Summary disposal or fast-track arbitration is a proceeding whereby the parties select a subset of disputes from the universe of potential disputes and agree that, if a dispute in this category arises, it will be resolved within a strict time-limit. Where the parties have a general arbitration clause and, once the dispute has arisen, it is of such urgency to have the decision that the arbitration proceeds at an ‘accelerated’ pace is called a summary disposal.
Summary procedure vis a vis other procedures:
A distinction has to be made between summary procedure and other related and overlapping procedures such as Expedited procedure, “Documents only” proceeding and Bifurcation proceeding. A summary procedure primarily allows both the parties the opportunity to obtain a quick and early determination on the merits of the case, without going through the entire process of evidence submission and arguments.
Expedited procedure effectively compresses the full arbitral process or any such agreed accordingly modified. ‘Documents only’ proceeding has no oral hearing while ‘Bifurcation’ involves parties choosing to determine some part of the case first with the agreement that a certain decision would dispose of with the entire case. These are predominantly cost-cutting measures to put an end to the extremely expensive arbitral proceeding which are charged accordingly. Therefore, a proper summary disposal mechanism is viewed favourably by the parties involved.
Outlining the issue:
Summary disposal of cases in arbitration matters has been an unsettled debate throughout the development of international arbitration over the years. The most important question is whether the tribunal which has been entrusted to adjudicate the matter in a fair and efficient manner has the power to dispose with the case summarily even if the parties have not expressly agreed to such a procedure.
Implications of summary procedure:
The availability of summary procedure has a lot of ramifications across jurisdictions and may cost the parties monetarily as well. Summary procedure has proven to be the boon to settling matters of urgent importance mostly in the securities and financial sector where such settlements are of importance given involvement of capital involved. Even otherwise, parties prefer to end the matter soon enough owing to the high cost involved in adjudication. The challenge faced by the courts is that there are several applications for the same filed before them and it is challenged by the defence that if such a procedure was allowed it would hinder with the representation of their side of the case and would, therefore, be challenged at a later part of the proceeding and the enforceability of the award would be in question.
Judicial Analysis:
1. United States v. Panhandle Eastern Corp.-
The Panhandle case of 1992, which certain commentators have referred to as “perhaps the best known and most discussed fast-track arbitration case” was decided under the Arbitration Rules of the International Chamber of Commerce (“ICC”).
In that case, the contract, which concerned the long-term supply of natural gas, provided for the possibility of fast-track arbitration for disputes arising from price redetermination negotiations. In the course of the parties’ negotiations, it became clear that they were unable to reach an agreement concerning the price redetermination and consequently, arbitral proceedings were initiated. The tribunal in that case excluded from its consideration issues such as the validity of the contract which, under the contract, it was not authorized to determine on a fast-track basis, but did proceed on a fast-track basis in relation to the price determination, issuing an award two months after the request for arbitration had been submitted.
In another prominent example of efficiency known as the Formula One Racing arbitration, where the parties agreed to a fast-track arbitration and briefed the matter within a very short period (between 25 and 31 December 1992), the tribunal issued an award within 48 hours of the hearing and the ICC. The International Court of Arbitration approved the award on the same day at an emergency session. The English High Court held that parties choosing arbitration do it in the expectancy of a fair trial similar to a normal trial and summary trials however quickly resolved can be challenged on grounds on absence of opportunity to present enough evidence and lack of due process having been followed.
3. Weirton Medical Center Inc v Community Health Systems Inc.-
More recently, summary procedure was discussed in the Weirton case where the award given after a summary procedure was challenged before the district court on the ground that the arbitrator had exceeded his powers and disregarded the applicable law that was the law of Tennessee and West Virginia which prohibited summary procedure without adequate discovery and an evidentiary hearing. The district court rejected the argument by saying that “read as a whole, these agreements make clear that the AAA rules governed procedural matters in the arbitration, while Tennessee and West Virginia law governed the substantive legal issues“. The court went on to highlight that it is well-established in the US that an arbitrator has jurisdiction to “adopt such procedures as are necessary to give effect to the parties’ agreement” and that “procedural questions which grow out of the dispute and bear on its final disposition are presumptively… for an arbitrator [ ] to decide.”
It also further ruled that “while the arbitration agreements do not expressly permit summary disposition, they do not expressly prohibit it either” and that express authority to conduct summary procedure is to be derived from the arbitration agreement entered into.
Institutional rules and lack of uniformity:
There is also a lack of uniformity in the presence of summary procedure provisions across arbitration institutions. The Singapore International Arbitration Center (SIAC) includes summary procedure provisions under Rule 29.1 and the Stockholm Chamber of Commerce (SCC) includes it under Article 39(1). ICC rules very recently adopted summary procedure provisions. Whereas institutions like the London Court of International Arbitration (LCIA), and UNCITRAL rules do not have an express provision. The absence of the provision from the ICC rules was a line of contention before the English Court in the Travis Coal case. It was argued that because summary procedure provisions had been omitted from the ICC Rules on their revision in 2012, Article 22 of the ICC Rules could not implicitly support such procedures. The English court rejected this argument and upheld the power of the court to implement such summary procedures.
