The Case for Administered Arbitration

Given that there are effective arbitration laws in place in the jurisdictions of most of the important trading regions of the world, and that there is growing expertise and sophistication on the part of parties and practitioners in this field, it is worthwhile considering why there remains significant added value in opting for administered arbitration over ad hoc arbitration, if arbitration is the chosen method of dispute resolution. There follow a number of points that may demonstrate why there remains significant added value in opting for administered arbitration, if arbitration is the chosen method of dispute resolution.

Certainty in Drafting

Ad hoc clauses are frequently either inadequate or overly complex. By incorporating established rules into their contract, the parties have the comfort of a comprehensive and proven set of terms and conditions upon which they can rely, regardless of the seat of the arbitration; minimising the scope for uncertainty and the opportunity for delaying or wrecking the process.

Taking care of the fundamentals

The incorporation of a set of established rules will reliably take care of the fundamentals, including the mechanism and timeframe for the appointment of the tribunal; determining challenges to arbitrators; default provisions for the seat and language of the arbitration; interim and conservatory measures; and control of the costs of the arbitration.

The applicable procedural law may well also provide for these matters, but it can be time-consuming and costly to invoke the jurisdiction of state courts at every procedural impasse. Court intervention may also jeopardise the confidentiality of the process.

Professional Administration

Institutional rules, as opposed to general provisions, like the UNCITRAL Rules , bring with them the additional advantage of a professional administrative service, which an ad hoc tribunal, with or without the co-operation of the parties, frequently cannot adequately provide.

Managing costs and delay

The most vociferous and sustained criticism of commercial arbitration is levelled at cost and delay. However, many of the leading institutions, including LCIA India, seek actively to moderate their costs and the fees charged by the tribunals they appoint. It is, therefore, frequently the case that these costs are better controlled and contained under the supervision of the leading institutions than in ad hoc proceedings.

LCIA India is of the view that a very substantial monetary claim (and/or counterclaim) does not necessarily mean a technically or legally complex case and that arbitration costs should be based on time actually spent by administrator and arbitrators alike. LCIA India’s charges, and the fees charged by the tribunals it appoints, are not, therefore, based on the sums in issue.

Ad hoc arbitrations do not run themselves and important administrative tasks can only be allocated to a member of the arbitrator’s own staff; to members of the parties’ legal teams; or to the parties themselves, at considerable opportunity and financial cost. The counter to the concern that the institution’s costs are costs which would not otherwise be incurred, therefore, is that the administration will be more efficiently, and more cost-effectively, done by an institution whose speciality it is.

The parties’ own legal costs, are, however beyond the control of the institution and, if these are to be reduced, the parties and their attorneys must work together to avail themselves of the leaner and more expeditious procedures that are inherent in good arbitration practice.

Closely related to the costs issue, then, is the issue of delay. Whilst it is not the role of an institution to interfere with the conduct of the proceedings, as agreed between the parties, directed by the tribunal or prescribed by the rules, institutions do have an important role in monitoring the process, in lending support to parties, counsel and arbitrators, and in keeping the process moving at as lively a pace as due process will allow.

And if the parties wish to adopt “fast track” procedures, these are readily available from LCIA India .

The cure for the costs and delay complaint is, therefore, largely in the hands of the parties and their Counsel, which will certainly have the support of the institution in any effort to effect that cure.

Balance of Relationships

There are at least two sides to every dispute. In many cases, however, there is not a balance of knowledge, experience, expertise and sophistication in the arbitral process, either on the part of the parties or of their attorneys.

Established rules can help to redress such imbalance and thus act to safeguard due process and, thereby, the reputation of the arbitral process and, indeed, the integrity and enforceability of awards.

Knowledge of Arbitrators

It is a truism that arbitration is only as good as the arbitrator, but no less a fundamental principle for that.

Institutions have their finger on the pulse of developments and individual progress within the pool of arbitrators and will have detailed knowledge of, and ready access to, the most eminent and most appropriately qualified arbitrators.

Parties may, therefore, find that that the institution is better placed than they to propose not only an arbitrator of the requisite skills, but also one whose diary is clear enough to allow him or her to devote the time needed, and when needed, to the matter.