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Current and preferred practices in the arbitral process

by Matthew Rushton on 25 Sep 2013

practices in the arbitral process

The 2012 International Arbitration Survey: By Paul Friedland, Esq. and John Templeman, Esq.

In October 2012, the School of International Arbitration at Queen Mary, University of London, and White & Case LLP released the results of a global survey titled “2012 International Arbitration Survey: Current and Preferred Practices in the Arbitral Process.” The survey examines the extent to which harmonised practices are emerging in international arbitration and whether they reflect the preferred practices of the international arbitration

 community. It contains responses of 710 private practitioners, arbitrators and corporate counsel to a written questionnaire, plus 104 interviews to contextualise the quantitative findings. The pool of questionnaire respondents and interviewees was diverse, consisting of participants from a wide range of industry sectors, roles, legal backgrounds and locations. The unprecedented number and diversity of participants makes this survey the most comprehensive empirical study ever conducted in the field of international arbitration.

In a departure from previous International Arbitration Surveys, views were sought not only from in-house counsel, but also from private practitioners and arbitrators. This provided a pool of respondents that was both highly knowledgeable of international arbitration and dramatically larger than earlier surveys. This critical mass of participants provided authoritative empirical evidence as to what actually occurs in international arbitration, and it also enabled the results to be broken down by categories of respondents, whether by different geographic regions, legal backgrounds or roles.

The results of the survey are set out under seven thematic sections that broadly follow the life of an arbitration. This article provides a summary of each section’s key findings:

1. Selection of arbitrators

A significant majority of respondents (76%) prefer selection of the two co-arbitrators in a three-member tribunal by each party unilaterally. This shows that the arbitration community generally disapproves of the recent proposal calling for an end to unilateral party appointments.

There has been a longstanding debate about whether pre-appointment interviews with arbitrators are appropriate. The survey reveals that two-thirds of respondents have been involved in them and only 12% find them inappropriate. The chief disagreement is not about whether such interviews are appropriate, but rather the topics that may properly be discussed.

Almost three-quarters of respondents (74%) believe that party-appointed arbitrators should be allowed to exchange views with their appointing party regarding the selection of the chair.

2. Organising arbitral proceedings

The IBA Rules on the Taking of Evidence in International Arbitration (“IBA Rules”) are used in 60% of arbitrations: in 53% as guidelines and in 7% as binding rules. In addition, a significant majority of respondents (85%) confirm that they find the IBA Rules useful.

Tribunal secretaries are appointed in 35% of cases. Only 10% of arbitrators said that tribunal secretaries appointed in their cases prepared drafts of substantive parts of awards, and only 4% said tribunal secretaries discussed the merits of the dispute with them.

The most effective methods of expediting arbitral proceedings are (in order): identification by the tribunal of the issues to be determined as soon as possible after constitution, appointment of a sole arbitrator and limiting or excluding document production.

Even though fast-track arbitration is regularly cited as a prime method of cost control, the survey reveals that it is not commonly used in practice. The vast majority of respondents (95%) either had no experience with fast-track arbitration (54%) or were involved in only 15 fast-track arbitrations (41%). However, 65% of respondents are either willing to use fast-track clauses for future contracts (5%) or willing to do so depending on the contract (60%).

3. Interim measures and court assistance

Despite being the subject of significant legal commentary, requests for interim measures to arbitral tribunals are relatively infrequent: 77% of respondents said they had experience with such requests in only one-quarter or less of their arbitrations. Even rarer are requests to courts for interim measures in aid of arbitration: 89% of respondents had experience with them in only one-quarter or less of their arbitrations.

Survey respondents report that 35% of all interim measures applications addressed to the arbitral tribunal are granted. Of those applications that are granted, the majority are complied with voluntarily (62%), and parties seek their enforcement by a court in only 10% of cases.

There is no consensus on whether arbitrators should have the power to order interim measures ex parte in certain circumstances. Just over half of respondents (51%) believe that arbitrators should have such a power, while 43% believe they should not (6% were unsure).

4. Document production

Requests for document production are common in international arbitration: 62% of respondents said that more than half of their arbitrations involved such requests.

