Source: https://www.cpradr.org/news-publications/articles/2011-05-04-summary-adjudication-in-arbitration-proceedings-2011-writing-contest-winner
Timestamp: 2019-04-21 22:38:21+00:00

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Summary Adjudication in Arbitration Proceedings: Is it Time for Arbitrators to Step Up and Start Hearing and Granting Dispositive Motions in Appropriate Circumstances?
Because arbitration is perceived as becoming a slow and expensive dispute settlement mechanism,1 there is a strong push to introduce mechanisms for summary disposition of cases as a tool to promote efficiency and speed in the arbitration process.2 In practice, however, arbitrators remain disinclined to hear and grant dispositive motions. This article examines the possible explanations for this reluctance and whether there are appropriate.
For purposes of this article, dispositive motions are motions that resemble the type of motions filed in US civil litigation and that a court would consider dispositive of a case, such as motions to dismiss for failure to state a claim, motions for summary judgment, motions or judgment on the pleadings, and motions for a directed verdict.
This article addresses in seriatim whether these explanations have a sound foundation, or if these areas of concern are somewhat overblown in light of the relevant existing legal framework and case law.
This article first examines whether arbitrators have the authority to hear and grant dispositive motions according to US law and the most frequently used arbitration rules. It appears that under the existing legal framework, arbitrators do have the authority, either explicitly or implicitly, to entertain dispositive motions.
So this article then turns to the grounds for vacatur of arbitration awards, and how courts have reviewed arbitration awards that make a summary disposition of a case. The applicable laws and accompanying case law reveals that, unless a panel’s decision to dismiss a claim at an early stage rises to the level of depriving one party of its right to a “fundamentally fair hearing”, a court will confirm a summary award.
Finally, this article discusses the challenges and unresolved issues surrounding the incorporation of these mechanisms grafted from the American litigation process in international arbitration proceedings, and whether these problems are insurmountable.
In the investment arbitration context, several recent developments reflect the progressive introduction of dispositive motion mechanisms in the resolution process. In 2006, the International Centre for the Settlement of Investment Disputes (“ICSID”) revised its Arbitration Rules. One of the most significant amendments was the introduction of Article 41(5), which provides arbitrators with the specific power to summarily dispose of a case.21 This mechanism was for the first time used by two very distinguished panels in the recent cases Global Trading Resource Corp. and Globex International, Inc. v. Ukraine,22 and RSM Production Corp. v. Grenada.23 In Global, an ICSID panel composed of Sir Franklin Berman QC, Professor Emmanuel Gaillard and Mr. Christopher Thomas QC granted a motion to dismiss a claim early in the proceeding, after only two rounds of short written submissions by each side, followed by two rounds of oral argument, completed within a day.24 Nine days after the Global Award was issued, the panel in RSM upheld Grenada’s objection that the claimant’s claim was “manifestly without legal merit” after only one round of written submissions and one round of oral submissions.25 The RSM Tribunal consisted of J. William Rowley QC, Professor Pierre Tercier and Edward W. Nottingham.
Another relevant development is the evolution of multilateral and bilateral investment treaties ratified by the US. While Chapter 11 of the North American Free Trade Agreement (“NAFTA”) is silent with respect to dispositive motions, recent accords, including the Central American Free Trade Agreement (CAFTA)26 and the 2004 U.S. Model Bilateral Investment Treaty,27 have established a procedural framework for the handling of motions for summary disposition.
Generally, parties challenging an arbitration panel’s decision to grant a dispositive motion have contended either that the arbitrators in doing so had exceeded their power, and/or that they engaged in misconduct by improperly refusing to hear evidence pertinent and material to the controversy. It has been suggested that arbitrators are particularly wary of the latter ground because the early dismissal of a case generally does not permit a full evidentiary hearing, which might expose the resulting award to a challenge on the basis that the arbitrators engaged in misconduct by refusing to hear evidence.35 Is this fear legitimate? Or is it misplaced?
While arbitrators have the authority to consider motions for summary disposition and courts have affirmed summary awards in every case but one, there remain challenges and unresolved issues that hinder the introduction of disposition motion mechanisms in international arbitration.
