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Arbitrator Responsibility for Efficiency Gains
An excellent article in the most recent issue of Arbitration International (Vol. 25, No. 4) discusses the challenges facing all participants in international arbitrations (and indeed all arbitrations) to rein in costs. The article, entitled “Inside Out: A User’s Perspective on Challenges in International Arbitration” is written by Jean-Claude Najar, General Counsel France for General Electric.
I take a quote from Mr. Najar’s article as the theme for this Commentary: ”
“(A)rbitral tribunals should be assessed on the robustness of their cost-saving procedures.
While the parties do exercise a fair amount of control over an arbitral proceeding, arbitrators should play a key role in containing the proceedings. Arbitrators need to feel that they are expected and empowered to act forcefully, using their discretion as a neutral party to keep proceedings as efficient as possible.”
Briefly I will comment here on some efforts within my own recent experience to rein in costs while still providing a thorough and fundamentally fair
process to the parties.
1. Hearing and Partial Award on a Separable Merits Issue:
Some years ago I was counsel in a China-related case arbitrated in Singapore. The tribunal elected to hold an evidentiary hearing, and to issue a partial award, on a critical separable mixed issue of law and fact: whether an amendment to the contract that disproportionately favored one side had been induced by economic duress, and should therefore be declared unenforceable. In the event, the tribunal did indeed hold that the amendment should be nullified. While a variety of other factors thereafter caused delays in reaching a final outcome, the partial award was the key determinant in bringing about a resolution by settlement prior to the scheduled hearing on remaining issues.
Drawing upon this experience in a recent case, a tribunal in which I was presiding (by the grace of my very experienced co-arbitrators) held hearings and issued a partial award on a severable, and seemingly essential, mixed issue of law and fact. The issue was not unlike the one in the above-mentioned Singapore case: here, whether a family trust was invalid because the settlor had been the victim of undue influence by other family members.
Following the partial award, which rejected the claim of indue influence, none of the parties requested further proceedings.
2. Resolving Claims As a Matter of Law Without Evidentiary Hearing:
It may occasionally appear that a claim may be sustained, or rejected, as a matter of law, even if all the material facts are assumed to as alleged by the party that would be aggrieved by the outcome.
To some extent this approach collides with parties’ expectation that in arbitration, whatever the issues may be, there will be some opportunity to present oral testimony to the tribunal and to cross-examine the main witness or witnesses for the opposing side.
Yet particularly in international arbitrations, and increasingly in U.S. domestic arbitrations influenced by arbitrators’ exposure to international practice, there is the opportunity through written witness statements to define with reasonable precision each party’s case-in-chief.
On that platform, the tribunal may assess whether the outcome does not at all depend on the veracity of a party’s contentions of fact that are disputed. If so, it may be desirable to move toward an award without hearing redundant testimony on direct or cross-examination.
Most rules however imply that some form of oral hearing shall be held, while also declaring the tribunal’s power to limit proceedings and exclude cumulative or redundant evidence. The solution often will be to conduct an oral hearing to hear legal arguments as to the proposed disposition without oral testimony.
3. Restricting Written Submissions on Disclosure Disputes
The simple expedient of requiring any procedural dispute to be introduced via conference call with the sole arbitrator or chairperson will discourage and limit the scope of disagreement. Counsel are invariably more willing to say precisely what it is they want when required to do so orally. Written submissions are more broadly phrased, often to avoid some admission or waiver.
4. Limitations on Obtaining Information By Subpoena from Non-Parties
It is useful to ask pointed questions about the reasons a particular subpoena is sought by a party. This may be advisable even if the non-requesting party raises no objection (as that party may be silent because it is drafting subpoenas of its own). Has the legal sufficiency of the claim to which the evidence pertains been established prima facie? Is it established that the evidence is relevant, material and non-cumulative? In the procedural timetable, it may make sense to schedule presentation of subpoena requests are exhibits and written testimony of the parties have been submitted — and then to require a specific showing that the evidence is needed to fill gaps in the parties’ proofs .
* * * *
Arbitrators should never lose sight of the principle that the arbitration “belongs to the parties.”
But the discretion of the arbitrators to regulate the proceedings is an essential part of what was bargained for. And ultimately the objectives of the parties, in a case destined for resolution by an award, are to win or to accept defeat only after exhausting all avenues to postpone final determination and impose high process costs on the likely winner. Efficiency gains in arbitration are therefore primarily in the domain of the arbitrators, and the artful arbitrator will implement measures more or less with the support of the parties whenever possible.