THE AUTHORS:
Benedikt Kaneko, Attorney at Law (New York)
Shinji Ogawa, Case Manager at the Japan Commercial Arbitration Association (JCAA)
Sometimes parties involved in an arbitration may devote considerable attention to specific issues in their written submissions, only to discover that the arbitral tribunal does not consider these issues to be decisive or relevant to the dispute. Parties may realize this by interpreting the tribunal’s apparent lack of interest in addressing these issues during the evidentiary hearing or even later only from the final award. While such an extreme scenario is certainly not the norm, it is certainly possible that, from the perspective of the arbitral tribunal, parties and counsel may unnecessarily spend too much time and energy on non-decisive issues.
One reason for this may be infrequent and inactive communication between the tribunal and the parties. Arbitral tribunals typically address procedural issues with the parties at the outset of an arbitration, but play a limited role after this initial stage. While the parties exchange written submissions and argue their respective cases until the preparation for the evidentiary hearing, the role of arbitral tribunals at this stage of the proceedings is often limited to resolving procedural or document production disputes.
The tribunal’s decision on disputed document production requests may suggest which issues it considers relevant and material to the outcome. However, this remains an educated guess for the parties. Furthermore, even if some procedural orders request the parties to submit an agreed list of key issues just before the evidentiary hearing, there is no guarantee that the parties will agree on a joint list. Consequently, they may end up providing separate lists. The tribunal may refrain from providing any feedback to the parties and the merits of the case may be discussed for the first time at the evidentiary hearing between the tribunal and the parties.
Process of Collaboration for Identifying Key Disputed Issues
Some arbitral tribunals, regardless of their civil or common law background, engage in coordinating with the parties to identify key disputed issues. For example, the tribunals may themselves provide a list of key disputed issues in the first procedural order or after the first round of written submissions. In the latter case, the identified issues are often more detailed and frequently take the form of questions, which the parties are asked to address in their subsequent written and oral submissions.
The active dialogue between arbitral tribunals and parties is reflected in article 18 of the Town Elder Arbitration Rules (“TEA Rules”), which reads: “The arbitral tribunal shall be actively involved in each Step of the arbitration and will interact with the parties by inter alia raising questions, asking for evidence and indicating when a matter being addressed by a party does not appear to be relevant to the determination of the issue(s) in that Step.” The TEA Rules, initially published by David Rivkin in 2021, are designed to serve as an informal supplement to the UNCITRAL (United Nations Commission on International Trade Law) Arbitration Rules (2021) (“UNCITRAL Arbitration Rules”). However, the active approach outlined in article 18 of the TEA Rules can be employed in any arbitration to implement measures to identify key disputes issues and thereby help controlling the time and cost of arbitral proceedings.
Midstream Case Management or Preliminary Views Conference
Further measures that parties and arbitrators sometimes take to increase the role of the tribunal during the arbitral proceedings is to hold so-called midstream case management conferences or preliminary/tentative views conferences, in which the tribunal shares its preliminary views on the dispute.
While most arbitration rules are silent on the use of midstream case management or preliminary views conferences, it is generally accepted that they can be arranged by the arbitral tribunal and the parties based on their agreement. In absence of guidance in arbitration rules, timing and procedure are generally decided on a case-by-case basis. The different terminology used already indicates that not every format fits every case and there is not yet a clearly established best practice with which all parties and arbitrators are familiar and comfortable. In some cases under the JCAA Commercial Arbitration Rules 2021 (“JCAA Commercial Rules”), the first procedural orders simply provide, as agreed by the parties, that the arbitral tribunal “may” state its preliminary views on the issues. The timing is generally left to the discretion of the tribunal unless the parties agree to a specific timing.
Practitioners familiar with litigation in a civil law court system are more familiar with the court’s active involvement in the management of the dispute by providing its preliminary views on the issues in dispute. This often extends to judges being actively involved in facilitating settlement discussions or even giving their views on settlement options. Lawyers with a common law background may not be used to such an active role of the court. This may result in greater reluctance to allow arbitrators to play a more active role in arbitral proceedings. However, a recent decision of the UK Court of Appeals indicates that judges from a common law background may also provide their provisional views: “There is nothing wrong with a judge indicating provisional views, and advocates are generally grateful for such indications as it gives them an opportunity to correct any misconception which the judge may have and to concentrate in their submissions on those points which appear to be influencing the judge’s thinking.” This suggests that the distinction between civil and common law may be oversimplified, particularly when it comes to experienced arbitration practitioners.
