:
a. A statement of facts;
b. A statement of each claim being asserted;
c. A statement of the applicable law and authorities upon which the party relies;
d. A statement of the relief requested, including the basis for any damages claimed; and
e. The evidence to be presented, including documents relied upon and the name, capacity and
subject of testimony of any witnesses to be called, the language in which each witness will
testify, and an estimate of the amount of time required for the party's examination of the witness.
12.2 If either party so requests or the Tribunal so directs, a hearing shall be held for the presentation of evidence and oral argument. Testimony may be presented in written and/or oral form as the Tribunal may determine is appropriate. The Tribunal is not required to apply the rules of evidence used in judicial proceedings. The Tribunal shall determine the applicability of any privilege or immunity and the admissibility, relevance, materiality and weight of the evidence offered.
12.3 The Tribunal, in its discretion, may require the parties to produce evidence in addition to that initially offered. It may also appoint neutral experts whose testimony shall be subject to examination by the parties and the Tribunal and to rebuttal.
12.4 The Tribunal shall determine the manner in which witnesses are to be examined, including the need and arrangements for translation of any witness testimony in a language other than the language of the arbitration. The Tribunal shall have the right to exclude witnesses from hearings during the testimony of other witnesses.
Rule 13: Interim Measures Of Protection
13.1 At the request of a party, the Tribunal may take such interim measures as it deems necessary, including measures for the preservation of assets, the conservation of goods or the sale of perishable goods.
The Tribunal may require appropriate security as a condition of ordering such measures.
13.2 A request for interim measures by a party to a court shall not be deemed incompatible with the agreement to arbitrate or as a waiver of that agreement.
Rule 14: The Award
14.1 The Tribunal may make final, interim, interlocutory and partial orders or awards. With respect to any interim, interlocutory or partial award, the Tribunal may state in its award whether or not it views the award as final for purposes of any judicial proceedings in connection therewith.
14.2 All awards shall be in writing and shall state the reasoning on which the award rests unless the parties agree otherwise. The award shall be deemed to be made at the seat of arbitration and shall contain the date on which the award was made. When there are three arbitrators, the award shall be made and signed by at least a majority of the arbitrators. When one of three arbitrators does not sign, the award shall be accompanied by a statement of whether the third arbitrator was given the opportunity to sign.
14.3 A member of the Tribunal who does not join in an award may issue a dissenting opinion. Such opinion shall not constitute part of the award.
14.4 Executed copies of awards and of any dissenting opinion shall be delivered by the Tribunal to the parties. If the arbitration law of the country where the award is made requires the award to be filed or registered, the Tribunal shall comply or arrange for compliance with such requirement.
14.5 Within 20 days after receipt of the award, either party, with notice to the other party, may request the Tribunal to clarify the award; to correct any clerical, typographical or computation errors, or any errors of a similar nature in the award; or to make an additional award as to claims or counterclaims presented in the arbitration but not determined in the award. The Tribunal shall make any clarification, correction or additional award requested by either party that it deems justified within 30 days after receipt of such request. Within 20 days after delivery of the award to the parties or, if a party requests a clarification, correction or additional award, within 30 days after receipt of such request, the Tribunal may make such corrections and additional awards on its own initiative as it deems appropriate. All clarifications, corrections and additional awards shall be in writing, and the provisions of this International Rule 14 shall apply to them.
14.6 The award shall be final and binding on the parties, and the parties will undertake to carry out the award without delay. If an interpretation, correction or additional award is requested by a party, or a correction or additional award is made by the Tribunal on its own initiative, as provided in International Rule 14.5, the award shall be final and binding on the parties when such clarification, correction or additional award is made by the Tribunal or upon the expiration of the time periods provided in International Rule 14.5 for such clarification, correction or additional award to be made, whichever is earlier.
14.7 The dispute should in most circumstances be heard and be submitted to the Tribunal for decision within nine months after the initial pre-hearing conference required by Rule 9.3. The final award should in most circumstances be rendered within three months thereafter. The parties and the Tribunal shall use their best efforts to comply with this schedule.
D. MISCELLANEOUS INTERNATIONAL RULES
Rule 15: Failure To Comply With International Rules
Whenever a party fails to comply with these International Rules, or any order of the Tribunal pursuant to these International Rules, in a manner deemed material by the Tribunal, the Tribunal shall, if appropriate, fix a reasonable period of time for compliance and, if the party does not comply within said period, the Tribunal may impose a remedy it deems just, including an award on default. Prior to entering an award on default, the Tribunal shall require the non-defaulting party to produce such evidence and legal argument in support of its contentions as the Tribunal may deem appropriate. The Tribunal may receive such evidence and argument without the defaulting party's presence or participation.
Rule 16: Costs
16.1 Each arbitrator shall be compensated on a reasonable basis determined at the time of appointment for serving as an arbitrator and shall be reimbursed for any reasonable travel and other expenses. The compensation for each arbitrator shall be fully disclosed to all Tribunal members and parties.
16.2 The Tribunal shall fix the costs of arbitration in its award. The costs of arbitration include:
a. The fees and expenses of members of the Tribunal;
b. The costs of expert advice and other assistance engaged by the Tribunal;
c. The travel, translation, and other expenses of witnesses to such extent as the Tribunal may deem
d. The costs for legal representation and assistance and experts incurred by a party to such extent as
the Tribunal may deem appropriate;
e. The charges and expenses of the Neutral Organization with respect to the arbitration;
f. The costs of a transcript, if any; and
g. The costs of meeting and hearing facilities.
16.3 Subject to any agreement between the parties to the contrary, the Tribunal may apportion the costs of arbitration between or among the parties in such manner as it deems reasonable, taking into account the circumstances of the case, the conduct of the parties during the proceeding, and the result of the arbitration.
