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Conference on Rules for Institutional Arbitration and Mediation

20 January 1995, Geneva, Switzerland

 

Discussion: The Arbitral Decision; Fees and Costs


Richard Hill (Switzerland)

I think I have the dubious distinction of being one of the only non-lawyers in this room, although I give perhaps the perspective of someone who is involved in negotiating the substance of contracts. We all know that arbitration is suppose to be faster, cheaper and better, but in many cases it is not viewed as being so, for valid, or less valid, reasons. From my perspective, having looked at the issues and talked to a number of people, I have to say that I reinforce the comments of Gerald Aksen. I believe the WIPO Rules represent an attempt, at least, at dealing with the issues that are perceived at my level as a user as being obstacles to fast and efficient arbitration. I should like to echo Mr. Aksen’s comments that really this is a very interesting exercise which could lead to a great expansion of the use of arbitration in practice in the future.

 

Yves Derains (France)

I should like to make three observations relating to the presentations that we have heard.

I should first of all like to congratulate the authors of this text, which seems to me generally to be excellent. I should only like to draw attention to some points where it seems to me that users ought to take certain precautions.

First, there is the provision in Article 61 which states that, in the absence of a majority, the presiding arbitrator shall make the award, order or other decision as if acting as a sole arbitrator. I think that the formula is rather deceptive, since it is one thing to say that the presiding arbitrator shall make the decision alone, and another thing to say that he shall do it as if he were a sole arbitrator. It is not because the presiding arbitrator takes the decision alone that he may cease to send his drafts to the other arbitrators. If, at the conclusion of a deliberation, he observes that there is no agreement, he prepares a draft and he must absolutely present his draft to the other arbitrators and ask for their agreement and do so until the end, otherwise there is a risk that the award will be void. Thus, he is not acting as a sole arbitrator; he is in a different position.

The second observation that I should like to make concerns the law applicable to the arbitration agreement, where we see at the influence both of the Swiss Law on Private International Law and of the New York Convention. But here, again, I think that prudence is called for, because the text is not a law. The text is rules that have only a contractual value. It is perfectly clear that this provision, for example, could not have been effective in the framework of the Concordat, and there are still many places today where the validity of the arbitration agreement is judged according to the principles of the law of the place of arbitration. It is not because these Rules say that the validity of the arbitration agreement may be assessed according to the law chosen by the parties or, worse, according to the law that the arbitrators, on the basis of Article 59(a) will have determined to be applicable that, at the place of arbitration, the arbitration agreement will be recognized as being valid. Thus, I think that there are a certain number of precautions to be taken in this regard.

Finally, I shall conclude on the question of the fees of the arbitrators. It is an insoluble problem and there is no good solution. But I am not at all convinced by the observation that the payment of an hourly rate makes arbitrators less efficient. I think that it is quite the contrary. I believe that in many cases the arbitrator who knows that all the work that he will do will be paid is going to do his work seriously and properly. The arbitrator who knows that, whatever he does, he will receive the same amount, will tend to leave aside the file to work on other matters where he is being paid on an hourly basis because he knows that there he can sell his time completely. In my view, that is not where the problem lies. The difficulty with payment on an hourly basis is that, within an arbitral tribunal of three members, there are considerable disparities between the position of each arbitrator. For example, a professor at a university who is not an attorney, who does not have expenses that are running, has an hourly rate that cannot be the same as an attorney who has daily expenses that are running. In addition, within the arbitral tribunal, it is very rare that the three arbitrators spend the same amount of time on the file. So, if one enters into this type of calculation, the difficulties are enormous.

 

Marc Blessing (Switzerland)

I only have a very short answer to what you said. Indeed, where the presiding arbitrator is not able to find a majority, it is somehow wrong to say that he would function as if he were a sole arbitrator. In other words, once realizing that there will be no majority, he cannot say "well, my fellow arbitrators, thank you so much for the work you have done, you can go home and I shall now continue myself." That is not the case. He will have to keep the co-arbitrators informed and properly circulate draft awards and the like. I think Article 61 is, or should be, understood this way. I fully share your view.