The survey confirms the widely held view that requests for document production are more frequent in the common law world: 74% of common lawyers, compared to only 21% of civil lawyers, said that 75-100% of their arbitrations involved such requests.

Notwithstanding the differing traditional approaches to document production in civil and common law systems, the survey reveals that 70% of respondents believe that Article 3 of the IBA Rules (“relevant to the case and material to its outcome”) should be the applicable standard for document production in international arbitration.

How important are disclosed documents to the outcome of the case? The survey reveals that they are crucial in a statistically significant percentage of arbitrations: A majority of respondents (59%) stated that documents obtained through document production materially affected the outcome of at least one-quarter of their arbitrations.

5. Fact and expert witnesses

In a significant majority of arbitrations (87%), fact witness evidence is offered by exchange of witness statements, together with either direct examination at the hearing (48%) or limited or no direct examination at the hearing (39%). 59% of respondents believe that the use of fact witness statements as a substitute for direct examination at the hearing is generally effective.

The vast majority of respondents believe that cross-examination is either always or usually an effective form of testing fact (90%) and expert witness evidence (86%).

While mock cross-examination of witnesses prior to their appearance at a hearing is considered unethical in some legal cultures, the survey shows that it is commonly done and often considered acceptable in international arbitration. 55% of respondents reported that there was mock cross-examination of witnesses in their arbitrations, and 62% of them (civil and common lawyers alike) find it appropriate.

In the vast majority of arbitrations, expert witnesses are appointed by the parties (90%) rather than by the tribunal (10%). However, survey respondents’ preferences are less stark: Only 43% find expert witnesses more effective when they are appointed by the parties, while 31% find tribunal-appointed experts more effective.

6. Pleadings and hearings

Not only does sequential exchange of substantive written submissions occur much more regularly (82%) than simultaneous exchange (18%), but there is also a strong preference for this type of exchange (79%).

The survey reveals that only a small minority (15%) of merits hearings are held outside the seat of arbitration.

The most common duration of a final merits hearing is 3-5 days (53%), followed by 6-10 days (23%), 1-2 days (19%) and 10+ days (5%).

Civil lawyers have traditionally claimed that their hearings are shorter than those of common lawyers. The survey confirms this to be true. 31% of civil lawyers said the average duration of their merits hearings was 1-2 days, with only 9% of common lawyers reporting that the average duration of their hearings was only 1-2 days.

Time limits are imposed for oral submissions and/or examination of witnesses in two-thirds of arbitration hearings. Most respondents prefer some form of time limits (57%), while only 6% prefer no time limits at all (34% said it depends on the case).

7. The arbitral award and costs

How long should a tribunal take to render an award? For sole arbitrators, two-thirds of respondents believe that the award should be rendered within 3 months after the close of proceedings. For three-member tribunals, 78% of respondents believe that the award should be rendered either within 3 months (37%) or within 3 to 6 months (41%).

A common criticism of arbitration is that tribunals unnecessarily “split the baby.” Overall, respondents believe this has happened in 17% of their arbitrations, while those actually making the rulings—the arbitrators—said this occurs in only 5% of their arbitrations.

Tribunals allocate costs according to the result in 80% of arbitrations, and they leave parties to bear their own costs and half the arbitration costs in 20% of arbitrations. However, only 5% prefer this latter approach, which shows there is a desire for tribunals to allocate costs according to the result more frequently than they are currently doing.

An overwhelming majority of respondents (96%) believe that improper conduct by a party or its counsel during the proceedings should be taken into account by the tribunal when allocating costs. This sends a strong message to arbitrators that they are expected to penalize improper conduct when allocating costs.

Despite the dominance of international arbitration as the dispute resolution method for international business, little empirical evidence exists about what goes on in this inherently private process. The 2012 International Arbitration Survey closes this gap, providing empirical evidence of a quality not seen before. We now know which practices in the arbitral process are most common around the world and which are preferred. We hope that the survey acts as a reference point for the international arbitration community for years to come, not least when arguing points of procedure before arbitrators.

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Topics: International Arbitration

Matthew Rushton

Written by Matthew Rushton