20 January 1995, Geneva, Switzerland
The WIPO Expedited Arbitration Rules: Fast-Track Arbitration
by Jan Paulsson
Freshfields, Paris
From the perspective of the arbitration practitioner, one may well wonder about the seriousness of those who are responsible for drafting international contracts. They tend to complain loud and clear about the defects of the international arbitral process. Arbitration, they say, has become too cumbersome, too expensive, too legalistic: in sum, contaminated by the habits of court litigation. Put on the defensive and consumed by guilt, arbitration specialists immediately put their minds to the task, confer with one another extensively, and devise a remedy to show the users of arbitration that the problem has been addressed.
The typical reaction of those who were clamouring for the solution is to ignore it.
To take one example: in 1988, the International Chamber of Commerce was one of the first organisations to respond to the call for ADR as a way toward a less costly and disruptive method for resolving contractual disputes. The ICC did this by reforming its old Conciliation rules in a number of ways which are outside the scope of this paper.
Since then, the response has been underwhelming. Despite the simplicity, flexibility, and low cost of the process, and more importantly its significant success rate, parties have not rushed to benefit from this new solution. In fact, since the new ICC Conciliation Rules came into force, the ratio of Requests for Conciliation to Requests for Arbitration has been less than 3% (1).
To take another example, in the 1970s the idea was conceived that the international arbitral process was falling short of its promise in failing to provide more creative solutions to long-term contracts than were provided by the ordinary courts. In order to keep a long-term contract alive, it may be necessary to fill gaps or even make adjustments in the light of changed circumstances. Without the ability to have the contract "react" to supervening changes, it may be possible to rely on the survival of the contract for a sufficient long period to amortise the vast investments that may be necessary, for example, to develop a natural gas field and the transport system without which it has no commercial viability. Yet if such questions were simply brought to arbitration, it is sometimes unclear whether a reliable solution would be found under traditional norms. (For example, there is a well-known common law aversion to enforcing "agreements to agree," and the civil law similarly considers that a bargain should not be enforced if the price cannot be determined by reference to objectively defined criteria). Thus in 1978 the ICC made available a so-called Standing Committee for the Regulation of Contractual Relations, with the objective of providing very rapid solutions by either making a recommendation which the parties undertake to consider in good faith, or a decision which--while not enforceable as an award--the parties agree in advance to give as much weight as if it were a provision of their contract.
But there have been no takers at all; the Standing Committee has never once been called upon to act. Indeed, a Report by Mr. Yves Derains, which has been approved by the ICCs Commission on International Arbitration and published in the ICC International Court of Arbitration Bulletin (November 1994, pp. 31-34), bluntly recommends that the ICC abandon this initiative.
A third and final example from the practice of the ICC is that of the 1990 Rules for a Pre-Arbitral Referee Procedure. This brings us closer to the topic of this paper, because the principal objective of the Referee initiative was to remedy the inherent defect of arbitration as concerns speed, given the fact that provisional remedies, if they are to have practical effect, often need to be granted sooner than the time it usually takes to constitute an arbitral tribunal. The ICC Referee Rules have an ambitious scope, as they create the authority to grant a full range of injunctive or conservatory relief. Although an ICC Referees decision is not an award, it nevertheless binds the parties; failure to comply may be sanctioned by the downstream arbitrators. It seems quite clear that this initiative was in principle a laudatory one; in its absence the only practical source of provisional remedies would be a national court, and in the international context courts are not always neutral, nor experienced, nor indeed authorised by their own laws to grant appropriate relief.
Yet once again, although it is too early to conclude that the ICC Referee concept has been a failure, it is clear that there has been no rush by contract drafters to provide for possible recourse to ICC Referees.
The reader will have understood that I have sought to create a very low-key ambience for a discussion of the WIPO Expedited Arbitration Rules, since it should be implicit from the above that no matter how clever a new invention might be, one should not be naively enthusiastic about revolutionising the international process. Parties who have actually participated in an arbitration tend to be very articulate about its shortcomings, but contract draftsmen nevertheless keep on demonstrating an often spectacular inability to draw appropriate conclusions from those experiences, or even to inform themselves of the existence of new solutions.
In other words, it is quite possible that WIPO Expedited Arbitration turns out to be yet another critical success which "fails at the box office," and that we once again will ask ourselves whether people really want to know whats good for them.
Leaving aside this disabused train of thought and considering the Expedited Arbitration mechanism on its merits, one may see that in essence WIPO is saying to the community of international users that they may choose between two systems of arbitration.