16.4 The Tribunal may request each party to deposit an appropriate amount as an advance for the costs referred to in International Rule 16.2 except those specified in subparagraph (d), and, during the course of the proceeding, it may request supplementary deposits from the parties.
Any such funds shall be held and disbursed in such a manner as the Tribunal may deem appropriate.
16.5 If the requested deposits are not paid in full within 20 days after receipt of the request, the Tribunal shall so inform the parties in order that jointly or severally they may make the requested payment. If such payment is not made, the Tribunal may suspend or terminate the proceeding.
16.6 After the proceeding has been concluded, the Tribunal shall return any unexpended balance from deposits made to the parties as may be appropriate.
Rule 17: Confidentiality
Unless the parties agree otherwise, the parties, the arbitrators and the Neutral Organization shall treat the proceedings, any related disclosure and the decisions of the Tribunal, as confidential, except in connection with judicial proceedings ancillary to the arbitration, such as a judicial challenge to, or enforcement of, an award, and unless otherwise required by law or to protect a legal right of a party. To the extent possible, any specific issues of confidentiality should be raised with and resolved by the Tribunal.
Rule 18: Settlement And Mediation
18.1 Either party may propose settlement negotiations to the other party at any time. The Tribunal may suggest that the parties explore settlement at such times as the Tribunal may deem appropriate.
18.2 With the consent of the parties, the Tribunal at any stage of the proceeding may arrange for mediation of the claims asserted in the arbitration by a mediator acceptable to the parties. The mediator shall be a person other than a member of the Tribunal. Unless the parties agree otherwise, any such mediation shall be conducted under the CPR Mediation Procedure.
18.3 The Tribunal will not be informed of any settlement offers or other statements made during settlement negotiations or a mediation between the parties, unless both parties consent.
Rule 19: Actions Against The Neutral Organization Or Arbitrator(s)
Neither the Neutral Organization nor any arbitrator shall be liable to any party for any act or omission in connection with any arbitration conducted under these International Rules, except that either may be liable to a party for the consequences of conscious and deliberate wrongdoing.
Rule 20: Waiver
A party knowing of a failure to comply with any provision of these International Rules, or any requirement of the arbitration agreement or any direction of the Tribunal, and neglecting to state its objections promptly, waives any objection thereto.
Rule 21: Interpretation and Application of Rules
The arbitrator shall interpret and apply these rules insofar as they relate to the arbitrator's powers and duties. When there is more than one arbitrator and a difference arises among them concerning the meaning or application of these rules, it shall be decided by a majority vote. All other rules shall be interpreted and applied by the Neutral Organization.
The primary objectives of arbitration are to arrive at a just and enforceable result, based on a private procedure that is:
o economical, and
o less burdensome and adversarial than litigation.
The above objectives are most likely to be achieved if the parties and their attorneys:
o adopt well-designed rules of procedure;
o select skilled arbitrators who are able and willing to actively manage the process;
o limit the issues to focus on the core of the dispute; and
o cooperate on procedural matters even while acting as effective advocates on substantive issues.
The International Institute for Conflict Prevention and Resolution (“CPR”) Rules for Non-Administered Arbitration of International Disputes (the “International Rules”) were developed by CPR to provide procedures to facilitate the conduct of international arbitration fairly, expeditiously and economically. The International Rules were designed to be easily comprehended and it is hoped that this Commentary will be useful to those considering using the International Rules. The International Rules are intended, in particular, for the complex international case, but are suitable regardless of the complexity of the case or the amount in dispute.
Every disputant wants to have a reasonable opportunity to develop and present its case. Parties that choose arbitration over litigation of an international dispute do so primarily to avoid the unfamiliarity and uncertainty of litigation in a foreign court; also out of a need or desire for a proceeding that is confidential and relatively speedy. The International Rules were designed with all of these objectives in mind.
The standard arbitration clauses in the International Rules have been drafted to make proceedings under the International Rules subject to the law selected by the parties. The standard clauses also provide for the parties to select the seat of arbitration as well as the Neutral Organization to perform the functions provided in Rules 5, 6 and 7. CPR may, but need not be, selected as the Neutral Organization.
The complexity of cases will vary greatly. In rules of general application, it is not appropriate to fix hard and fast deadlines. Rule 14.7 commits the parties and the arbitrator(s) to use their best efforts to assure that the dispute will be submitted to the Tribunal for decision within nine months after the initial pre-hearing conference, and that the final award will be rendered within three months thereafter. Rule 9.2 empowers the arbitrator(s) to establish time limits for each phase of the proceeding, including specifically the time allotted to each party for presentation of its case and for rebuttal.
Counsel are expected to cooperate fully with the Tribunal and with each other to assure that the proceeding will be conducted with civility in an efficient, expeditious and economical manner. Rule 16.3 empowers the arbitrators in apportioning costs to take into account, inter alia, "the circumstances of the case" and "the conduct of the parties during the proceeding." This broad power is intended to permit the arbitrators to apportion a greater share of costs than they otherwise might to a party that has employed tactics the arbitrators consider dilatory, or in other ways has failed to cooperate in assuring the efficient conduct of the proceeding.
Types Of Disputes
The International Rules are designed for "international disputes," which broadly encompass disputes of any nature involving persons or business enterprises of different nationalities or located in different countries. For example, international commercial disputes, intellectual property disputes, construction disputes, disputes between manufacturers and distributors or franchisees, disputes between joint venturers, insurance disputes and investment disputes. The International Rules may be adopted by parties that do not have a contractual or other business relationship, e.g., for a patent infringement dispute. The International Rules may also be employed to adjudicate a dispute between a government agency and a private entity, subject to any legal restraints on that government's submission to arbitration.
