10 August 2009
One of the most important advantages of arbitration, when compared to litigation, is supposed to be speed. However, there is growing criticism that in recent years commercial arbitration has become too lengthy and, as a result, too expensive.
As a reaction to such complaints, the German Institution of Arbitration (DIS) issued a set of arbitration rules in April 2008 that provide for fast track arbitration. These “Supplementary Rules for Expedited Proceedings” are available at http://www.dis-arb.de/download/2008_SREP_Download.pdf. As indicated by their name, these new rules neither substitute nor change, but rather supplement the standard arbitration rules of the DIS (DIS Rules) in cases where the parties commit to fast track arbitration. The Supplementary Rules enable the parties to conduct arbitral proceedings within a fixed, accelerated schedule.
The Arbitration Clause
Parties that want to use the benefits of fast track arbitration shall explicitly agree on both the DIS Rules and the Supplementary Rules. As the Supplementary Rules do not provide for a stand-alone set of rules, they have to be agreed upon in conjunction with the standard arbitration rules of the DIS. Moreover, it should be noted that, in contrast to the Swiss arbitration rules, the expedited German DIS procedure is not automatically applicable if the value in dispute is below a certain amount.
The DIS recommends the following wording for a fast track arbitration clause:
All disputes arising in connection with the contract [description of the contract] or its validity shall be finally settled according to the Arbitration Rules and the Supplementary Rules for Expedited Proceedings of the German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law.
In addition, the fast track arbitration clause should be complemented by the following provisions:
- The place of arbitration is ....
- The substantive law of ... is applicable to the dispute.
- The language of the arbitral proceedings is ….
It is also possible to agree on specific conditions that have to be met in order to initiate fast track arbitration. For instance, fast track arbitration could be made dependent on the value at stake, as the Swiss arbitration rules provide. However, any deviation from the standard clause recommended by the DIS should be carefully considered with an arbitration expert, as otherwise procedural problems might arise when a dispute occurs. Moreover, the parties may agree on fast track arbitration only prior to commencement of the arbitral proceedings. It is no longer possible to opt for fast track arbitration if the arbitral proceedings are already pending.
The Fast Track Procedure
The Supplementary Rules consist of only seven provisions. One of the core provisions is Section 1.2, which stipulates that the duration of the arbitral proceeding shall be limited to six months (in the case of a sole arbitrator) or nine months (in the case of a three member tribunal) as of the filing of the statement of claim. Whereas in standard arbitral proceedings under the DIS Rules the arbitral tribunal consists of three arbitrators, unless the parties have agreed on only one arbitrator, in fast track arbitration this rule is reversed: the dispute shall be decided by only one arbitrator unless the parties have agreed otherwise.
In addition, the procedure to nominate the arbitrators is significantly shortened and the Appointing Committee of the DIS has wider reaching authority to appoint the arbitrator(s) if the parties cannot agree at short notice. Moreover, as parties to arbitration often delay payment of the arbitrators’ fees, the Supplementary Rules require claimants to pay the full amount of the arbitrators’ fees in advance of filing the statement of claim.
Once the tribunal has been appointed it shall, after consultation with the parties, establish a schedule to ensure the six- or nine-month time frame. Unless the parties agree otherwise, respondent shall file its statement of response within four weeks from receipt of the statement of claim. Thereafter, all further written submissions have to be filed within four weeks of receiving the other party’s submission. Each party shall submit only one further brief after the exchange of statement of claim and defence. In addition, only one oral hearing (at which any taking of evidence will occur) will take place within four weeks of receiving the final written submission. Upon the oral hearing having taken place, the tribunal shall, within four weeks, render its decision. No further written submissions may be exchanged after the closing of the oral hearing. Moreover, counterclaims and set-offs shall only be admissible with the consent of all parties and the arbitral tribunal.
Therefore, in summary, an ideal schedule pursuant to the Supplementary Rules could look as follows:
Day Stage of the arbitral proceeding
0 Filing of the statement of claim with DIS
3 Respondent’s receipt of the statement of claim
31 Filing of the statement of defence
59 Filing of claimant’s rebuttal
87 Filing of respondent’s rebuttal
115 Oral hearing
143 Handing down of arbitral award
The parties can, of course, agree on an even more ambitious time frame. However, once the arbitral tribunal is constituted, any modification of the schedule requires its consent. Experience teaches us that parties are often enthusiastic about short deadlines at the beginning of arbitral proceedings but, later, regularly apply for extensions of time. To encourage the parties to stick to the initial timetable, the Supplementary Rules require the arbitral tribunal to consent to the extension of time limits only for good cause. Moreover, if the arbitral proceeding cannot be concluded within the initial time frame, the arbitral tribunal is required to justify the delay in writing vis-à-vis both the parties and the DIS Secretariat.
The Supplementary Rules provide for a compelling procedure to minimize time and costs in cases where a quick decision is as important to the parties as a just decision. However, the success of the Supplementary Rules will decisively depend as well on the willingness of arbitrators and parties to stick to the tight schedule the rules impose.
The common DIS Rules do not prevent parties from agreeing to speedy arbitration procedures. However, in practice, one or more of the parties often aims to delay or even obstruct the arbitration. Moreover, we see that from time to time certain arbitrators are too busy to fully dedicate themselves to the proceedings or may manage the proceedings too loosely. Therefore, the most important benefit of the Supplementary Rules might be to constantly remind the parties, as well as the tribunal, that they have committed to fast track proceedings so as to encourage them to act accordingly.