The new expedited procedure in the ICC rules and the danger of an award being set aside

Chile - 
Mónica van der Schraft and Cristóbal Sarralde, partner and principal associate at Garrigues office in Chile

The International Chamber of Commerce has opened the door to an expedited arbitration procedure that will allow proceedings to be conducted more quickly and reduce costs where the disputed amount is not above two million dollars. This procedure includes measures such as the appointment of a sole arbitrator or the absence of a hearing or examination of witnesses. Though it simplifies steps, there is a certain amount of concern that some of these measures may be seen by the losing party in an international arbitration proceeding as a potential reason for setting aside the award. In this article the author takes a look at the new scenario from the standpoint of Chilean legislation and the decisions of the Chilean courts.

The International Court of Arbitration attached to the International Chamber of Commerce (ICC) made an amendment to its arbitration rules (the ones that came into force on March 1, 2017) and probably the greatest change was the introduction of an expedited procedure (the “Expedited Procedure”) offering simplified arbitration with a reduced scale of fees (article 30 of the Rules of Arbitration and in Appendix VI). By taking this step, the ICC has echoed a trend seen at other international arbitration organizations, including the Hong Kong International Arbitration Center, the Swiss Chambers Arbitration Institution and the Singapore International Arbitration Center.

One of the greatest new developments in the Expedited Procedure is that it applies automatically if in an arbitration clause the parties agreed to submit to ICC arbitration, the amount in dispute does not exceed US$ 2,000,000, and the parties do not expressly opt out of this type of procedure.

Additionally, if the Expedited Procedure is applied, the ICC may appoint a sole arbitrator, despite any contrary provision in the arbitration agreement. Also, this procedure does not establish any Terms of Reference and the arbitrator may not allow requests from the parties for document production and may limit the number, length and scope of written submissions and written witness evidence. Lastly, the arbitrator may decide the dispute only on the basis of documents filed by the parties, with no hearing and no examination of witnesses or experts.

The purpose of all these measures is clearly to expedite the proceedings and reduce their costs, or put another way, to improve the cost-efficiency ratios of arbitration proceedings under the ICC Rules. Those measures could, however, also be seen by the losing party in an international arbitration proceeding as a possible basis for a reason for setting aside an arbitral award.

In actual fact, the Model Law on International Commercial Arbitration by the United Nations Commission on International Trade Law (Uncitral), which has been adopted by a great many legislations, including the Chilean legislation through Law No 19,971 on International Commercial Arbitration (“LACI”), establishes among the reasons for setting aside an arbitral award: (1) if the interested party furnishes proof that composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties (article 34.2.a.iv) and, (2) if the court finds that the award is in conflict with the public policy of this State (article 34.2.b.ii).

Regarding the first of these reasons, the party making the application for setting aside could submit, for example, that arbitration before a panel of three arbitrators was stipulated by the parties in the disputed agreement as the dispute resolution method, yet, by reason of applying the Expedited Procedure, the dispute was entertained only by a sole arbitrator, contravening the express terms of the arbitration clause. The applicant could also argue that because there are no Terms of Reference (in which the parties express their consent to the arbitral tribunal that is going to entertain the dispute, the parties, the subject matter of the arbitration, etc.) there is no way that party could have expressly given its consent to amending the arbitration clause.

As for the second reason, the party making the application could contend that the award is contrary to international public policy, from a procedural standpoint at least, in that the party has not been allowed to present its case properly, with the appropriate proof enabling it to do so, and so the principle of due process has been breached. It could found that circumstance on the arbitrator’s refusal to receive in a hearing proof from witnesses of facts or from experts, or else on restrictions imposed by the arbitrator regarding the request for production of documents or other evidentiary investigations.

Faced with allegations such as an infringement of the arbitration agreement or a breach of the principle of due process, the court called upon to entertain an application for setting aside the award might be inclined to grant it and render the arbitral award null and void. Particularly in Chile, where the respective Court of Appeal is responsible for hearing applications for setting aside awards, to date, in the whole 14 year period that the LACI has been in force no application for setting aside has ever been granted. However, grounds like those described could result in a change of interpretation having regard to the nature of the safeguards that could be held breached.

A solid counter argument to an application for setting aside is to invoke the estoppel doctrine, founded on the fact that: (i) the appellant accepted and did not challenge the appointment of a sole arbitrator, and as a result, there was no infringement of the arbitration agreement; or (ii) the party making the application consented or did not object in the proceeding to certain evidentiary investigations being omitted or to the chance to submit certain documents in the arbitration being restricted, and so the principle of due process was not breached either. To support this argument properly it will be important to be able to provide express proof of these circumstances in the proceeding, so as to lay bare the contradiction by the appellant, and, at the same time, make it clear that the alleged reason or reasons are unjustified.

This will enable the parties to reduce the risk of having an award handed down in an Expedited Procedure set aside, and also enable the objective of this type of procedure recently added to the ICC rules to be achieved. It will nevertheless be necessary to watch closely how the case law unfolds in relation to applications for setting aside awards rendered in an Expedited Procedure.