CPR recommends that where the parties are based or located in different countries or where their contract involves a foreign subject matter or otherwise calls for performance abroad, they specifically provide for application of CPR's International Rules. Where parties have provided for CPR arbitration generally, without specifically identifying which CPR arbitration rules shall apply, the general CPR Rules for Non-Administered Arbitration (the "Rules") shall apply. The International Rules differ from the general Rules only to the extent that the international nature of the dispute calls for additional or different rules for international dispute resolution. Thus, the International Rules contain additional or different provisions concerning, inter alia, certain time limits ( e.g., International Rules 3.4 and 5.2), the nationality of arbitrators (International Rules 6.4 and 6.5), the language of the arbitration (International Rule 9.6), applicable laws and remedies including currency (International Rule 10), and certain provisions concerning evidence (International Rule 12). Significantly, the most common and important differences frequently found between U.S. domestic and international arbitration rules relating to the neutrality of party-appointed arbitrators and the existence of reasoned awards do not exist between the CPR Rules and the International Rules. Both sets of CPR Rules require all arbitrators to be neutral and require a reasoned award.
While most arbitrations involve two parties, the International Rules are also suitable for proceedings among three or more parties. References to "Claimant," "Respondent" and "other party" should be construed to encompass multiple Claimants, Respondents or other parties in such multi-party proceedings. Where necessary, the International Rules specifically address particular issues raised in the multi-party context. For example, Rule 3.2 provides that the arbitration shall be deemed commenced "as to any Respondent" when that Respondent receives the notice of arbitration. Rule 5.4 deals with the constitution of the Tribunal where the arbitration agreement entitles each party to appoint an arbitrator but there is more than one Claimant or Respondent to the dispute.
Administered vs. Non-Administered Arbitration
The principal functions normally performed by an organization administering international arbitration proceedings are to:
o provide a set of rules which the parties can adopt in a pre-dispute agreement or for an existing
o provide lists of persons from which arbitrators may be chosen;
o appoint the arbitrator(s) if necessary;
o decide arbitrator conflict of interest challenges if necessary;
o provide administrative staff to render services required for case handling and to insulate arbitrators
o determine arbitrator fees and bill the parties for such fees;
o schedule hearings and send notices of hearings;
o provide hearing rooms;
o distribute documents;
o review awards for procedural comments.
The charges of administering organizations typically are related to the amount in dispute, but rates vary.
Many international arbitration practitioners and arbitrators see a need for administered arbitration, but others favor non-administered or "ad hoc" arbitration, particularly for large or complex cases. They believe that the arbitrator(s) and the parties' advocates are capable of performing most of the functions generally performed by the administering organization, with the possible exception of the first four listed, and that the arbitrator(s) and advocates often may be better able to control the conduct of the proceeding than such an organization. The fees charged by an administering organization also may be a factor.
CPR's International Rules provide for non-administered arbitration of international disputes, as do UNCITRAL's Arbitration Rules. The assistance of a neutral organization to serve as appointing authority may nevertheless be valuable in selecting the Tribunal or deciding a conflict of interest challenge to an arbitrator. Under CPR's International Rules, a Neutral Organization on which the parties agree will perform these limited functions. (See Rules 5, 6 and 7).
CPR is prepared to perform the functions of a Neutral Organization under the International Rules. The following organizations have informed CPR that they also are prepared to perform such functions:
Australian Commercial Dispute Center
Austrian Federal Economic Chamber
British Columbia International Commercial Arbitration Centre
The Chartered Institute of Arbitrators, London
Hong Kong International Arbitration Centre
Inter-American Commercial Arbitration Commission
International Chamber of Commerce, International Court of Arbitration
Italian Arbitration Association
London Court of International Arbitration
Netherlands Arbitration Institute
Arbitration Institute of the Stockholm Chamber of Commerce
Swiss Arbitration Association
Zurich Chamber of Commerce
Organizations in addition to those listed above are capable and may also be willing to serve as the Neutral Organization under the International Rules. In the event the parties have not designated or otherwise agreed on a Neutral Organization, CPR will serve as the Neutral Organization (Rule 6.1). It is advisable for the parties to inquire into charges before selecting an organization. CPR's fee schedule for performing certain functions only upon party request is listed on CPR's website at www.cpradr.org.
A vast majority of international arbitrations take place pursuant to the parties’ binding agreement to submit possible future disputes to arbitration in accordance with specified rules. Once a dispute has arisen, it is usually much more difficult for the parties to agree on any alternative to litigation. CPR recommends the inclusion of a dispute resolution clause in most business agreements. The parties should also consider whether to provide for administered or non-administered arbitration.
Salient Features Of The Rules
Features of the International Rules which CPR considers particularly significant are:
1. The International Rules call for non-administered arbitration, in which a Neutral Organization only becomes involved when necessary to break an impasse in the proceedings. Specifically, the Neutral Organization's role in the arbitral proceedings is limited to appointing arbitrators where the parties are unable to agree on such arbitrators (Rule 6) and ruling on challenges to arbitrators (Rule 7).
2. The International Rules require the expeditious conduct of the proceeding, empowering the arbitrator(s) to establish time limits for each phase of the proceeding (Rule 9.2), and to penalize a party engaging in dilatory tactics (see Rule 16.3).
3. All arbitrators, including those appointed by either party, are required to be independent and impartial (Rule 7.1).
4. The parties are given ample opportunity to select a sole arbitrator or a panel of three arbitrators without intervention of a Neutral Organization. If they fail, either party may request the assistance of a Neutral Organization (Rules 5 and 6).