For an arbitral tribunal, a midstream case or preliminary views conference will almost certainly require considerable time and effort. While this active engagement may lead to time and cost savings at the end of the proceedings, it may come at an unexpected point in the proceedings, because the parties’ desire to hear the tribunal’s preliminary views may not be triggered until after the first round of extensive written submissions. In other words, well after the arbitrators have accepted their appointment. Depending on the remuneration structure agreed or provided for in the arbitration rules, this additional time and effort may not even be reflected in the arbitrator’s remuneration.
In July 2023, the ICC Commission on Arbitration and ADR released a Guide on Effective Conflict Management and identified that preliminary views conferences could potentially “lead to renewed efforts to engage in settlement discussions with the other side”. At the same time, the commission also released its Report on Facilitating Settlement in International Arbitration and cautioned that “giving of preliminary views brings potential risks for the enforceability of an award if not conducted properly”. On the positive side, preliminary views can provide parties with a “better understanding of their chances of success and are therefore able to find an adequate settlement” or at least “increase the efficiency of the proceedings as it will enable the parties to focus on the aspects that are crucial to the tribunal”.
JCAA Interactive Rules
The Japan Commercial Arbitration Association (“JCAA”) has established the JCAA Interactive Arbitration Rules 2021 (“JCAA Interactive Rules”), with initial introduction in 2019, in addition to the default JCAA Commercial Rules. If expressly agreed to by the parties, the JCAA Interactive Rules provide mechanisms to encourage active management of the arbitration by the arbitral tribunal at all stages of the arbitration.
Most of the JCAA Interactive Rules reflect international best practices, which are also reflected in the JCAA Commercial Rules. The following provides an overview of the distinctive main features of the JCAA Interactive Rules: the arbitral tribunal shall actively communicate with the parties to provide “work products” at two different stages of the arbitral proceedings.
Most of the JCAA Interactive Rules reflect international best practices, which are also reflected in the JCAA Commercial Rules. The following provides an overview of the distinctive main features of the JCAA Interactive Rules: the arbitral tribunal shall actively communicate with the parties to provide “work products” at two different stages of the arbitral proceedings.
Clarifying the Parties’ Positions and Identifying the Key Disputed Issues
The first mechanism contained in the JCAA Interactive Rules provides for the active role of the arbitral tribunal in clarifying the parties’ positions and identifying relevant issues pursuant to Article 48 of the JCAA Interactive Rules. According to article 48 of the JCAA Interactive Rules, “[a]t a stage as early as possible in the arbitral proceedings, the arbitral tribunal shall draft a document containing a summary of each Party’s positions on factual and legal grounds of the claim and the defense (“Positions”) and the factual and legal issues that the arbitral tribunal tentatively ascertains arising from the Positions (“Issues”).”
Depending on the case, this may already be possible after the constitution of the arbitral tribunal (i.e., after the parties have submitted the request for arbitration and answer) or only after the parties filed their first round of pleadings (i.e., statement of claim and statement of defense). This provides the necessary flexibility to ensure that this process takes place at the earliest possible time, while at the same time ensuring that all essential factual and legal issues can be addressed. In the first case under the JCAA Interactive Rules, the tribunal adopted a “hybrid” approach by sharing its preliminary understanding of Issues and Positions after its constitution and then providing the refined Issues and Positions after the first round of pleadings.
The parties may comment on the written Positions and Issues and the arbitral tribunal shall take such comments into account when finalizing the written Position and Issues. During the course of the arbitral proceedings, a party may request that its written Position be amended or modified. This ensures that a party retains the ability to change its actual position during the course of the arbitration if necessary. Such a request may only be denied if it comes too late in the arbitral proceedings and is consistent with best practice, which prohibits attempts to introduce entirely new factual and legal arguments at the last minute.
Not only does the arbitral tribunal provide clear guidance to the parties on which issues to focus their pleadings. The JCAA Interactive Rules also expressly provide that the written Positions can be used by the tribunal in its award. This not only saves the arbitral tribunal time and effort in drafting the award, but also ensures that the parties’ positions are accurately and precisely reflected in the final award.
