DOCDEX rules—what will rule changes mean in practice?

Matthew Harley of Stephenson Harwood LLP and Manisha Meetarbhan of BLC Chambers explain the changes to the Documentary Instruments Dispute Resolution Expertise (DOCDEX) rules and discuss the implications for trade finance lawyers.

What is the background to the revised International Chamber of Commerce (ICC) DOCDEX rules?

In 1997, the ICC created the DOCDEX service. DOCDEX is administered by the ICC’s International Centre for ADR (the Centre) and was originally intended to resolve trade finance disputes relating to documentary credits incorporating ICC rules. Once the Centre receives a claim, it appoints a panel of three experts with expertise and experience of the specific issues in dispute to make a decision, which is only binding if all the parties to the dispute have expressly agreed in writing to be bound. To ensure transparency, the parties are not informed of the identity of the experts and only liaise with the Centre.

The cost of the procedure is fixed by reference to the value in dispute: the maximum possible fee is US$15,000, but can be as little as US$5,000. DOCDEX offers a cheap, fast (and documents-only) procedure, with experts expected to render a decision within two to three months of the submission of the claim. Since 1997, the Centre has administered approximately 150 cases, with disputes ranging in value from US$500,000 to US$45m.

The DOCDEX rules were revised in 2002, when their scope was expanded to include guarantees and collections incorporating ICC rules. Since those revisions, there have been concerns with the scope of the DOCDEX rules and the operation of the service. In May 2015, the ICC revised the DOCDEX rules to address these concerns.

What are their aims?

The most important aims of the DOCDEX rules are to open DOCDEX to a wider variety of trade finance disputes, and to improve the speed and transparency of the procedure.

Under the old rules, only disputes in respect of documentary credits which incorporated specific ICC rules (such as the ICC Uniform Customs and Practice for Documentary Credits and the ICC Uniform Rules for Demand Guarantees) could be referred to DOCDEX. This limitation has been removed—any trade finance related dispute can now be referred to DOCDEX.

The DOCDEX rules also improve the transparency and speed of the procedure, including the imposition of tighter deadlines, greater scrutiny of awards and enhanced measures to safeguard the independence of the experts appointed to produce a decision.

What are the key revisions from the previous version?

The main revisions to the DOCDEX rules (other than the provisions for improved transparency, which are dealt with below) can be categorised under two headings:

Scope

The scope of the DOCDEX rules has been expanded. A dispute arising from any trade finance related instrument, agreement or undertaking can be referred to DOCDEX—there is no requirement that the relevant agreement incorporate any ICC trade finance rules. The removal of this requirement has also expanded the type of dispute that can be referred to DOCDEX. For example, the old rules did not permit disputes which were not covered by the relevant ICC trade finance rules (such as disputes concerning the governing law of the relevant instrument).

Administration

DOCDEX filings are now primarily to be made in electronic form, with the DOCDEX rules providing that standard online forms are to be used to file claims and answers. This will streamline case administration and accelerate proceedings. The ICC expects that parties will receive a decision within two months of submitting a dispute to DOCDEX.

What provisions do the DOCDEX rules make for transparency and independence?

The DOCDEX rules strengthen transparency and independence by way of two key improvements to the old rules.

First, the ICC will now publish anonymised copies of every DOCDEX decision. This will establish a body of precedents, which will:

  • allow the Centre to more thoroughly monitor the quality of experts’ decisions
  • provide certainty as to how issues will be decided by DOCDEX experts, and
  • identify areas of the ICC’s trade finance rules which are frequently in dispute and may need improvement

Second, the old rules provided that appointed experts declare their independence from the parties to a dispute. The DOCDEX rules go much further in strengthening the requirement for independence and quality, by:

  • stipulating that those experts cannot act/have acted in any other capacity in respect of the dispute
  • requiring prospective experts to make a statement declaring their availability, impartiality and independence at the outset of the dispute
  • empowering the chair of the ICC’s Banking Commission to remove poorly performing experts from the DOCDEX panel, and
  • expressly allowing the ICC’s banking Technical Advisor to scrutinise the substance of decisions (not just the form of the decisions, as was the case under the old rules)

Is there a danger that the speed of the decision-making diminishes the quality?

The quality of the decision-making is not prejudiced by the speed of the procedure. The DOCDEX rules are expressly stated to be unsuitable for disputes requiring oral or expert evidence, and are not intended as a substitute for litigation or arbitration. The procedure is only suitable for certain types of disputes which, by their nature, can be dealt with relatively quickly. The experts are also limited in what documents they can review to reach decisions—they can only consider the claim, any answer and international practice.

What are the advantages of using the DOCDEX rules as opposed to other forms of dispute resolution?

DOCDEX has a number of advantages. Perhaps the most obvious is its speed: the panel of experts must provide a draft decision within 30 days of receipt of the documents relating to a dispute. That time can only be extended in ‘exceptional’ circumstances. The Centre expects that parties will receive decisions within 60 days of submitting a dispute.

DOCDEX has other advantages. Its costs are fixed and, depending on the amount in dispute, the total cost of the process is capped at US$5,000 or US$10,000 (with an absolute maximum of US$15,000). Not only are these costs much lower than in litigation or arbitration, but the parties also have certainty at the outset as to the costs of the procedure.

The procedure is non-adversarial and, like other forms of alternative dispute resolution, this generally helps to maintain business relationships with trading partners (especially compared with litigation or arbitration). This is especially important in a trade context, where repeat transactions with counterparties are the norm.

The procedure is also flexible. The experts are not bound by strict rules of evidence and are expressly empowered to consider international practice when making decisions.

As (anonymised) DOCDEX decisions are published, there is a body of precedents for the appointed experts to consider. The Centre also scrutinises draft awards to ensure consistency and quality. Both measures promote certainty of outcome.

Finally, as the parties do not know the identity of the experts and because the experts can have no other involvement in the dispute, the procedure safeguards transparency and the independence of the experts.

How will the new rules affect trade finance lawyers?

Trade finance lawyers should be aware of the new DOCDEX rules, and in particular their wider scope, so that they can advise their clients in appropriate circumstances to consider using DOCDEX as a means of dispute resolution.

Can parties opt out of DOCDEX if trade finance (TF) documents are subject to general ICC rules?

There is no ‘opt-in’ to DOCDEX—trade finance documents governed by ICC Rules do not contain DOCDEX ‘dispute resolution’ clauses. The DOCDEX rules should only be chosen after a dispute has arisen, because certain types of disputes (for example, those requiring oral or expert evidence) cannot be referred to DOCDEX. Accordingly, parties should not include a DOCDEX dispute resolution clause in their trade finance agreements, nor should they otherwise agree to use DOCDEX before a dispute has arisen.

Are there any implications on trade finance documentation?

There is no material implication for trade finance documentation. As discussed above, parties should not choose DOCDEX in their trade finance agreements. There is no need to refer to DOCDEX in any contractual documents, as the parties choose DOCDEX by completing the relevant forms and sending the same to the Centre.

Interviewed by Alex Heshmaty.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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