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Shortcut your arbitration – the new ICC expedited procedure

  • United Kingdom
  • Global
  • Construction and engineering
  • International arbitration
  • Litigation and dispute management

08-08-2017

In March, the International Chamber of Commerce (ICC) launched its Expedited Arbitration Procedure. Here we look at what the procedure is and how useful it might be in construction and engineering disputes.

The construction industry already has at its fingertips an impressive range of procedures for resolving disputes. A disputes resolution satnav would show several coloured routes to get to your destination of Satisfactory Outcome: from the A-roads of litigation and arbitration, to the motorway that is adjudication, to the more pleasant, scenic route of mediation. Even B-roads such as expert determination and early neutral evaluation could be displayed.

Is the ICC’s Expedited Arbitration Procedure a good alternative? Or could it take you down dubious side roads and leave you stranded in your dispute?

Arbitration is already a popular route for resolving major construction disputes.

It is the usual contractual choice on major engineering projects involving international parties. It is flexible, normally confidential and brings relative ease of enforcement between New York Convention signatory states. This ease of enforcement may become critical post-Brexit, when it is uncertain whether reciprocal arrangements for enforcement of court judgments between EU member states will continue to apply to the English and Welsh courts.

The ICC arbitration rules are commonly selected, including within the FIDIC standard forms. They embody a well-established procedure and the ICC has a large bank of skilled arbitrators to choose from.

But arbitration is often criticised for being too slow.

The disputes resolution satnav would give a journey time of one to two years to arbitrate a major dispute. This seems glacial to those of us who are used to adjudicating in the space of 4-6 weeks (albeit adjudication is “rougher justice” and does not have the same finality). 

ICC arbitration also has two characteristics that can slow it down further, compared to arbitration under other institutional rules:

(a) it has a distinct “terms of reference stage”, in which the tribunal and parties sign a document containing details of the parties, a summary of the claims and relief sought, a list of issues to be determined, the place of arbitration and the procedural rules.  Whilst helpful on complex cases, this stage can be perceived as unnecessary otherwise

(b) the final award is scrutinised by the ICC’s International Court of Arbitration before issue, essentially to ensure quality of the award

The ICC expedited procedure seeks to bypass bottlenecks en route.

The procedure forms Appendix VI of the main ICC Rules of Arbitration. It applies automatically to claims that do not exceed US $2 million, where the arbitration agreement was executed on or after 1 March 2017. 

The parties can opt out of the expedited procedure (Article 30(3)(b) of the Rules) or the ICC’s International Court of Arbitration (ICA) can determine that it is inappropriate for the procedure to apply, either on request of a party or of its own volition (Article 30(3)(c)). Likewise the parties can agree to opt in to the procedure, where their claims fall outside its automatic remit.

The procedure allows for the following, taking precedence over any contrary terms in the arbitration agreement:-

(a) appointment of a sole arbitrator, rather than a three person tribunal, at the option of the ICA (Appendix VI, Article 2(1))

This could be useful where the arbitration agreement provides for a three-person tribunal, but one party considers that the particular dispute does not merit three people. There is however debate over whether the imposition of a sole arbitrator could prompt a jurisdictional challenge, on the basis that (1) the tribunal gains its jurisdiction by party agreement and so (2) there can be no jurisdiction for a sole arbitrator where party agreement was to a three-person tribunal.

(b) skipping of the “terms of reference” stage (Appendix VI, Article 3)

(c) a case management conference within 15 days of the case file being remitted to the tribunal (Appendix VI, Article 3(3))

Skipping the terms of reference and convening a case management conference within 15 days could speed up the arbitration. But in practice, the terms of reference and case management conference can often be combined under the standard ICC arbitration procedure anyway, so as to avoid any time lag between them. And the timing ultimately depends on tribunal availability.