First and foremost, even if vacatur of a summary award is very unlikely, there still is an infinitesimal risk that such occurrence happens. Thus, is it not rational for arbitrators to make the calculus that the best way to preserve an award from being challenged is simply to avoid hearing and granting dispositive motions, regardless of whether these motions are justified under the circumstances and courts willing to affirm summary awards? Arbitrators, the argument follows, have nothing to gain, but everything to lose from utilizing procedural tools which may put their award at risk, as well as end up costing more time and money to the parties, who will have to retry the case before a court. Yet if that were the standard by which arbitrators should measure proposals to improve arbitration, as a dispute resolution mechanism, then no modification would ever be implemented. Certainly, arbitrators cannot hold the potential use of summary determination mechanisms to such a high standard.
Second, the use of dispositive motions may worsen the causes that triggered commentators to advocate for the introduction of these mechanisms in international arbitration. Counsel determined to win and willing to engage in dilatory tactics may use these procedures to cause the opposing parties to incur additional time and expense.57 Arbitrators, however, are not powerless in the face of these potential abuses. On the contrary, they have broad power to manage arbitration proceedings and could use it to prevent any abusive use of these mechanisms.
Third, unlike litigation, arbitration awards are not subject to de novo review.58 This characteristic makes many arbitrators uneasy with the idea to summarily dispose of a case because they are well aware that the arbitration likely constitutes the parties’ only real opportunity to be heard. However, as noted above, arbitrators have broad discretion to decide when hearing and granting a dispositive motion would be fair to the parties. Therefore, arbitrators have the flexibility to use these mechanisms only where appropriate.
Finally, a key issue with the introduction of summary disposition mechanisms is discovery. Unlike US civil litigation, absent agreement among the parties, there is very little guidance for arbitrators as to how much and what type of discovery should be available before a panel may hear a motion for summary disposition. On the one hand, “denying all discovery on an issue relevant to the judgment may be viewed as fundamentally unfair.”59 On the other hand, “rare would be the voice arguing for US-style discovery in international arbitration.”60 There is no consensus as to how much discovery is appropriate in the international arbitration context. Nevertheless, under the arbitration rules of all arbitration providers mentioned above, arbitrators have sufficient broad power to make these judgment calls. A one-size fits-all approach may in any case not be the right approach, as the answers to discovery-related questions will likely vary depending on the circumstances of each case.
Because arbitrators have a duty toward the parties and the arbitral institutions to manage arbitration proceedings with a view to efficiently resolving the case, arbitrators ought to start hearing and granting dispositive motion mechanisms where appropriate.
For all the reasons set above, arbitrators tend to view denying motions for summary disposition as the safe option. Yet, the existing legal framework and case law are favorable to the introduction of disposition motions mechanisms in arbitration proceedings.
Certainly, there remains unresolved issues and challenges to the mechanics of introducing these mechanisms in arbitration proceedings, such as, preventing counsel to use these motions to delay the arbitration proceedings, enabling the non-moving party to present its case, determining what amount of discovery should be allowed, if it should be allowed, etc. However, these challenges are not insurmountable. As alluded above, the relaxed procedural rules of arbitration proceedings give arbitrators broad discretion to shape the procedures that could apply to dispositive motions.
Moreover, the increasing discontent towards the length and cost of arbitration proceedings, coupled with the courageous steps recently taken by the ICSID panels in Global and RSM, have created an opportunity for arbitrators to come forward and grant dispositive motions where appropriate. While this is not a task arbitrators may relish, they have the authority to do so, and in circumstances where it would promote the speedy, efficient, and yet fair resolution of a dispute, one may go so far as to say that they have a duty towards the parties and institutions to do so.
1 See, e.g., James Lyons, Arbitration: The Slower, More Expensive Alternative? Am. Law., Jan.-Feb. 1985, at 107 (quoting then American Arbitration Association President Robert Coulson as stating “[p]eople used to promote arbitration (for its speed, economy, and justice)…like religious zealots…I don’t think any of those words are entirely accurate”); see also Thomas Stipanowich, Rethinking American Arbitration, 63 Ind. L. J. 425, 452-76 (1988) (observing that many surveyed respondents disagreed that arbitration was faster and cheaper than litigation).
2 See e.g., International Bar Association Rules on the Taking of Evidence in International Arbitration, Article 2, which states, in relevant part: “3. The Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be appropriate, any issues (…) for which a preliminary determination may be appropriate.” (emphasis added). The Commentary on the Rules further states: “While the Working Party did not want to encourage litigation-style motion practice, the Working Party recognized that in some cases certain issues may resolve all or part of a case. In such circumstances, the IBA Rules of Evidence make clear that the arbitral tribunal has the authority to address such matters first, so as to avoid potentially unnecessary work.” (emphasis added), available at http://www.ibanet.org/Document/Default.aspx?DocumentUid=68336C49-4106-46BF-A1C6-A8F0880444DC; see also Alfred G. Ferris and Biddle W. Lee, The Use of Dispositive Motions in Arbitration, 62 Disp. Resol. J. 17, 24 (1 August 2007) [hereinafter Ferris]; see also David W. Rivkin, 21st Century Arbitration Worthy of Its Name, in Law of International Business and Dispute Settlement in the 21st Century (Liber Amicorum Karl-Heinz Bockstiegel), (Eds: Robert Briner, L. Yve Fortier, Klaus Peter Berger, Jens Bredow) (2001).