5. The Tribunal may decide challenges to its jurisdiction (Rule 8). This should allow arbitrators to decide all issues, including arbitrability questions, without the necessity for court intervention."
6. The chair of the Tribunal is assigned responsibility for the organization of conferences and hearings and arrangements with respect to the functioning of the Tribunal (Rule 9.1).
7. The Tribunal is required to hold at least one pre-hearing conference to plan and schedule the proceeding (Rule 9.3). Such conference should result in the smooth scheduling of the case, and may aid possible settlement.
8. The Tribunal is required to apply the substantive law chosen by the parties to govern the merits of their dispute (Rule 10.1). The Tribunal is also specifically empowered to grant any remedy, including specific performance and injunctive relief, within the scope of the parties' agreement and permissible under applicable law (Rule 10.4).
9. The Tribunal is given great leeway in matters of procedure. The Tribunal is specifically empowered, for instance, to:
o establish time limits for each phase of the proceeding (Rule 9.2);
o limit the time allotted to each party for presentation of its case (Rule 9.2);
o make pre-hearing orders (Rule 9.4);
o require such disclosure as it deems appropriate (Rule 11);
o require the submission of pre-hearing memoranda (Rules 9.4 and 12.1);
o require evidence to be presented in written or oral form (Rule 12.2).
10. The Tribunal is empowered to appoint neutral experts (Rule 12.3).
11. The Tribunal may take interim measures as it deems necessary, including for the preservation of assets (Rule 13.1).
12. The Tribunal is required to state the reasoning on which its award rests unless the parties agree otherwise (Rule 14.2). CPR believes the parties are entitled to know how the decision was reached. The requirement that the award be reasoned also discourages any tendency for arbitrators to "split the baby" without a principled basis for doing so.
13. Each arbitrator is to be compensated on a reasonable basis determined at the time of appointment for serving as an arbitrator (Rule 16.1).
14. The Tribunal is empowered to apportion costs, including attorneys' fees and other costs incurred by a party, between the parties, taking into account the circumstances of the case, the conduct of the parties during the proceeding and the result (Rule 16.3).
15. The proceedings are confidential, with limited exceptions (Rule 17).
16. The Tribunal may suggest at any time that the parties explore possible settlement (Rule 18.1).
17. The Tribunal may arrange for mediation of the dispute at any time with the consent of the parties (Rule 18.2).
18. The International Rules are intended primarily for disputes between responsible parties who will not attempt to obstruct the process.
However, the Rules do permit the process to go forward even if a Respondent fails to deliver a notice of defense, fails to participate in selection of the Tribunal, or ultimately fails to appear at a hearing. (See Rules 3, 6 and 15).
COMMENTARY ON STANDARD CONTRACTUAL PROVISIONS
CPR recommends that in most instances, business agreements include a multistep ADR scheme with three sequential stages of dispute resolution: (i) a Negotiation Phase between executives with decisionmaking authority who are at a higher level than the personnel involved in the dispute; (ii) a Mediation Phase to facilitate settlement by employing a skilled neutral, not to impose a solution, but to assist the parties in reaching agreement; and (iii) a Final Binding Arbitration Phase in case the non-binding phases produce no settlement, or, Litigation if the non-binding phases produce no settlement and private binding arbitration is not selected. (See CPR website for sample clauses, www.cpradr.org).
The suggested standard pre-dispute clause and submission agreement which precede the International Rules may be modified or supplemented. The pre-dispute clause is intended to apply to any amendment of the contract and to any agreement between the parties settling a dispute relating to the contract, unless the parties express a contrary intent. It is desirable that the parties specify the number of arbitrators, the seat (which is often referred to as the place) of arbitration and the governing law. If a governing law is specified, it may be advisable to state whether or not the conflict of laws rules of that law are included.
The pre-dispute clause and the submission agreement call for an election as to whether the Tribunal will be composed of:
o three arbitrators, of whom each party appoints one, and the two party-appointed arbitrators in turn
attempt to select the third,
o three arbitrators, none of whom are appointed by the parties, or
o a sole arbitrator.
Such an election made in a pre-dispute clause may be changed by further agreement once a specific dispute has arisen. If the parties fail to make an election, the party-appointed model where each party appoints an arbitrator, and they in turn select the third applies in accordance with Rule 5.1. (Rules 5 and 6 govern the selection of arbitrators.)
The seat of arbitration is of great significance, not only because the controlling arbitration law may enlarge the authority of the Tribunal, but also because the mandatory provisions of the arbitration law may impose restrictions on the conduct of the arbitration. Even the best set of rules cannot overcome the mandatory provisions of the law of the seat and thus selection of the seat should be made in light of the arbitration law of the jurisdiction selected. Parties also are well-advised to consider how such law can fill gaps in the set of selected rules. It is well to consider, for instance, what possibilities are present for judicial assistance with respect to the gathering of evidence, especially from non-parties.
It may be desirable for the parties to stipulate that judgment may be entered upon the award in order to facilitate compliance with statutory requirements in certain jurisdictions. See, e.g., the United States Federal Arbitration Act, 9 U.S.C. §9.
Punitive Damages - The U.S. Supreme Court in Mastrobuono v. Shearson Lehman Hutton, Inc., 512 U.S. 52, 115 S. Ct. 1212 (1995), held that, unless the parties expressly agree otherwise, arbitrators are authorized to award punitive damages. Given the nature of the commercial disputes most commonly referred to arbitration under these International Rules, and to allay concerns that non-U.S. parties may have about U.S.-style punitive damages awards, Rule 10.5 reverses the presumption about the parties' intent by providing that, by adopting the International Rules, the parties waive any right to punitive damages, unless a statute (such as the antitrust laws or RICO) requires otherwise. If the parties want punitive damages to be available, they may expressly so provide in their contract or arbitration agreement.
