The Use of Time Limits in International Arbitration: Help or Hindrance?
Reporter: Nathaniel Lai (Sidley Austin)
In recent years, the use of time limits in international arbitration has garnered increasing support from practitioners and users of international arbitration, given the increasing duration and associated expense in conducting large international arbitrations. Proponents argue that time limits provide a viable means to curb unnecessarily long proceedings and ensure that arbitrations are conducted efficiently and cost-effectively. However, time limits are not without their problems: detractors argue that as a general matter they can be unrealistic, and come at the cost of due process.
As part of Hong Kong Arbitration Week, Morrison & Foerster organized a seminar on this topic. The seminar took the form of a panel discussion with the following distinguished practitioners and was moderated by Ms Sarah Thomas (Partner, Morrison & Foerster):
- Andrew Aglionby (Independent Arbitrator, Arbitration Chambers)
- Craig Celniker (Head of International Arbitration, Morrison & Foerster)
- The Honourable Mr Justice Coleman (Hong Kong Court of First Instance)
- Christopher Moger, QC (Independent Arbitrator, 4 Pump Court)
- Wesley Pang (Managing Counsel, HKIAC)
- Neeti Sachdeva (Secretary General and Registrar, MCIA)
Time Limits by Agreement
The discussion opened with a consideration of time limits agreed to by parties, either in the arbitration agreement or as part of their procedural timetable. The key points that emerged from the discussion are as follows:
- Users of international arbitration have voiced concerns that the time between close of proceedings and the award is long and unpredictable. This is especially so with popular arbitrators who have many cases to handle. This can be an issue for parties, who generally expect (legitimately) that their case would be decided promptly after closure of proceedings so that their dispute can be finally resolved.
- Anecdotally there are cases where tribunals have taken an unreasonably long time to render their award – sometimes over a year. Long lead times can prejudice the substantive merits of the case, as tribunals invariably lose their recollection of what happened at the hearing. While transcripts can serve as a record, over time tribunals may not be able to recall their impressions of the credibility of witnesses during the hearing.
- On the other hand, even though contracting parties generally want to settle their disputes more quickly and efficiently, often when disputes arise there is one party in the dispute that has an interest in prolonging the proceedings. In such situations, parties may try to drag out the arbitration by raising interim relief applications, challenges to arbitrators, and jurisdictional objections. Tribunals often find it difficult to hold the parties to the timetable when this happens.
- Furthermore, parties sometimes themselves agree to a procedural timetable which is longer than necessary. Parties often have their own reasons for doing so, such as to build in time for negotiations. So long as the timetable appears broadly reasonable, tribunals typically find it difficult to interfere with the parties’ agreement, even if they think that the case could be completed more efficiently.
- One solution would be for parties to provide tribunals with a time limit for the rendering of the award in their arbitration agreement. This provides the parties with certainty. Tribunals have also found such clauses useful as it provides them with leverage to push back against the parties when they seek to prolong the procedural timetable unnecessarily.
Institutional Time Limits
Some arbitral institutions have sought to impose time limits on parties and tribunals in their rules. For example, the ICC Rules require that tribunals complete the Terms of Reference within 30 days of transmittal of the file to the tribunal. The key points that emerged from the discussion on institutional time limits are as follows:
- Time limits set by institutions are not always respected. For example, the ICC often will grant time extensions for submission of the Terms of Reference.
- The issue with time limits set out in institutional rules is that they are imposed irrespective of the nature and complexity of the case. Larger and more complex cases require more time than smaller cases involving fewer issues, but it is difficult for institutions and institutional rules to include specific provisions for this beforehand in drafting their rules. Institutions are left with setting out a general timeline in their rules, and then granting extensions as required in individual cases.
- One procedure that was developed by institutions in recent years is the use of expedited procedures, where often the number of submissions allowed is reduced and the case is decided on the documents only. Expedited procedure rules often come with deadlines for the issue of the final award. Such procedures allow lower-value disputes to be resolved more economically and efficiently.
