Time and money
21 January 2008
Over the past decade London has maintained its pre-eminence as a centre for arbitration by offering a progressive and arbitration-friendly regime that allows the parties to agree how their disputes are resolved. Key to this was the enactment of the Arbitration Act 1996. The act put in place a clear framework, the object of which "is to obtain fair resolution of disputes by an impartial tribunal without unnecessary delay or expense".
However, 10 years on a recent study by the Queen Mary University School of International Arbitration and PricewaterhouseCoopers of corporate attitudes to arbitration has shown that large corporations are far from satisfied with the arbitration process. Their main concerns are the cost of the process (including the cost of lawyers, arbitrators and the arbitral institution that may be involved) and the time it takes from filing a claim to receiving an award.
While the perceived advantages of arbitration (flexibility, privacy and enforceability of awards) currently outweigh the disadvantages for most corporations, their concerns as regards cost and time cannot be ignored and could have a serious impact on London's future as a centre for international arbitration.
The cost of London
London is currently rated the second most expensive city in the world, according to Mercer Human Resource Consulting's 'Cost of Living' study (2007), and as a result arbitrating in London does not come cheap. The cost of hiring hearing venues, booking hotels and meeting rooms, travelling, using support services and other general expenses all add considerably to the cost of arbitrating in London.
Added to this, the capital's lawyers are also comparatively expensive, charging higher hourly rates than their counterparts in other European jurisdictions.
But this is not the only way in which lawyers are adding to the cost of arbitrating in London.
The common law approach
UK lawyers tend to adopt a common law approach to disputes generally and to treat arbitration as if it were analogous to litigation. Long hearings, extensive disclosure, detailed witness statements, as well as extensive examination and cross-examination of witnesses are common to London arbitrations. In contrast, civil law practitioners tend to avoid heavy document disclosure, are less reliant on extensive examination and cross-examination, and do not favour lengthy hearings.
This added complication of proceedings is one of the main reasons why arbitrating in London may cost more and take longer than arbitrating in a civil law jurisdiction. This is very much reflected by the experience of Hammonds' international offices.
In London we expect a typical arbitration hearing to last a couple of weeks to allow time for due consideration of factual and expert evidence, while our colleagues in Paris expect similar types of arbitration to be dealt with in a hearing lasting no more than a day, perhaps two at most, with the issues having been dealt with by detailed written exchanges in advance of the actual hearing.
Controlling time and costs in arbitration
Earlier this year the International Chamber of Commerce (ICC) Commission on Arbitration issued a report setting out a number of techniques that can be used to organise arbitral proceedings and control their duration and cost.
According to the ICC Commission, these techniques embody two underlying principles: the parties and the tribunal should choose early on in the proceedings the specific procedures suited to the case; and the tribunal should manage proactively the procedure from the outset of the case.
The techniques include:
• using simplifying arbitration agreements;
• using arbitrators with sufficient time to devote to the case;
• using a sole arbitrator when appropriate;
• use of time limits for the rendering of awards;
• holding an early management conference; and
• choosing short but realistic time periods.
And when it comes to establishing procedural directions for the arbitration:
• setting out the case in full early on in the proceedings;
• limiting the length and number of submissions;
• establishing a clear and efficient procedure for the submission and exchange of documents;
• limiting the number of witnesses and the scope of their evidence;
• using information technology where possible (telephone and videoconferences, electronic submission of documents);
• minimising the length and number of hearings;
• using written statements as direct evidence at a hearing (avoiding oral examination in chief); and
• limiting the time available for the cross-examination of witnesses.
Interestingly, many, if not all, of these techniques are already available to parties arbitrating in the UK. The Arbitration Act 1996 puts an obligation on tribunals to adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, and requires the parties to do all things necessary for the proper and expeditious conduct of the arbitral proceedings.
The London Court of International Arbitration (LCIA) Rules incorporate all the provisions of the act and impose on the tribunal a similar obligation to avoid unnecessary delay and expense. Similar provisions can also be found in the Chartered Institute of Arbitrators' Controlled Cost Arbitration Rules (Edition 2000) and the London Maritime Arbitrators Association Terms (2006), both of which aim for the quick and economical resolution of disputes.
Flexibility is the key
The ICC Commission has recognised the importance of controlling the cost and duration of arbitration if it is to remain attractive to parties. It is now very much up to us as arbitration practitioners to realise fully the flexibility of procedure inherent in the arbitration process and to use that flexibility "to avoid unnecessary delay or expense". In this way we can all contribute to securing London's pre-eminence as an arbitration centre in the years to come.
Paul Oxnard is head of international arbitration and Nikos Dimopoulos is a trainee at Hammonds