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The original purpose of arbitration was to provide a simple, quick and cost-effective method for resolving commercial disputes outside the formality of the court system. The attraction of arbitration for international commercial disputes was further driven by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which has given arbitration awards—unlike court judgments—almost global enforceability.
Unfortunately, as arbitration became the preferred means for international commercial dispute resolution (largely thanks to the New York Convention), so it became increasingly slower, more complicated and more expensive, in direct contrast to its original purpose. In the eyes of its critics, arbitration became excessively complicated, slow and expensive.
It is against this background that the American Arbitration Association (AAA), through its international arm, the International Centre for Dispute Resolution (ICDR), has published new guidelines designed to assure that arbitrations are conducted fairly, efficiently and in a manner that is cost-effective.
Background of International Arbitration
The procedural rules in international arbitration are regulated, not by the governing law of the contract subject to arbitration, but rather by the law of the country in which the arbitration takes place (lex fori) and by any specific provisions in the arbitration agreement, provided that the latter do not conflict with the lex fori. With the rise in popularity of international arbitration, users sensibly sought countries in which to hold arbitrations where the laws were user-friendly. England's arbitration laws did not fulfill this requirement until the passing of the Arbitration Act 1996, which sought to bring the conduct of arbitration back to its historic roots by spelling out, in section 33, "General duty of the tribunal":
1. The tribunal shall—
a. act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
b. adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
2. The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.
Section 33(1)(a) went no further than the equivalent provisions of the United Nations Commission on International Trade Law (UNCITRAL) Model Law (Article 18), the UNCITRAL Arbitration Rules (Article 15.1) and the Rules of Arbitration of the International Chamber of Commerce (ICC Rules) (Article 15.2). However, section 33(1)(b) of the Arbitration Act 1996 introduced new guidelines (not expressly referred to in the above-mentioned rules and the UNCITRAL Model Law) promoting speed and cost-efficiency, the historic raison d'être of arbitration. These provisions are adopted, almost verbatim, in the London Court of International Arbitration (LCIA) Rules (Article 14.1).
The major stumbling blocks on cost and speed in arbitrations have been document production and the provision of evidence by witnesses. In this respect, the International Bar Association (IBA) has done great service to the process by publishing in June 1999 the IBA Rules on the Taking of Evidence in International Commercial Arbitration (IBA Rules). The IBA Rules were designed to be adopted into arbitration agreements so as to simplify, accelerate, and introduce cost-efficiency into the arena of document disclosure and evidence production.
The AAA/ICDR Guidelines
The new AAA/ICDR guidelines, which have been broadly welcomed, became effective as of May 31, 2008. The International Arbitration Rules of the AAA have hitherto provided, not only that arbitrations should be conducted in an even-handed and fair way (cf. section 33(1)(a) of the English Arbitration Act 1996, cited above), but also with a view to promoting expedition (Article 16.1 and Article 16.2). The new guidelines also concentrate on cost-efficiency (thus covering the section 33(1)(b) issues of speed and cost) and generally set out a blueprint for arbitrations conducted under the AAA International Arbitration Rules.
The AAA guidelines, which will be reflected in amendments to be incorporated into the next revision of the AAA's International Arbitration Rules, are in effect for all international cases administered by the ICDR that commenced after May 31, 2008, but may also be adopted in arbitration clauses or by agreement at any time in any other arbitration administered by the AAA. It should be noted, in particular, that depositions will generally not be permitted and that discovery is to be much more limited than in litigation, which marks a major divergence from U.S. litigation procedures. In this respect, the ICDR is clearly seeking to promote the benefits of parties opting to adopt the AAA's International Arbitration Rules and thus also to promote the ICDR as an arbitral administrative body for international commercial arbitrations.
The ICDR Guidelines for Arbitrators Concerning Exchanges of Information are succinct. They state in full:
1. In General
a. The tribunal shall manage the exchange of information among the parties in advance of the hearings with a view to maintaining efficiency and economy. The tribunal and the parties should endeavour to avoid unnecessary delay and expense while at the same time balancing the goals of avoiding surprise, promoting equality of treatment, and safeguarding each party's opportunity to present its claims and defenses fairly.
b. The parties may provide the tribunal with their views on the appropriate level of information exchange for each case, but the tribunal retains final authority to apply the above standard. To the extent that the parties wish to depart from this standard, they may do so only on the basis of an express agreement among all of them in writing and in consultation with the tribunal.
2. Documents on which a Party Relies
Parties shall exchange, in advance of the hearing, all documents upon which each intends to rely.
3. Documents in the Possession of Another Party
a. In addition to any disclosure pursuant to paragraph 2, the tribunal may, upon application, require one party to make available to another party documents in the party's possession, not otherwise available to the party seeking the documents, that are reasonably believed to exist and to be relevant and material to the outcome of the case. Requests for documents shall contain a description of specific documents or classes of documents, along with an explanation of their relevance and materiality to the outcome of the case.
b. The tribunal may condition any exchange of documents subject to claims of commercial or technical confidentiality on appropriate measures to protect such confidentiality.
4. Electronic Documents
When documents to be exchanged are maintained in electronic form, the party in possession of such documents may make them available in the form (which may be paper copies) most convenient and economical for it, unless the tribunal determines, on application and for good cause, that there is a compelling need for access to the documents in a different form. Requests for documents maintained in electronic form should be narrowly focused and structured to make searching for them as economical as possible. The tribunal may direct testing or other means of focusing and limiting any search.
5. Inspections
The tribunal may, on application and for good cause, require a party to permit inspection on reasonable notice of relevant premises or objects.
6. Other Procedures
a. Arbitrators should be receptive to creative solutions for achieving exchanges of information in ways that avoid costs and delay, consistent with the principles of due process expressed in these Guidelines.
b. Depositions, interrogatories, and request to admit, as developed in American court procedures, are generally not appropriate procedures for obtaining information in international arbitrations.
7. Privileges and Professional Ethics
The tribunal should respect applicable rules of privilege or professional ethics and other legal impediments. When the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should to the extent possible apply the same rule to both sides, giving preference to the rule that provides the highest level of protection.
8. Costs
a. In resolving any dispute about pre-hearing exchanges of information, the tribunal shall require a requesting party to justify the time and expense that its request may involve, and may condition granting such a request on the payment of part or all of the cost by the party seeking the information. The tribunal may also allocate the costs of providing information among the parties, either in an interim order or in an award.
b. In the event any party fails to comply with an order for information exchange, the tribunal may draw adverse inferences and may take such failure into account in allocating costs.