Young ICCA Skills Training Workshop: Efficiency and Costs in International Arbitration: A Practicum

Post Event Report

On 22 September 2017, Young ICCA with the support of the Spanish Club of Arbitration under 40 (CEA -40) held a Skills Training Workshop in Madrid, Spain. The workshop was hosted by Pérez-Llorca and was attended by a diverse crowd of over 50 participants. The event was generously sponsored by both Pérez-Llorca and the Swiss Chambers’ Arbitration Institution (SCAI).  Paloma Castro Hernández, Associate at Pérez-Llorca (Madrid) reports.
 

The topic of the workshop was “Efficiency and Costs in International Arbitration: A Practicum”. The guest of honour speaker was Professor Yves Derains, partner at Derains and Gharavi in Paris. The workshop was conducted by seven speakers over two panels moderated by Mr. Felipe Aragón Barrero, Associate at Armesto & Asociados (Madrid) and Ms. Camilla Gambarini, Associate at Debevoise & Plimpton (London) and Global Events Director of Young ICCA. The workshop was followed by a wrap up session led by Ms. Maria Juliana Muci, Associate at Three Crowns (London). 
 

FIRST SESSION – HOW TO ACHIEVE EFFICIENCY IN INTERNATIONAL ARBITRATION
 

Mr. Felipe Aragón started the first session with an introduction about the hot topic of how to achieve efficiency in international arbitration. In particular, Mr. Felipe Aragón introduced three main questions which were later addressed by the speakers: (i) the parties and arbitral tribunal’s basic techniques to guarantee the effective conduct of arbitral proceedings; (ii) the parties’ dilatory tactics; and (iii) the arbitral institutions’ position regarding the achievement of efficiency in the arbitral proceedings.
 

After the introduction, Mrs. Alba Briones, Senior Associate at Hogan Lovells (Madrid), addressed in detail the topic of “How parties and tribunals set the rules to guarantee the effective conduct of arbitration”. Mrs. Briones pointed out the fact that it is very complicated to design cost-efficient and time-efficient arbitral proceedings and obtain an award of high quality at the same time. Furthermore, Mrs. Briones gave some tips for achieving efficiency, such as: (i) discussing in detail the procedural calendar of the proceedings; (ii) speaking to the counterparty; (iii) making a honest review at the beginning of the case of what is essential for the case and what could be avoided; (iv) avoiding document production if it is not really necessary for the outcome of the case; (v) avoiding written statements and legal expert reports and only use them when dealing with very complex legal issues; (vi) using the Redfern Schedule and the Scott Schedule; and (vi) being flexible and open-minded when discussing the procedural calendar with the counterparty and the arbitral tribunal.
 

In relation to Mrs. Briones’ intervention, Professor Yves Derains stated that the problem of the arbitral proceedings is that they are not tailored to the specific needs of the parties. In this regard, Mr. Derains suggested that it would be convenient to establish not only one but two management conference calls, one at the beginning of the arbitral proceedings to discuss preliminary issues of the proceedings and other in the course of the arbitral proceedings to discuss specific issues of the case. However, Mr. Paul Brumpton, Partner at White & Case (London), noted that in a small and typical arbitration it would be difficult and inefficient to establish two management conference calls.
 

The speakers also discussed the mechanism of bifurcation as a tool for reducing costs in arbitral proceedings. In particular, Mrs. Briones disagreed with the use of bifurcation “ex officio” but submitted that, drawing from her experience, the bifurcation between quantum and liability is very useful. This opinion was also shared by Mr. Brumpton.
 

The second topic discussed in this first session was related to the use of “Guerrilla Tactics in International Arbitration” as a dilatory tactic. Mr. Luca Beffa, Counsel at Baker & McKenzie (Geneva), remarked that the use of guerrilla tactics is increasingly common in international arbitration. He stated that there are three different types of guerrilla tactics: (i) the extreme ones, which include violence, threats and intimidation; (ii) the severe ones, including forgery and fraudulent behavior; and (iii) the light ones which comprise challenges of arbitrators, requests for extension of time, late submission of files as well as opposition to the signing of the terms of reference. Regarding the consequences of the use of these tactics, Mr. Beffa specified that the use of these tactics can cause not only undue delays, but also substantive prejudices to the outcome of the case.
 