COMMENTARY ON INDIVIDUAL RULES
A. General And Introductory Rules
Rule 3. Commencement Of Arbitration
Rule 3 sets forth the procedure to be followed when a proceeding is commenced pursuant to a pre-dispute arbitration clause. Rules 3.1 and 3.2 provide that the arbitration is commenced by the delivery and receipt of a notice of arbitration. Rule 2 governs how notices are to be made, and authorizes service of notices and other communications by registered mail, courier, telex, facsimile transmission, or any other means of telecommunication (which include email) that provides a record thereof. It is generally advisable to service the notice of arbitration that commences the arbitration by registered mail and/or by courier rather than by facsimile, email or other electronic means.
Under Rule 3.4, the arbitration will proceed even if the Respondent should fail to file a timely notice of defense. If the pre-dispute clause required each party to appoint an arbitrator, and either party fails to do so, the other party may request the Neutral Organization to step in pursuant to Rule 6. Rule 3.8 governs the addition or amendment of claims after the notice of arbitration is filed; defenses, too, may ordinarily be freely added or amended, unless the Tribunal determines otherwise.
A submission agreement entered into after a dispute has arisen may include all or some of the material called for by Rules 3.3 and 3.5 and may eliminate the need for a notice of arbitration and a notice of defense. Rule 3.9 provides that "Rule 3 shall apply to the extent that it is not inconsistent with the submission agreement." If the parties so desire, the submission agreement can provide that Rule 3 notices will not be required or will be modified.
Rule 4. Representation
It is assumed that parties normally would be represented by a law firm or an individual attorney; however, the International Rules permit parties to be represented or assisted by any persons of their choice.
Under the laws of certain jurisdictions, representation of a party in an arbitration proceeding may constitute the practice of law, in which case representation by an attorney would be required. If the parties are represented by legal counsel, such counsel need not be a member of the local bar at the seat of the arbitration unless local law or regulation at the seat of the arbitration so requires.
B. Rules With Respect To The Tribunal
Rule 5. Selection Of Arbitrators By The Parties
Most practitioners, when confronted with a large or complex dispute, have greater confidence in a panel of three arbitrators than in a single arbitrator. Moreover, they usually prefer to permit each party to appoint an arbitrator. Rule 5.1 provides, therefore, that the Tribunal shall consist of two arbitrators appointed by the parties and a third arbitrator who shall chair the Tribunal, unless the parties have agreed on a Tribunal consisting of a sole arbitrator or three arbitrators not appointed by the parties.
For many parties the ability to select a Tribunal well qualified to hear and decide their dispute is a primary motivation to opt for arbitration. The selection of highly qualified, experienced arbitrators is critical. CPR believes that at least the chair of the Tribunal usually should be a respected attorney experienced in arbitration.
The arbitrators should be persons able and willing to control the course of the proceeding and to make definitive rulings on substantive and procedural matters.
Sophisticated counsel representing the parties are likely to know of individuals, especially of attorneys, who are well qualified and who meet the "independent and impartial" standard of Rule 7.1. CPR has established the CPR International Panel of Distinguished Neutrals composed of leading international members of the bar, who are highly qualified to serve as arbitrators. CPR's listing of neutrals within the United States, the CPR Panels of Distinguished Neutrals, lists many other panelists skilled in international arbitration. CPR's lists of panelists are available on the CPR website (www.cpradr.org) or upon request from CPR.
It should be noted that scheduling hearings on dates on which all three arbitrators are available frequently presents considerable difficulties and may well result in delays. Moreover, the need to have two or three arbitrators agree on the text of an award may also cause delay and additional expense. Consequently, a proceeding conducted by a sole arbitrator may be more expeditious and less expensive.
Tribunals of two arbitrators have been used on occasion, typically in complex technological disputes in which the objective was to structure a modus vivendi rather than only to arrive at conclusions as to liability and damages. The International Rules may be modified to provide for a two arbitrator Tribunal.
Rule 5.4 deals with the constitution of three member Tribunals in the multi-party context. It provides that if there is more than one Claimant or one Respondent, and the parties' arbitration clause contemplates each party appointing an arbitrator, then the multiple Claimants or multiple Respondents can jointly appoint an arbitrator. If they are unable or unwilling to do so, the Neutral Organization shall appoint all of the arbitrators following the procedures of Rule 6.4.
Rule 6. Selection Of Arbitrator(s) By The Neutral Organization
Selection of arbitrators by the parties is the preferred course, and the parties are given ample opportunity to select a Tribunal without the assistance of a Neutral Organization. However, either party may request the assistance of CPR or another Neutral Organization at the time and in the manner specified in Rule 6. CPR's fee for providing the services of a Neutral Organization is available on CPR's website at www.cpradr.org.
In accordance with Rule 6.4, the Neutral Organization will submit a list of candidates to the parties in writing. The parties are required to rank the nominees in order of preference. The nominee(s) willing to serve for whom the parties collectively have indicated the highest preference will be selected. If either party requests that the nominees be of a nationality other than that of the parties, the Neutral Organization shall comply with that request. By agreement, the Neutral Organization could first attempt to complete the Tribunal in a less formal manner by convening the parties and proposing candidates orally. Where a party has failed to appoint its party-appointed arbitrator, the Neutral Organization shall appoint a person whom it deems qualified, taking into account the nationalities of the parties and other relevant circumstances (Rule 6.5).