7 See Ferris, supra note 2.
10 See Ferris, supra note 2, at 18 (“as a few courts had occasion to review the propriety of a dispositive motion while considering a petition to vacate an award, it became increasingly clear that arbitrators had such authority.”).
11 2000 Revised Uniform Arbitration Act (“RUAA”), Section 15(b), available at http://www.law.upenn.edu/bll/archives/ulc/uarba/arbitrat1213.htm. As of 2007, it has been enacted in 12 states.
21 ICSID Rules of Procedure for Arbitration Proceedings (“Arbitration Rules”), Article 41(5): “Unless the parties have agreed to another expedited procedure for making preliminary objections, a party may, no later than 30 days after the constitution of the Tribunal, and in any event before the first session of the Tribunal, file an objection that a claim is manifestly without legal merit. The party shall specify as precisely as possible the basis for the objection. The Tribunal, after giving the parties the opportunity to present their observations on the objection, shall, at its first session or promptly notify the parties of its decision on the objection.” (emphasis added).
24 See Global, supra note 22, at para 18.
25 See RSM, supra note 23, at para. 1.3.
26 See CAFTA-DR, Article 10.20 (“Without prejudice to a tribunal’s authority to address other objections as a preliminary question, a tribunal shall address and decide as a preliminary question any objection by the respondent that, as a matter of law, a claim submitted is not a claim for which an award in favor of the claimant may be made under Article 10.26.”), available at: http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta/final-text.
28 See William W. Park, Why Courts Review Arbitral Awards, in FESTSCHRIFT FUR KARL-HEINZ BOCKSTIEGEL 595, 596 (2001), available at www.williamwpark.com/.../Why%20Courts%20Review%20Awards.pdf (“Efficient arbitration implicates a tension between the rival goals of finality and fairness…Freeing awards from judicial challenge promotes finality, while enhancing fairness calls for some measure of court supervision…To this end, legislators and courts must engage in a process of legal tuning that seeks a reasonable counterpoise between arbitral autonomy and judicial control mechanisms.”).
30 See Ferris, supra note 2, at 20-22.
31 The relevant state laws have incorporated similar narrow grounds, based on the language found either in Section 12(a) of the UAA, or Section 23 of the RUAA.
34 See Gabriel M. Wilner, 1 DOMKE ON COMMERCIAL ARBITRATION 34:07, at 14 (Rev. ed. 1998).
35 Michael D. Young and Brian Lehman, Arbitrators Are Less Prone to Grant Dispositive Motions Than Courts, New York Law Journal (June 26, 2009) (noting that “arbitrators are sensitive to the fact that one of the grounds for vacatur under the Federal Arbitration Act is the arbitrator’s refusing to hear evidence that is pertinent and material to the controversy at issue. Sensitivity to this ground for vacatur frequently leads arbitrators to admit even arguably duplicative or irrelevant evidence at a hearing, and causes them to be all the more concerned about deciding a case without any kind of evidentiary hearing.”).
37 See Prudential Secs. v. Dalton, 929 F. Supp. 1411 (N.D. Okla.1996).
38 See Tempo Chain Corp. v. Bertek, Inc., 120 F. 3d 16, 20 (2nd Cir. 1997) (citing Hoteles Condado Beach v. Union De Tranquistas Local 901, 763 F. 2d 34 (1st Cir. 1985).
40 Max Marx Color & Chem. Co. Employees’ Profit Sharing Plan v. Barnes, 37 F. Supp. 2d 248 (S.D.N.Y 1999).
51 Prudential Secs. v. Dalton, 929 F. Supp. 1411, 1417 (N.D. Okla.1996).
60 Summary Judgment in International Arbitration: The Nay Case, supra note 4, at 5.
Author: Solomon Ebere, se85@law.georgetown.edu, holds an L.L.M. from the University of Paris-La Sorbonne and a Juris Doctor from Georgetown University Law Center.

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