The various institutions that have incorporated the procedure into its rules have differences among them and analysis of the various types allowed is crucial to understand the concept. For example, the Singapore International Arbitration Center (SIAC) allows for early dismissal of a claim or defence and the basis for this being that it is manifestly without legal merit. The discretion is then given to the tribunal to decide to allow it or not and there is no time frame prescribed for the same. This function provides for flexibility due to absence of deadline and keeps a check on abuse of the process laid down like vacationing the evidentiary hearing at the final hour via a summary procedure. The rule envisions to decide the application after giving them the opportunity to be heard and an award ought to be passed within 60 days from such date. It is pertinent to observe that the grounds for filing for a summary procedure are narrower before the SIAC as legal grounds are the only ground to move forward whereas it is comparatively broader in the Stockholm Chamber of Commerce rules which provides for grounds of both legal and factual grounds to be proceeded under. The absence of the discretion given to court expressly to hear such matters brings in more problems as the rule has vaguely given the consideration to the tribunal to decide whether such a summary procedure would contribute to a more efficient and expeditious resolution of the dispute. But the presence of such a vague consideration allows for flexibility to the courts in deciding the summary application.
These provisions provide for protection in baseless claims or slam-dunk claims which under the present SIAC rules will be cleared in 60 days while the statistics show that on an average, full hearings take up to 13.5 months before the Singapore International Arbitration Center and 20 months before the LCIA London Court of International Arbitration.
Summary disposal, therefore, provides for speedy disposal and prevention of excessive backlog which is a feature of the contemporary court system.
Abuse of due process:
A vast majority of institutions have conditioned the applicability of expedited procedure rules to a pecuniary threshold, a first practical challenge relates to the difficulty of assessing whether a matter falls within the scope of those rules. The question may be relatively straightforward in situations where a claimant provides a clear valuation of its claim(s) at the outset. However, in situations where a recalcitrant party wishes to avoid the accelerated pace of the proceeding, institutions and tribunals may be faced with — and compelled to assess — procedural tactics such as defendants devising counterclaims to rise above the pecuniary threshold. There might also be instances where the timing of the application would be to disrupt the orderly conduct of the oral hearing. Summary applications, therefore, have to be carefully looked at.
Tackling the due process argument:
The flipside to this beneficial procedure is the argument that the losing party may argue that it was not given sufficient time to present this case. The only counter to this argument would be that the parties expressly chose an institution whose rules provide for a summary procedure on the application of either party. This prevents the losing party from having its proverbial cake and eating it too. Also, the English High Court in the Travis Coal case had specifically rejected the argument that a summary judgment process by arbitrators necessarily amounts to a denial of due process of law.
The decision to not include an express provision is that no express authority is required to render an award on a summary basis and this was clearly reinforced by the Weirton principle. Although the provision relating to the summary procedure is not set in stone, the arbitrators have the authority to decide cases summarily in its general case management powers. Hopefully, the Weirton case seeks to dissipate that paranoia which had set in recently. Issues begin after passing award and such concerns may be heightened in contemporaneous arbitral practice and what certain commentators have called “due process paranoia,” in reference to the growing concern in international arbitration about certain tribunals’ perceived reluctance to act decisively in certain situations for fear of the award being challenged on the basis of a party not having had an opportunity to be fully heard.
Denial of due process is not a question that could be addressed in general terms; rather, the facts of the particular case and the terms of the arbitration agreement must be taken into account to determine whether the measures adopted by the tribunal are within the scope of its powers and otherwise fair.
On this basis, it held that there was no “realistic prospect” of resisting enforcement of the award based on the summary procedure adopted by the arbitral tribunal.
Conclusion:
Analysing the various rules across arbitral institutions and their impact on proceedings, it is clear that the presence of a provision regarding summary trial is beneficial for it removes the complications that arose regarding enforceability and other similar issues that arise. The certainty of law, therefore, gives more certainty to the procedure in place and a sigh of relief to the parties before the tribunal by giving them an easy way out of frivolous suits. However, there is a greater need for harmonisation of such laws across institutions. Greater clarity and conditions have to be laid down to ensure that proceedings under such provisions are not at the helm of appeals for lack of follow of due procedure. Such reforms would inter alia other factors contribute to arbitration being a favorable means for expeditious dispute resolution.
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This article is written by Naveen Kumar LR, a law student at The National University of Advanced Legal Studies, Kochi.
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