(d) discretion for the tribunal to adopt such procedural measures as it considers appropriate. In particular, it may decide not to allow requests for document production, or it may decide to limit the number, length and scope of written submissions and written factual and expert evidence (Appendix VI, Article 3(4)). It may also opt to decide the dispute solely on the documents, without a hearing (Appendix VI, Article 3(5)).

True, the tribunal in standard ICC arbitrations also has a discretion over what case management techniques to adopt, after consultation with the parties, and could use some of the same techniques to manage the case efficiently. However a party favouring a curtailed procedure is more likely to get it within the expedited framework.

(e) a final award within six months from the date of the case management conference (Appendix VI, Article 4(1))

The six month timescale is in fact no different to under the standard ICC procedure - it is just measured from the case management conference, rather than the terms of reference. Either way, the ICA retains discretion to extend the time limit (Article 31(2)). Again, tribunal availability will be the overriding factor. But the ICC’s “Notes to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration” indicate that, under the expedited procedure, the timescale is more critical: time is of the essence and there is an expectation that the 6 month time limit will be complied with (notes 82, 91 and 94). The ICA may reduce the tribunal’s fees if the award is late (Appendix III Article 2(2) of the Rules and note 94).

(f) slightly reduced tribunal fees (Appendix III)

Clearly any reduction in tribunal fees is welcome. For a US $2 million claim, the ICC costs scales show a saving in arbitrator fees of some US $8,000, but significant legal fees could also be saved along the way.

How does the ICC’s expedited procedure compare with expedited procedures of other arbitral institutions?

The ICC expedited procedure is not the only one of its kind – several other institutions got in first with their own expedited procedures, including the Singapore International Arbitration Centre, the International Centre for Disputes Resolution, the Hong Kong International Arbitration Center and the Swiss Chambers’ Arbitration Institution.

Some of the other procedures operate on an opt-in rather than opt-out basis. The threshold for application of the procedure also varies between institutions. The ICC’s threshold of US $2 million is higher than some, lower than others and it is said that it will capture a significant portion of ICC cases.

The other major institution for London-based arbitrations, the London Court of International Arbitration, does not have its own separate expedited procedure, though it does permit the expedited formation of the tribunal in cases of exceptional urgency.  

What does it all mean for construction disputes?

The ICC’s expedited procedure will bring benefits to many claims within the US $2 million threshold. However some claims will merit opting out of the procedure – for example, where the claim value belies its complexity and/or significance, or where a hearing is essential to present the factual or technical issues. Another reason for opting out might be where there are key issues which, if decided early, will help the parties settle the rest of the dispute. It is common in construction disputes for such issues to be heard early as “preliminary issues”. There may be less appetite for preliminary issues within the expedited procedure – the tribunal may decide simply to get on with the case in its entirety. Ideally the opt-out would be contained in the arbitration agreement itself, but this requires an assessment of the nature of potential disputes that may arise under the contract – which is often difficult to predict at the negotiation stage.

It is also worth considering whether (less complex) claims of over US $2 million should opt in to the expedited procedure, to achieve a quicker award.

The expedited procedure is perhaps of most significance to contractors and subcontractors bringing lower value claims against their employer. There is always a question over whether claims of below around US $2 million will be disproportionately expensive to arbitrate. The potential time and cost savings under the new procedure may tip the balance in favour of pursuing the claim.

Employers will need to be prepared to respond promptly if a claim does arrive. Employers themselves may also find the procedure useful on more major disputes where there are discrete issues, such as points of contractual interpretation, that can be determined without substantial evidence or a hearing.

The key is to ensure with your lawyers that the arbitration process, with its inherent flexibility, is tailored to suit the particular circumstances of your case. This needs to be considered both when drafting the arbitration agreement and when the dispute arises.

In conclusion

The ICC Expedited Arbitration Procedure is not revolutionary. It will not displace adjudication as the quickest satnav route for arriving at a resolution of your construction dispute. But where adjudication is not available (or its temporary nature is unacceptable) and arbitration is the agreed route, it offers a handy shortcut to the chequered flag for suitable cases.