The race to expedite: arbitration’s response to the coronavirus (COVID-19) crisis

The race to expedite: arbitration’s response to the coronavirus (COVID-19) crisis

The coronavirus (COVID-19) pandemic has brought unprecedented economic and commercial challenges worldwide. It has also accelerated some positive changes that were emerging before it struck. One of these is the development of expedited (or fast-track) arbitration, which may be well-suited to deal with post-crisis disputes, helping parties to move on and rebuild. James Clanchy of the Lexis®PSL Arbitration team looks at international arbitration’s response to the demand for quick dispute resolution.

Early in the crisis caused by COVID-19, hearings in international arbitrations were postponed, sometimes for many months. Soon realising that the pandemic would continue to affect parties, their lawyers and arbitrators, keeping many of them confined to home, for a long time, the international arbitration community embraced virtual hearings. Institutions, arbitrators’ associations, hearing centres and other organisations shared their learning and promulgated guidelines about the available technology. At the end of May, a new online forum for news and developments on the law and practice of arbitrating on web-based meeting platforms, Virtual Arbitration, was launched. 

See our subtopic: Coronavirus (COVID-19) and arbitration—overview.

At the same time as the international arbitration community was making efforts to keep proceedings going, it was obvious that new disputes would be generated by the fallout from the crisis and that not all of these could be handled in the same ways as before.  

International arbitration can meet the challenge

Following a meeting on 7 April 2020, hosted by the British Institute of International and Comparative Law (BIICL), attended by retired judges and academics, including Lord Phillips of Worth Matravers and Lord Neuberger of Abbotsbury, the BIICL published its concept note, ‘Breathing space’, which urged parties to negotiate when trying to deal with the disruption to commercial contracts caused by the pandemic. The note, and the BIICL’s Concept Note 2 which followed in May, spoke of a risk of a ‘deluge of litigation and arbitration placing a strain on the system of international dispute resolution’.

There is no doubt that national court systems could face strain, though many, including in the UK, have been bearing up well so far. Limited numbers of judges and restricted budgets make difficulties inevitable. With its vast lakes of arbitrators and flexibility, which is one of its hallmarks, international arbitration is not in the same boat. 

Based on my experience as Registrar of the London Court of International Arbitration (LCIA) in the wake of the 2008 global financial crisis, I would suggest that international arbitration is well equipped to cope with a deluge of new cases.  In 2009, the LCIA Court appointed 502 arbitrators (up from 284 in 2008), a record which stood for ten years: in its recently published 2019 casework report, the LCIA announced that it made 566 appointments.

Simpler, faster, greener

There is a tendency to assume that international commercial arbitrations generally require three-member tribunals, teams of lawyers, numerous witnesses, hearings lasting several days, and a lot of travelling. Many arbitrations require none of these.  Nearly half (46%) of the LCIA’s 2019 cases were handled by a sole arbitrator. Only a small proportion of international commercial arbitrations go to an oral evidential hearing. Long before the lockdown, thousands of arbitrations were being conducted on a ‘documents only’ basis, allowing parties and their lawyers in different parts of the world to see proceedings through without the time, expense and environmental waste of international travel. 

For the current demands for faster and cheaper procedures as well as for the environmental agenda, which we must not forget, international arbitration has a positive story to tell.

See our News Analysis: Documents-only arbitrations in times of coronavirus (COVID-19), written by Nicholas Gould of Fenwick Elliott LLP.

In praise of variety

The London Maritime Arbitrators Association (LMAA) probably has more international commercial arbitrations conducted each year under its Terms for ad hoc proceedings than any other arbitral rules in the world (see my post, Arbitration statistics 2018: London bucks downward trends) . It reported that in 2019 it saw 2,592 appointments of arbitrators, an estimated 1,756 references and 529 awards published. Only 74 of its reported awards were made following an oral hearing.

More than twenty years ago the LMAA published its Small Claims Procedure (SCP), a set of rules for expedited documents-only fixed-costs ad hoc arbitration, with a default claim limit currently at US$100,000. The association reports that in 2019 it saw a record 218 appointments of sole arbitrators under the SCP and 121 awards. 

It is only much more recently that UNCITRAL has set about compiling rules for expedited arbitrations. Its Working Group II (WG II) has been tasked with formulating proposals. In 2019 it consulted arbitral institutions on the provisions that they make for expedited proceedings and on their (generally fairly limited) experience of administering fast track procedures for smaller cases. 

Lord Mustill, the distinguished English judge and co-author of the leading textbook on commercial arbitration (published by LexisNexis), might be disappointed.  In the first Cedric Barclay Lecture, which he delivered at the International Congress of Maritime Arbitrators (ICMA) in Vancouver in September 1991, he stressed how important it was that the international arbitration community should learn from one of its major constituents, maritime arbitration. He spoke about his own experience as a delegate at UNCITRAL in the debates which led up to the Model Law:

‘There was a refreshing absence of that forensic chauvinism which sometimes disfigures international debates in this field. Nevertheless, it must be recognised that the distinguished people who took part, whether they were professors of law or senior officials in government departments or executives of national arbitration institutions, were in the main more acquainted with the theory than with the practice of arbitration. Again, the majority of those who did have direct personal experience of arbitration had acquired it in the field of large-scale, formal, heavily-documented and very expensive arbitrations of a kind quite different from those with which this present Congress is concerned.’

There was room for different styles of arbitration, said Lord Mustill, and variety, not harmonisation, was key.

New rules

As a member of the board of the London Chamber of Arbitration and Mediation (LCAM), attached to the London Chamber of Commerce and Industry (LCCI), I was pleased to be asked to assist with drafting its new Expedited Arbitration Rules, which were launched along with LCAM’s other dispute resolution services, in May 2020. 

The rules are grounded in my experience and that of other board members, not only in commercial arbitration but also in consumer arbitration, a field in which low-cost simplified arbitration has been a success story.  I drew my own inspiration from, among other sources, the LMAA’s SCP, the Rules of Simplified Arbitration of the Danish Institute of Arbitration, and the Prague Rules on the Efficient Conduct of Proceedings in International Arbitration.

Other organisations have responded to the pandemic by bringing out their own schemes.  The Chartered Institute of Arbitrators (CIArb) and the Centre for Effective Dispute Resolution (CEDR), for example, have combined forces to launch the Pandemic Business Dispute Resolution Service, which includes the CIArb’s existing Business Arbitration Scheme (BAS).

If the crisis has taught us anything, it is that it is possible for a great deal to happen in a short space of time.

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About the author:

James is an arbitration specialist. He has more than 25 years’ experience of ad hoc, trade association, institutional and investment arbitrations as a solicitor in London and Paris, as a former Registrar of the London Court of International Arbitration (LCIA), and as a case assessor for legal costs insurers and third party funders. His background as a lawyer is in international trade, commodities, shipping and insurance.

He trained at Withers in London and then spent four years in the firm’s Paris office. He was admitted as an avocat at the Paris bar (1994 – 2008). Returning to London, he spent more than 13 years at Holman Fenwick Willan in its Trade & Energy group. As Registrar and Deputy Director General of the LCIA in 2008 – 2012, he oversaw the administration of more than a thousand commercial arbitrations and assisted with a review of its Arbitration Rules. He subsequently spent two years at Thomas Miller Legal, assessing and managing a wide range of commercial and investment claims on behalf of insurers and funders. Returning to private practice in 2015, he spent a year in Stephenson Harwood’s International Arbitration group where he assisted on ICC and LCIA arbitrations, principally oil and gas disputes.

James is a Fellow of the Chartered Institute of Arbitrators. At LexisNexis, James works on the Lexis®PSL Arbitration module.