Rule 7. Qualifications, Challenges And Replacement Of Arbitrators
The degree of independence expected of a party-appointed arbitrator in international arbitration is not always clear. Parties sometimes expect the arbitrator they appoint to act as their advocate on the panel. CPR does not favor this approach. CPR believes that the advocacy role should be performed exclusively by each party's counsel or other representative, and that permitting arbitrators to play such a role is prejudicial to the disinterested and candid deliberations in which the Tribunal should engage. Consequently, Rule 7.1 states: "Each arbitrator shall be independent and impartial."
Rule 7.2 recognizes that other time commitments of arbitrators may well delay the proceeding, particularly if the Tribunal consists of more than one arbitrator. The International Rules provide that by accepting appointment each arbitrator is deemed to represent that he or she has the time available to devote to the expeditious process contemplated by the International Rules.
The rationale for party appointment is to enable each party to select an individual it considers well qualified and whom it expects in turn to select a capable chair of the Tribunal. A party may not have ex parte communications relating to the case (other than of a purely ministerial nature) with any arbitrator or arbitrator candidate, except that a party may discuss the case in general terms with an individual before appointment to determine his or her suitability and availability to serve as arbitrator, and may confer with its appointee regarding the selection of the chair of the Tribunal (Rule 7.4).
Rules 7.3 and 7.5 - 7.8 set forth a formal procedure for disclosure of "circumstances that might give rise to justifiable doubt regarding the arbitrator's independence or impartiality," and for a challenge for "justifiable doubt" after the Tribunal has been constituted. It is anticipated that normally an individual's possible conflicts of interest would be disclosed and resolved informally before selection, and that it would rarely become necessary to invoke the formal procedure.
If an arbitrator is formally challenged by a party, Rule 7.8 provides that the Neutral Organization will decide the challenge after providing the challenged arbitrator, the other members of the Tribunal and the non-challenging party with an opportunity to comment on the challenge. If CPR serves as the Neutral Organization, in providing an opportunity to comment and deciding the challenge, CPR will follow the procedures set forth in its CPR Challenge Protocol (distributed to the parties and the Tribunal upon notification of a challenge and/or upon request). The CPR Challenge Protocol provides that challenges are decided by a designated Challenge Officer within CPR or, where appropriate in light of the difficulty, complexity or other relevant factors, by a Challenge Review Committee consisting of three members drawn from a CPR Challenge Review Board of CPR Panelists. Decisions on challenges will be made and communicated to the parties and Tribunal expeditiously. The basis and reasons underlying the decision, however, are not communicated to the parties or the Tribunal, consistent with the confidential and administrative nature of the decision and the desire to avoid or minimize interlocutory proceedings in the courts. CPR's fee schedule for ruling on a challenge is listed on CPR's web-site at www.cpradr.org.
Rules 7.9 - 7.11 provide for the event that an arbitrator must be replaced due to a successful challenge, resignation, failure to act, or death. In that event, a substitute arbitrator is selected pursuant to the procedure by which the arbitrator being replaced was selected. In recognition of the (usually slight) risk that party-appointed arbitrators might resign to delay the proceedings, the International Rules are designed to minimize the impact of such tactics. Rule 7.9 allows the party that appointed the resigning arbitrator only 20 days to appoint a replacement, after which the Neutral Organization is empowered to make the appointment. Moreover, under Rule 7.11, the remaining majority of the Tribunal have discretion not to repeat any previously held hearings once the substitute arbitrator is appointed.
Rule 8. Challenges To The Jurisdiction Of The Tribunal
This Rule expresses the generally accepted principle that arbitrator(s) have the competence at least in the first instance, to determine their own jurisdiction, both over the subject matter of the dispute and the parties to the arbitration. The arbitrator(s) will also decide whether the arbitration proceeds pending resolution of a jurisdictional challenge.
C. Rules With Respect To The Conduct Of The Arbitral Proceedings
Rule 9. General Provisions
Under Rule 9.1, the Tribunal may conduct the arbitration as it deems appropriate, taking into consideration any mandatory provisions of applicable arbitration law (Rule 1.2). Such mandatory provisions could include, for example, provisions of arbitration law at the seat of arbitration requiring arbitrators and/or witnesses to take oaths.
Rule 9.1 further provides that the chair is "responsible for the organization of the arbitral conferences and hearings and arrangements with respect to the functioning of the Tribunal."
The efficiency of the proceeding will depend in large part on the chair's taking the lead in asserting the Tribunal's control over critical aspects of the procedure, including the setting of time limits as authorized by Rule 9.2.
The International Rules give the Tribunal wide latitude as to the manner in which the proceeding will be conducted. It is expected that the procedure will be determined in large part during the pre-hearing conference(s) held pursuant to Rule 9.3 and that following the conference(s) the Tribunal will issue one or more orders on procedural matters. The pre-hearing conference prescribed by Rule 9.3 should ordinarily be held in person in order to maximize the benefits of the conference, but may also be held by telephone or other form of electronic or teleconference where considerations of efficiency so dictate.
Narrowing issues to those central to the controversy, fact stipulations and admissions should be strongly encouraged by the Tribunal in the interest of focusing on core issues and simplifying the proceeding. Some controversies hinge on one or two key issues of law. At the pre-hearing conference, the desirability of the Tribunal's ruling on such issues before the hearings commence can be considered.
Other controversies hinge on a key issue of a technical nature on which a neutral expert can be helpful in bringing about a resolution. The appointment by the Tribunal of such an expert is authorized by Rule 12.3 and also can be discussed at the pre-hearing conference.
The Tribunal may bifurcate the proceeding. If the proceeding is bifurcated to first decide the issue of liability, the parties then may well be able to agree on the remedy. Often parties have options not available to a judge or to arbitrators.