In light of the foregoing, the speakers suggested that guerrilla tactics shall be treated as criminal actions provided that they have an enormous impact on the proceedings and that they can also lead to the annulment of the award. In order to avoid these kinds of dilatory tactics, it would be convenient to establish strict rules to fight these tactics from the very beginning of the case, but always taking into account the rules of the due process.
 

The last topic addressed in this session was “The role that arbitral institutions play in achieving efficiency and saving costs in arbitration”. The speakers focused on the new expedited procedure provisions which are ideal for arbitrations in which time is a key issue for the parties. Mr. Luca Beffa reminded the attendants that the Geneva Chamber of Commerce/Swiss Chamber’s Arbitration Institution introduced expedite procedure rules in 1992. Interestingly, the Swiss Rules provide that an arbitral tribunal composed of three members may be appointed to deal with the expedite procedure without regard to the amount in dispute, if the parties so decide.  On the contrary, the ICC introduced Expedited Procedure Provisions as of 1 March 2017 and they do not provide for such parties’ choice.
 

SECOND SESSION – HOW TO MINIMISE COSTS IN INTERNATIONAL ARBITRATION
 

Ms. Camilla Gambarini moderated the second session. The scope of this session was to discuss the main issues on costs in international arbitration and what junior lawyers should know to try to minimize them.
 

Ms. Gambarini opened the second panel by giving some data to highlight the importance of costs in arbitration. In particular, she discussed an 2015 LCIA’s which had revealed that in commercial arbitrations under either LCIA, ICC and SIAC rules with no more that USD 1 million in dispute, the costs vary between USD 100 thousand and USD 200 thousand, including administrative charges, the fees of the tribunal and, where relevant, the fees of a tribunal secretary. Moreover, she remarked that in the Yukos case the Permanent Court of Arbitration and the arbitrator’s fees expenses amounted to the sum of about USD 8,5 million, that the claimant’s fees were around USD 80 million and the defendant spent around USD 27 million.[1]  Accordingly, costs play an important role in arbitral proceedings.
 

The speakers addressed the issue of “How to manage teams of lawyers and in-house counsel to minimize costs”. Ms. Gambarini introduced the topic by remarking certain data from the ICC and the Arbitration Institute of the Stockholm Chamber of Commerce which shows that costs for legal representation correspond to around 80-83% of the parties’ costs in arbitration, and that arbitrator’ fees and case administration account for a small portion of the costs amounting to around 20%. Mr. Wojciech Sadowski, Partner at K&L Gates (Warsaw), and Mr. Jeremy Hannah, Litigation Counsel at GE Oil & Gas (Zurich), agreed with the data and noted that, in their experience, the costs seem to increase at the discovery stage of the proceedings and during the examination of witnesses, if they are required to travel.
 

Mr. Jeremy Hannah suggested that a better management of the relationships between external and in-house counsel could contribute to the reduction of the costs of legal representation. In particular, he indicated that for an in-house counsel it is important to establish a cap or a lump sum with the external counsel in the engagement letter, in order to preserve predictability and transparency. Mr. Wojciech Sadowski recommended setting up closed teams of three or four junior lawyers, in order to allow them to be fully involved in the cases and to reduce costs. Mrs. Mercedes Romero, Partner at Pérez-Llorca (Madrid), stated that the best piece of advice she usually gives to her junior lawyers when they work in arbitration matters is to be really focused on what they are doing and to use technology for saving time.  In general, all the speakers noted that lawyers should think creatively to try to better assist the client and minimize the costs of arbitration proceddings.
 

The second topic addressed in this panel was “The use of Information Technology (“IT”) to minimise costs”. In this regard, Ms. Gambarini noted that the ICC has recently issued an interesting report on the use of IT in international arbitration which shows that IT has transformed the international arbitration process in a positive way. In this respect, Mrs. Romero established a very clear distinction between IT and artificial intelligence, and stated that the use of artificial intelligence will be extremely important in the near future. Moreover, Mrs. Romero shared with the audience an experience in using IT in arbitration with the aim of showing how the new technologies can lead to reduction of costs and to more time-efficient arbitral proceedings.
 

Each panel ended with a dynamic and insightful Q&A session. Following the workshop, and the wrap up session led by Mrs. Maria Juliana Muci,the speakers and participants were invited to a lovely cocktail reception at Pérez-Llorca. The cocktail provided a further opportunity for discussions and interactions amongst speakers and participants.
 

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Paloma Castro Hernández

Pérez-Llorca

Madrid, Spain 

[1] Yukos Final Award, paras. 1873- 1874.