The first approach gives priority to what we might call legal security. Although it may well be that in 90% of all cases an experienced sole arbitrator studying an abbreviated file for 50 hours will reach a conclusion essentially consistent with that reached by a three-member tribunal after 1,000 hours of work, the fear of falling in the 10% zone of error is sufficient--especially in light of the large stakes involved in international cases--to cause many parties to accept the greater costs in time and money that result from proceedings before a three-member tribunal where there is opportunity for exhaustive evidence-gathering and pleadings (2).
The second system is designed for parties who consider time to be of the essence, and who in return for speed (and low cost) are willing to accept the marginal reduction of legal security. This is Expedited Arbitration.
It may be that some parties will consistently opt for Expedited Arbitration. They will favour it whenever they can convince their contracting party to accept it. One might thus imagine that some companies have a steady high volume of transactions, none of which is individually a dominant part of their business, and that such companies take something of an actuarial view of disputes: i.e., they say to themselves that X% of their contracts will give rise to disputes, and (while they will try to win them all) they accept that they will occasionally lose a case. In that mindset, they are unwilling to spend twice as much money or twice as much time to improve the quality of awards by 10% (3).
Others may prefer Expedited Arbitration because they are cynically convinced that a three-member tribunal gives no better legal security than a sole arbitrator, on the reasoning that if the presiding arbitrator makes a mistake, one of the party-appointed arbitrators will in fact reinforce his decision. While my own experience leads me to believe that such cynicism is in fact wrong, there is no accounting for the variety of human motivation, and little surprise when people do the right thing for the wrong reason.
Yet again some sophisticated parties will keep in mind both alternatives, and opt for one or the other depending on the circumstances. Considering how ill-informed drafters seem to have remained over the years with respect to the carefully considered ICC initiatives mentioned above, one might, however, be somewhat doubtful about the prospects of judicious à la carte use of these mechanisms.
There is little reason to review the Expedited Arbitration Rules in detail, because such an exercise is likely to end up in a series of paraphrases.
The drafting committee opted for the solution of providing a list of the ways in which these Rules diverge from the ordinary Arbitration Rules. You might say, if you like, that it would have been less confusing to reproduce a complete text including those alterations. But if we had done that, some would have said it would have been more user-friendly to show only the alterations. The fact is that anyone who is serious about understanding the process will not have great difficulty (4).
That being said, the basic features of WIPO Expedited Arbitration may be expressed in two phrases:
- the invariable appointment of a sole arbitrator, and
- the compression of deadlines from beginning to end.
The detailed provisions of the Expedited Rules are but the consequences of these two fundamental features. The end result is still an award, as final and binding and enforceable as any other award. It will simply be produced sooner. (Two special features merit mention in this context. Article 53(b) of the Expedited Arbitration Rules provides that any hearings must be convened within 30 days of receipt of the Statement of Defence, and that only in "exceptional circumstances" may they exceed three days. Article 55(a) requires that any expert named by the arbitrator must complete his mission within 30 days.)
So the question is squarely put to those whose task it is to draft dispute-resolution clauses: do you believe arbitrations may be conducted quicker without becoming hasty; does less expensive mean cheap?
Notes
1. E. Schwartz, "International Conciliation and the ICC," ICC International Court of Arbitration Bulletin, Nov. 1995, at p. 5.
2. At least since about 1387, when Chaucers Canterbury Tales are thought to have been first published, the English have been dubious about quick fixes:
"Ther nys no werkman, whatsoever he be,
That may bothe werke wel and hastily;
This wol be doon at leyser parfitly."
(The Merchants Tale, line 1832.) Some would say that in their quest for perfect justice the English have sometimes gone to the opposite extreme, at that too much "leyser" can be a bad thing.
3. The savings reasonably to be anticipated in Expedited Arbitration relate to (i) the time value of money, which is an obvious motive for wanting quick decisions, (ii) the fact that legal fees ought to be far less where the well-known maxim "work expands to fill available time" is reversed, and (iii) the systematic elimination of co-arbitrators. On the other hand, the fees payable to the sole arbitrator in Expedited Arbitration will be no less than those payable in ordinary arbitration. Indeed, it may be that accelerated proceedings may be so disruptive that they justify fixing the sole arbitrators fee at a higher level within the ad valorem range.
4. The WIPO Arbitration Center makes available at request a consolidated text of the Expedited Arbitration Rules, showing the modifications in bold-face type.
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