The Tribunal may also in exceptional circumstances consolidate two proceedings involving common issues, for example, when the arbitration law at the place of arbitration authorizes such consolidation and/or when a single dispute involves several parties and agreements and the parties are willing to consolidate proceedings.
A pre-hearing conference may well give the arbitrators an opportunity to suggest settlement discussions or mediation, as contemplated by Rule 18. Simply bringing the attorneys together for purposes of a conference may lead to such discussions.
Rule 10. Applicable Law(s) And Remedies
Under Rule 10, unless the parties have agreed in their contract or otherwise as to which law shall govern, the Tribunal is free to apply the law(s) or rules of law as it determines to be appropriate to govern the dispute. Rule 10.4 makes clear that the Tribunal can grant any remedy or relief available under the contract and applicable law, including equitable relief such as specific performance and injunctive relief. Indeed, arbitrators have been held to have even greater latitude than courts in fashioning appropriate equitable relief.
Arbitrators may not simply do as they please, however; any remedy or relief granted must be permissible under the contract and applicable law and Rule 14.2 requires arbitrators to explain the reasoning on which their awards rest.
Rule 10.3 provides that the " Tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties have expressly authorized it to do so." While there are no universally accepted definitions of amiable compositeur and ex aequo et bono, the defining characteristic of arbitrators having the power to act as such is that they need not apply strict legal rules of law in resolving the parties' dispute if they consider that a strict legal approach would lead to an inequitable result. In particular, they may take a more flexible approach in determining contractual rights and obligations and in formulating appropriate remedies that reflect commercial fairness and reality. Giving the Tribunal power to act as amiable compositeur/ex aequo et bono may be suitable for situations where the parties to a long-term agreement wish the Tribunal to have the power to take into account new or changing circumstances in fashioning fair and creative remedies. That power is not unlimited, however; it does not authorize the Tribunal to disregard or rewrite the parties' contract, to ignore any applicable mandatory rules of law or public policy, or to fail to afford the parties due process in the arbitration. Because some jurisdictions question the validity or international enforceability of awards rendered by Tribunals acting as amiable compositeur/ex aequo et bono, parties should ensure that the law of the proposed place of arbitration (and of any other potentially relevant jurisdiction) permits such a provision and enforces awards not based on substantive rules of law.
The U.S. Supreme Court in Mastrobuono v. Shearson Lehman Hutton, Inc., 512 U.S. 52, 115 S. Ct. 1212 (1995), held that, unless the parties expressly agree otherwise, arbitrators are authorized to award punitive damages. Given the nature of the commercial disputes most commonly referred to arbitration under these Rules, and to allay concerns that non-U.S. parties may have about U.S.-style punitive damages awards, Rule 10.5 reverses the presumption about the parties' intent by providing that, by adopting the International Rules, the parties waive any right to punitive damages, unless a statute (such as the antitrust laws or RICO) requires otherwise. If the parties want punitive damages to be available, they may expressly so provide in their contract or arbitration agreement.
Rule 11. Disclosure
Under Rule 11, the Tribunal
"may require and facilitate such disclosure as it shall determine is appropriate in the circumstances, taking into account the needs of the parties and the desirability of making disclosure expeditious and cost-effective."
Arbitration is not for the litigator who will "leave no stone unturned." Disclosure should be limited to those items which a party has a substantial, demonstrable need. Except under highly unusual circumstances, disclosure should be limited to the production of relevant documents.
It is desirable for the parties' counsel to agree, preferably before the initial pre-hearing conference, on a disclosure plan and schedule and to submit the same to the Tribunal for its approval.
Rule 12. Evidence And Hearings
The International Rules do not establish a detailed mandatory hearing procedure but permit the Tribunal to determine the procedure. At least the main features should be established during the pre-hearing conference(s) and set forth in an appropriate order by the Tribunal.
The Tribunal need not apply rules of evidence used in judicial proceedings. Rule 12.2 provides that the Tribunal shall determine the applicability of any privilege or immunity. That protection is intended to apply to pre-hearing disclosure as well as to evidence at hearings.
Self-authentication of documentary exhibits, the authenticity of which are not disputed, is a widely used practice which reduces hearing time. In cases in which voluminous testimony is expected, the hearings will be expedited considerably if the Tribunal requires the direct testimony of all or most witnesses to be submitted in written form before the witness is to appear. This procedure also enables opposing counsel to better prepare for examination. Affidavits or witness statements would be admissible in evidence unless the Tribunal rules otherwise.
The Tribunal should consider at the pre-hearing conference the imposition of time limits on case presentation, as authorized by Rule 9.2. If necessary, any such limits can be extended.
The International Rules do not provide specifically for the notice the parties are to be given of hearing dates and times. It is assumed that the Tribunal will give notice in such form and with such lead time as is reasonable under the circumstances.
The efficiency of the proceeding will be enhanced substantially if hearings are held consecutively, particularly if party representatives or members of the Tribunal are required to travel long distances. If the Tribunal heeds every schedule conflict claim and adjournment request by either counsel, the hearings may drag on quite unnecessarily.
Rule 12.3 empowers the Tribunal to appoint neutral experts. CPR expects this power to be exercised sparingly, and only following consultation with the parties as to the need for a neutral expert, the scope of the assignment, and identification of well-qualified candidates. It is not intended that the expert give advice to the Tribunal ex parte; indeed, the Rule provides that the expert's testimony shall be subject to examination by the parties and to rebuttal. The conflicting views of partisan experts can lead to confusion rather than enlightenment of arbitrators. In appropriate cases the arbitrators might encourage the parties early on, e.g., at the pre-hearing conference, to agree on the joint appointment of a neutral expert.