Communicating Preliminary Views
Pursuant to article 56 of the JCAA Interactive Rules, the arbitral tribunal shall provide the parties with a written summary of its preliminary views on the issues of fact and law and any other matters it considers important. Article 56 of the JCAA Interactive Rules expressly provides that the communication of preliminary views is intended to “assist the Parties to present their cases effectively and efficiently”. This preliminary view shall be communicated before the arbitral tribunal decides on “whether or not witness examination will be conducted”. The parties have an opportunity to comment on the issues and on whether witnesses should be examined. In a typical arbitration, this is likely to be after the parties’ written submissions and before any evidentiary hearing is held. This is because the parties have had a chance to present a substantial part of their case at this point. It is also expected that the tribunal may have naturally developed its initial opinions by then. In the first case under the JCAA Interactive Rules, the tribunal employed this approach.
While it may not be a best practice for arbitral tribunals to provide written preliminary views, written communication may provide a better opportunity for the parties to comment on the views and ensure a proper understanding of the preliminary views. This, in turn, provides an opportunity for the parties to consider the status of the dispute and their positions.
Preliminary views are not “binding upon the arbitral tribunal’s subsequent decisions or the arbitral award” and no party may “challenge any arbitrator based on the fact that he or she has expressed preliminary views”. This provision is consistent with best practices regarding ad hoc preliminary views conferences and ensures the enforceability of an arbitral award.
Fixed Remuneration of Arbitrators
The remuneration of arbitrators under the JCAA Interactive Rules is based on the economic value of the claims in question. This contrasts with the application of a fixed hourly rate as the default for arbitrations conducted under the JCAA Commercial Rules.
In accordance with Article 96 of the JCAA Interactive Rules, the remuneration of the arbitrator shall not be reduced in the event that the arbitral proceedings are terminated. The exceptions to this rule are only acknowledged in cases where arbitral proceedings are terminated before the arbitral tribunal is constituted or an arbitrator ceases to act as an arbitrator due to, for example, resignation or removal.
This provision ensures that any appearance of remuneration considerations is eliminated when it comes to an arbitral tribunal endeavor to facilitate settlement discussions and the subsequent early termination of arbitral proceedings. It could be argued that this encourages arbitral tribunals to be efficient and to facilitate the resolution of disputes by way of settlement, where possible.
Opt-In or Opt-Out?
Parties and counsel who wish to have the tribunal actively involved in providing its preliminary or tentative views at some point in an arbitration should consider the JCAA Interactive Rules as the rules governing their arbitral proceedings. By choosing the JCAA Interactive Rules, a framework is established from the outset of the arbitration that provides clear guidance to the parties and the tribunal as to the two points in the arbitration at which the tribunal’s tentative views will be communicated. This will also provide clarity and manage user expectations from the outset, and will enable arbitrators to better consider whether accepting the appointment will fit into the arbitrator’s schedule.
If the parties wish to change the procedure (for example, oral preliminary views or an hourly rate of arbitrator’s remuneration) or waive the hearing of preliminary views altogether, this is also possible under the JCAA Interactive Rules. Thus, the JCAA Interactive Rules provide an opt-out alternative to other arbitration rules. Other arbitration rules provide for an opt-in mechanism, which requires the parties to agree ad hoc not only to hear preliminary views by the tribunal, but also the exact procedure and possibly the scope. The distinctive provisions in the JCAA Interactive Rules may serve as a useful reference for crafting procedural orders in arbitral proceedings conducted under any commercial arbitration rules if the parties prefer a more interactive approach of a tribunal to the case management.
ABOUT THE AUTHORS
Dr. Benedikt Yuji Kaneko is admitted to the New York Bar (Attorney at Law) and his application to the German Bar is pending (Ass. iur.). He has experience acting in commercial and investment arbitrations under various rules (ICC, SIAC, KCAB, UNCITRAL, and ICSID).
Shinji Ogawa currently works as the case manager at the Japan Commercial Arbitration Association (JCAA). He manages all arbitration and mediation cases filed with the JCAA. He actively contributes to the refinement of the JCAA Rules and served as a member of the Study Group on the Steady Promotion of the Use of International Arbitration in Japan, a governmental initiative aimed at fostering the growth of international arbitration in Japan.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
