On 1 November 2018, the revised HKIAC Arbitration Rules entered into force (see GAN: New HKIAC Administered Arbitration Rules further enhance efficiency of arbitrations). HKIAC has followed a recent trend in international arbitration and has introduced a provision providing for “Early Determination Procedures”. Under the new Article 43 a party may seek an early decision of the tribunal on factual or legal issues. Article 43(1) provides:
The arbitral tribunal shall have the power, at the request of any party and after consulting with all other parties, to decide one or more points of law or fact by way of early determination procedure, on the basis that:
(a) such points of law or fact are manifestly without merit; or
(b) such points of law or fact are manifestly outside the arbitral tribunal’s jurisdiction; or
(c) even if such points of law or fact are submitted by another party and are assumed to be correct, no award could be rendered in favour of that party.
What are Early Determination Procedures / Summary Procedures?
In reaction to continuing criticism that arbitral proceedings were not time- and cost-efficient enough, some arbitration institutions have started issuing provisions which enable arbitral tribunals to make early decisions. In so-called summary or early determination procedures, the tribunal is empowered to render an early decision on issues without having to allow the submission of full evidence or all arguments. In a best case, such early decisions shall lead to an early settlement or dismissal of claims or at least to a limitation of the issues in dispute.
It is debated whether tribunals are empowered to make an early determination even if there is no express provision in the arbitration rules allowing for it. It could be argued that the tribunal has a wide discretion to conduct the arbitration proceedings efficiently, and therefore also has the discretion to determine distinct issues separately. However, in practice tribunals have been reluctant to do so mainly for one reason: they fear that their award might be challenged based on a violation of due process or public policy.
The number of arbitration institutions which provide for an early determination procedure is growing: As early as 2006, the International Centre for Settlement of Investment Disputes (ICSID) implemented Rule 41(5) in its latest Arbitration Rules. Rule 41(5) provides that “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” and that “[t]he Tribunal, after giving the parties the opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, notify the parties of its decision on the objection.” Ten years later, the Singapore International Arbitration Centre (SIAC) followed this example and implemented Rule 29 in the 2016 SIAC Arbitration Rules. Rule 29 introduces summary proceedings in which “[a] party may apply to the Tribunal for the early dismissal of a claim or defence on the basis that: a. a claim or defence is manifestly without legal merit; or b. a claim or defence is manifestly outside the jurisdiction of the Tribunal.” Only a year later, the Arbitration Institute of the Stockholm Chamber of Commerce introduced a similar provision. According to Article 39(1) of the 2017 SCC Arbitration Rules “[a] party may request that the Arbitral Tribunal decide one or more issues of fact or law by way of summary procedure, without necessarily undertaking every procedural step that might otherwise be adopted for the arbitration.” The Hong Kong International Arbitration Centre is now a further arbitration institution that provides an express competence for fast proceedings in certain situations.
What are the characteristics of Article 43 HKIAC Arbitration Rules?
According to Article 43(1) HKIAC Rules a tribunal may make an early decision on any point of law or fact that might be manifestly without merit (a), that might be manifestly outside the tribunal’s jurisdiction (b) or if the tribunal cannot render an award in favour of the party relying on the point of law or fact, even if the alleged point of law or fact is assumed to be correct (c).
The scope of Article 43 is rather broad and follows the example of the SCC Arbitration Rules in allowing early decisions on any point of law or fact. In contrast, the SIAC Arbitration Rules only allow an early dismissal of a claim or defence.
The early determination procedures under Article 43 HKIAC Rules will be conducted as follows:
- One of the parties, i.e. the claimant or the respondent, has to make a request for early determination procedures (Article 43(2)). In order to promote efficiency, this request shall be made as early as possible (Article 43(3)) and with the content listed in Article 43(4).
- The tribunal will give the other party an opportunity to comment on the request and will then decide whether to dismiss or allow the request for early determination procedures. This decision shall be made within 30 days after the party filed its request.
- In case the request for early determination procedures was allowed, the tribunal shall make a decision within 60 days. The decision shall take the form of an order or award (Article 43(6)). Until the tribunal issues its early decision, the tribunal may stay the arbitration proceedings (Article 43(7)).
Procedures for an early decision under the SIAC Arbitration Rules and SCC Arbitration Rules are conducted similarly. Under both rules, a party has to make a request, the other party will be heard and get the opportunity to comment on the request. The tribunal will make a decision in the form of an order or award which can be subject to enforcement under the New York Convention.
Are early determination procedures working?
The inherent risk of an early determination procedure is that the opposite happens of what is intended, i.e. that the arbitration proceedings are prolonged and not shortened. The risk is that the dispute about the early determination becomes an arbitration within the arbitration with separate rounds of briefs and possibly even an oral hearing.
The provisions on early determination / summary procedures, however, minimize these risks. Under the SIAC, SCC and HKIAC Rules early determination / summary procedures are divided in two phases. In a first phase, the tribunal will have to decide whether to allow early determination procedures at all. The tribunal has to make this decision in a certain time period, under the HKIAC Rules within 30 days after the party requested early determination procedures. Before making this decision the tribunal has to hear the other party, but has to do so within the 30 day period. This procedure will limit the time that is spent on the dispute about the early determination. Clearly unmeritorious requests for an early determination will not even reach the second phase. The second phase, i.e. the actual early determination procedure, shall in principle not take longer than 60 days.
Finally, case statistics show that an early determination can work in practice. According to ICSID statistics, there have been only 25 applications for a decision on manifest lack of legal merit in the past twelve years since the introduction of Rule 41(5). This shows that parties do not use an application for early determination as a guerrilla tactic in order to delay the proceedings. Moreover, a reasonable number of applications are successful. Twelve early determination decisions have been published; half of the applications for an early determination were granted.
It can be expected that the same will hold true for early determination / summary procedures under the SIAC, SCC and HKIAC Rules.