The International Rules do not automatically require the submission of post-hearing briefs, but it is likely that the Tribunal will order the submission of such briefs. Final oral argument also may be scheduled.
The Tribunal's powers with respect to subpoenas are determined by applicable law and are not dealt with specifically in the International Rules.
Rule 14. The Award
Rule 14.2 provides: "All awards shall be in writing and shall state the reasoning on which the award rests, unless the parties agree otherwise." Most parties engaging in arbitration want to know the basis on which the arbitrator(s) reached their decision. CPR, moreover, considers it good discipline for arbitrators to require them to spell out their reasoning. Sometimes this process gives rise to second thoughts as to the soundness of the result. The Rule 14.2 mandate gives the arbitrator(s) greater leeway than would a requirement to state "conclusions of law and findings of fact." Some parties hesitate to arbitrate out of a concern that arbitrators are prone to "split the baby", i.e., to make compromise awards. Any tendency on the part of arbitrators to reach compromise awards should be restrained by the requirement of a reasoned award. Finally, the arbitration laws of several countries require arbitration awards to be reasoned; the reasoning requirement in the International Rules therefore enhances the international enforceability of the award.
Certain administering organizations and practitioners favor "bare" awards without explanation of any sort, in the belief that such awards are the least likely to be challenged and overturned by a court. In CPR's view the risk that a reasoned award will be successfully challenged normally is small and outweighed by the other considerations mentioned above.
Where there are three arbitrators, a majority of the arbitrators must sign the award. Occasionally, a Tribunal of three arbitrators experiences great difficulty in developing a position to which a majority can subscribe. Certain other arbitration rules empower the chair of the Tribunal to make an award singly under such circumstances, notwithstanding the (usually slight) risk of a rogue chair ruling unreasonably. The parties are free to modify the International Rules to grant such authority to the chair.
Rule 14.7 requires the parties and the arbitrators to use their best efforts to submit the dispute to the Tribunal for decision within nine months of the initial pre-hearing conference, and to render the final award within three months following such submission. If the Tribunal believes that more time will be needed due to the complexity of the case, the Tribunal should establish an appropriate schedule by order following the pre-hearing conference. Prompt completion of the proceedings is a matter of great importance.
The International Rules do not deal expressly with confirmation of an award, as the matter will be covered, in most instances, by the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the New York Convention, or the Inter-American Convention on International Commercial Arbitration. The United States is a party to both Conventions.
D. Miscellaneous International Rules
Rule 15. Failure To Comply With International Rules
Rule 15 empowers the Tribunal to impose a remedy it deems just whenever a party materially fails to comply with the International Rules. The power to make an award on default is specifically provided. Pursuant to Rule 16.3, the Tribunal also may take a party's conduct during the proceeding into account in assessing costs.
Rule 16. Costs
CPR believes that highly qualified arbitrators are entitled to be adequately compensated. Normally, compensation would be at a per diem or hourly rate, but other approaches are not ruled out. Unless the parties otherwise agree, compensation of party-appointed arbitrators should be agreed to between the appointee and the appointing party. Compensation of other arbitrators should be established by agreement with both parties. The members of a three-member Tribunal may be compensated differently, but gross variations may present problems. In any event, the compensation for each of the arbitrators should be fully disclosed to all Tribunal members and parties.
The "costs of arbitration" enumerated in Rule 16.2 include the costs for legal representation and assistance and experts of a party to such extent as the Tribunal may deem appropriate.
Normally, the parties are expected to make advances for costs to a fund pursuant to Rule 16.4, and the arbitrators' fees, as well as other expenses, would be paid from such fund.
In accordance with Rule 16.3, unless the parties otherwise agreed, the Tribunal may apportion the costs of arbitration between the parties "in such manner as it deems reasonable taking into account the circumstances of the case, the conduct of the parties during the proceeding, and the result of the arbitration." The arbitrator(s) may take into account tactics by either party that unreasonably interfered with the expeditious conduct of the proceeding or increased its cost.
Rule 18. Settlement And Mediation
A high percentage of civil lawsuits and of arbitration proceedings are disposed of before a trial or hearing takes place, most by settlement. Yet often each party is reluctant to propose settlement negotiations, if only out of concern that the proposal will be seen as a sign of weakness. A suggestion to explore settlement by the Tribunal at one or more appropriate junctures in the proceeding should launch such negotiations, without either party's bearing the onus of being the proposer.
A skilled mediator can play a critical role in bringing about agreement between adversaries, even where unaided negotiations did not result in agreement. If the Tribunal believes that mediation may result in a settlement, the Tribunal may suggest that the parties engage in such a process and, if the parties agree, assist in arranging the same. CPR's mediation procedures are available for such situations along with CPR's International Panel of Distinguished Neutrals. The parties should consider suspending the arbitration proceedings while mediation is in progress, at least for a limited time. In a business dispute it is desirable for senior executives to play an active role in a mediation proceeding. Often, the parties have settlement options that are business-oriented and more creative than the payment of money. Business executives are likely to be best able to explore such options.
As a general rule, members of the Tribunal should not serve as mediator. The parties may hesitate to confide in an arbitrator serving as mediator and an arbitrator would be inhibited in making settlement proposals or giving advice to the parties. Moreover, an arbitrator serving as mediator may no longer be able to serve as an impartial arbitrator if the mediation fails to resolve the dispute. The Tribunal can nevertheless be helpful by proposing well qualified candidates to serve as a mediator.
If a settlement does not come about, the terms of any settlement offers will not be admitted into evidence at the hearings or otherwise disclosed to the Tribunal. If the parties enter into a settlement agreement, they may wish to request the Tribunal to issue an award incorporating the settlement terms.