Time Limits on Arbitrators
The panel also considered time limits applicable to tribunals in their rendering of decisions and awards:
- Institutions have soft power in pushing arbitrators to render their awards timely, as arbitrators often look to institutions for repeat appointments in future cases. Some institutions such as the ICC also have power to sanction arbitrators in the form of reduced fees for late awards.
- One possible way of running the case more efficiently as suggested by Mr Moger QC is to hold a “Kaplan hearing”, which is a short hearing after the exchange of pleadings but prior to the exchange of evidence on the issues that have to be decided. Experience has shown that this has helped parties and tribunals focus their attention on the key issues to be tackled.
Statutory Time Limits – India’s Experience
India’s amendment to its arbitration legislation in 2015 imposed a 12-month time limit for the rendering of the final award. Extensions to such time limits can only be granted by the courts. Ms Sachdeva as Secretary General and Registrar of the Mumbai Centre for International Arbitration shared her experience with the panel:
- Prior to 2015, arbitration in India was a slow process compared with other jurisdictions, as arbitrators often took on more cases than they could handle, resulting in them not being able to devote sufficient time and attention to individual cases. The 2015 amendment was enacted to tackle this situation.
- Practitioners were initially skeptical. In particular, there was a concern that this would clog up the court system with extension applications, which could result in even more delay.
- However, the enactment has since worked well. Arbitrators no longer take on cases unless they are able to devote sufficient time and attention to them, and in Ms Sachdeva’s experience, the vast majority of cases are now completed within 12-18 months. Indian courts have also been quick to grant extensions as and when required.
The Indian Arbitration and Conciliation Act was further amended in 2019 to remove the strict 12-month time limit for international commercial arbitration. Instead, international commercial arbitration awards may be made “as expeditiously as possible”, and “endeavour may be made” to dispose of the matter within 12 months from the date of completion of pleadings.
Time Limits and the Courts
Courts at times have also been asked to weigh in on issues relating to time limits. Typically, these have to do with the tribunal rendering its award after the time limit set by the parties in their arbitration agreement. Mr Justice Coleman of the Hong Kong Court of First Instance offered his views on this:
- Section 72(2) of the Hong Kong Arbitration Ordinance provides courts with the power to grant extensions of time for the rendering of awards, even if the parties have sought to impose a time limit in their arbitration agreement. Singapore domestic arbitration legislation as well as Malaysian arbitration legislation contain similar provisions. Interestingly, such applications have to be brought by parties to the dispute, not the tribunal itself.
- Generally, courts are unlikely to reject applications for time extensions unless there are strong reasons to do so. For example, if the parties have a commercial deadline that hinges on the rendering of the award, courts may be more cautious in granting such applications.
- The question for the courts more often has to do with whether an award rendered after the deadline set by the parties in their arbitration agreement should be set aside. Generally, courts are likely to be reluctant to set aside awards on this basis.
- In Singapore, this is viewed as a jurisdictional issue that goes to the power of the tribunal to render an award. In Mr Justice Coleman’s view, this is unlikely to go to jurisdiction, but instead is more properly considered a failure to comply with the parties’ procedural agreement. Under Hong Kong arbitration law, awards may be set aside on this ground if the failure to comply constitutes a serious irregularity that causes substantial injustice to the parties. This standard would give Hong Kong courts leeway to look at the equities of the circumstances and consider whether the tribunal’s failure to comply with the time limit would warrant setting aside the award.
In practice, time limits are an important consideration for counsel as well as the parties themselves. Parties to dispute resolution proceedings often structure their negotiations and commercial affairs around milestones in the arbitration, including the expected rendering of the award, and it is important that there be a level of certainty in the proceedings. Moreover, efficiency and cost is often one of the principal reasons parties choose arbitration over litigation, and it is important that practitioners, arbitrators and institutions recognize this and put in place practical time limits to the extent possible so that arbitrations can be completed within a reasonable time period.