Wednesday, January 20, 2016

Choosing Your Arbitration Rules

As many readers would be aware, on 23 November 2015, Peter Wolrich, Partner, Curtis Paris, and Jean- Claude Najar, Counsel, Curtis Paris presented a publication titled “ICC International Arbitration Toolkit: How to run a cost-effective and time-efficient arbitration.”

The speakers are well qualified to speak on the publication, given their extensive involvement with the ICC. For those that were unable to attend, the publication provides practical tools and tips for making time-efficient, cost-effective decisions at key points in a dispute, from pre-arbitration through settlement considerations to the hearing itself.

One question from the audience was in relation to choosing the type of arbitration one might specify in a contract. As the panel explained, appointing bodies charge fees on different bases, and this may be a factor in any decision made. For example, the costs payable to arbitrators and the ICC in relation to arbitration in accordance with the ICC Arbitration Rules will be calculated primarily based upon the amount in dispute. On the other hand, the costs payable in relation to an arbitration in accordance with LCIA rules will be determined using hourly rates. Hence, it may ultimately be cheaper to have a complicated construction dispute decided via the ICC Arbitration Rules, whereas it may be cheaper to have a straightforward claim decided via the LCIA Arbitration Rules.

There are other considerations as well. The costs of the tribunal are just one part of the overall costs of using arbitration to resolve disputes. Specifying a tribunal consisting of three arbitrators will significantly increase the costs as compared to specifying one arbitrator. Choosing arbitrators that are not locally based adds to the costs. The ICC also vets arbitration awards before they are published, which can add to the quality and ensure the award is enforceable, but may also extend the process. Often, particularly in Oman, the tribunal will seek to engage an expert to assist the tribunal, which may add to the costs.

In Oman, the contract often specifies any dispute be resolved by arbitration in accordance with the Arbitration Law of Oman (Royal Decree (“RD”) 47/1997 as amended by RD 2/2007). Arbitration in accordance with this decree is generally an ad hoc arbitration (i.e., an arbitration where there is no appointing body or like organization involved). There is a small amount of money saved by not having an appointing body, but this is offset by the difficulties in such cases where the parties are unable to agree on the identity of the arbitrator.

The Arbitration Law of Oman does not specify a costs scale. In practice, arbitrators often adopt the fee scales set out in the Rules of Procedure for the GCC Commercial Arbitration Centre (1994), which are similar to, but cheaper than, the scales applied by the ICC. However, arbitrators appointed under these rules may charge hourly rates instead. A lot will depend on the arbitrator or arbitrators selected by the parties to resolve disputes.

In any event, the proposed terms of any arbitration clause should take into account the nature and value of the contract, the identity of the parties and the other considerations mentioned above. It is prudent to obtain legal advice in relation to any proposed arbitration clause, or dispute resolution clause, in any contract of significance.