Your second observation was on Article 59(2). Your remark is correct that the provision operates as a contractual provision. It has the effect that the parties agree that the validity of the arbitration clause as such will be judged according to the most favorable legal provision. Such as to exclude pleas in the sense while we now happened to learn that this arbitration clause is invalid under the laws of Afghanistan or so it does give remedy to defences which have been raised in that direction. Of course, the subject is so vast that we could devote an entire conference to it. Unfortunately, we do have not the time.

As to your third remark, I can only agree with what you said. It is by no means inefficient for an arbitrator to know that he is going to get paid for the amount of work he devotes to the case; on the contrary.

 

François Dessemontet (Switzerland)

I should like to intervene on one of the points made in the excellent explanations presented by Francis Gurry, concerning the characteristic role of the arbitrator, particularly where there is a settlement. He said just now that a settlement coming, by definition, before the final award will have consequences on the fees of the tribunal. What he said seems quite realistic. In summary, the role of the judge is to judge, and thus the role of the arbitrator is to make the award. I am not absolutely sure that it is this conception of arbitration which should prevail in all cases. I think that a certain number of us believe that the role of an arbitrator is, if it is possible, to contribute to a reconciliation or closening of the parties. Then you might say that, for that, there is mediation and in mediation precisely one should reach a settlement, whereas in arbitration, properly speaking, it is not necessary. But practice, on the Continent in any case, is not so clear. It happens actually quite frequently, in my experience in perhaps 50% or 40% of cases, that there is a settlement reached very often following an interim award or a partial award. I make this point because I think that the intervention of the arbitrators at the beginning of the procedure is also a performance characteristic of arbitrators.

 

Marc Blessing (Switzerland)

I could not agree more and I can only assure you that the WIPO Arbitration Center is very well aware of all of that. Francis Gurry wanted to say, and I think correctly so, that the lawyer’s work is front-end loaded, while the tribunal’s work normally is back-end loaded and the characteristic performance of an arbitrator is not rendered if the case is settled on the runway of arbitration. What the Center wants to do is to avoid certain mishaps which have unfortunately occurred at the ICC. For instance, my personal experience is that we carried an ICC case through two years of evidentiary proceedings in Vienna, with hearings and so forth. We then had a settlement agreement. The ICC was unaware that each of the arbitrators had invested several hundred working hours and the fee which was paid to me was 2,000 US dollars and, on division of my working hours, it came to about 22 Swiss francs per working hour--less than what we pay to our cleaning personnel in the office. This came about because the ICC did not pay attention to the fact that the settlement was reached after lengthy proceedings and, indeed, after the arbitrators had been quite instrumental in bringing the parties at the end to an amicably resolved position. I think that the WIPO Arbitration Center has been very carefully advised to have an open ear to appreciate all of these circumstances very carefully, and I share your view that it is one of the noble tasks of an arbitrator also to facilitate an amicable settlement wherever this is appropriate or convenient.

 

Gustavo Ghidini (Italy)

My question relates to Mr. Herrmann’s speech about the effect of the award under Article 64. I do not see in Article 64 any provision as to possible means of ensuring compliance with the award, whereas in Article 46(a) there are provisions about deposits, escrow and guarantees. May I ask whether, even in exceptional circumstances, for instance, in a case where one of the parties has shown in other cases lack of compliance with the award by, for example, having recourse to a court of law and not respecting the award, the tribunal has any means of imposing a deposit of security to be released after compliance has been ensured.

 

Gerold Herrmann (Germany)

In terms of the short time available, there is a fairly long answer which I think we could better discuss with either a cup of coffee or even a glass of wine in our hands. The very short answer is that this provision on effect of awards, as you rightly stated, does not contain an express provision to allow the arbitral tribunal to request a bank guarantee or some other kind of means of ensuring the carrying out of the award to which you refer, in order to take into account the knowledge, if it is really the knowledge, and not just the allegation of a party, that there has been previous notorious conduct of one party. There may be, at least for the good arbitrator, ways of taking that into account. But I am not sure whether it would be possible, or even advisable, to have a provision which would give guidance on what to do in such a situation.

 

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