October 24, 1997, Geneva, Switzerland
The Need For Speed
Dr. Francis Gurry
Director, WIPO Arbitration And Mediation Center
(Geneva, Switzerland)
Since the WIPO Arbitration and Mediation Rules have only very recently been established, and since we have had the privilege of being able to expose the reasoning of their drafters on previous occasions, I do not intend to speak about them this morning. Rather, I should like to share with you our thoughts on two projects that we are currently working on and that we hope will materialize in the first half of 1998. Each, however, will ultimately have an impact on Rules, although not in a conventional way.
The two projects have in common one factor that is, in our opinion, of vital interest to users, namely, the question of speed or, in other words, the capacity of the arbitral process to produce results within a time-frame that is acceptable to users. The question of speed can, of course, be addressed within the context of, if one may so call them, conventional rules, where a duty can be placed on the arbitral tribunal to ensure that the arbitral procedure takes place with due expedition (see Article 38(c), WIPO Arbitration Rules), the arbitrators can be deemed to have undertaken to make available sufficient time to enable the arbitration to be conducted and completed expeditiously (see Article 23(a), WIPO Arbitration Rules), time limits may be imposed on the various steps in the procedure, and so forth. However, perhaps our thinking in this regard is too much conditioned by traditional approaches and perhaps we should be exploring more radical possibilities outside these approaches.
Emergency Relief
The first project that we have been working on was mentioned this morning by Johnny Veeder. It concerns the question of emergency relief, that is interim relief, usually in the form of an injunction, that is sought on an emergency basis by one party in order to prevent irreparable harm being done to that partys interests. The need for such relief may arise in any type of dispute. It may be, for example, that oil is about to flow through a pipeline or that a product is about to be launched on a market and that one party considers that its rights will be irreparably damaged if a remedy is not granted to prevent the flow of oil or the launch of the product. While potentially of general application, however, the problem is particularly acute and frequently encountered in the area of intellectual property. In this area, the owner of intellectual property rights is often confronted with a situation in which it believes that another party is about to take certain action, in violation of the intellectual property rights, for which damages will not provide an adequate remedy. One notable example of such a situation is the disclosure of a trade secret. Once disclosed, the value of the secret is totally lost and the consequent loss of competitive advantage can rarely be adequately compensated through damages.
In many countries, such situations of need for emergency relief are dealt with by the courts, which provide a facility for parties to apply for and obtain, on very short (24 hours) notice, an interim injunction. However, in many other countries such an expeditious facility does not exist and interim relief can be obtained only in a period of 12 months. Given the international nature of commerce, in general, and of the exploitation of intellectual property, in particular, this unevenness in the availability of judicial remedies can be extremely damaging to the rights of a party. Information is highly mobile and the prevention of the disclosure of a trade secret through an injunction in one jurisdiction is of relatively little value if the injunction is not similarly available in another jurisdiction in which disclosure is threatened. Can arbitration, which seeks to provide a single solution to multijurisdictional problems, provide the answer to this unevenness in the availability of judicial relief?
The power of arbitral tribunals to grant interim injunctive relief is increasingly recognized, although it is still the case that there are some jurisdictions, such as Italy, in which that power cannot be exercised by an arbitral tribunal. The problem in arbitration, however, is that the need for emergency relief is generally the first manifestation of the existence of a dispute and thus arises before an arbitration has been commenced and, in consequence, before the arbitral tribunal has been constituted. The claimant is therefore confronted with a situation in which it needs to obtain relief, but there is no arbitral tribunal in place to grant the relief.
The ICC recognized this problem in introducing its Pre-Arbitral Referee Procedure in 1990. One perceived difficulty with that procedure, however, is that it takes up to seven days to have the referee appointed. In order to address this difficulty, the WIPO Arbitration and Mediation Center has been working on the development of proposed WIPO Emergency Relief Rules.
Under the proposed WIPO Emergency Relief Rules, it is intended to establish a standby panel of arbitrators who would be available, on 24-hours notice, to hear and decide an application for emergency interim relief. The Emergency Relief Rules would not apply automatically in every case in which parties designate the WIPO Arbitration Rules, but would, rather, be an optional additional feature to the WIPO Arbitration Rules. Where parties do include the Emergency Relief Rules in their arbitration agreement and one of them does initiate an application for emergency relief, the emergency arbitrator would be appointed from the standby panel by the WIPO Arbitration and Mediation Center. The need for speed in this instance necessitates an institutional appointment and does not allow for party participation in the appointment process (as is contemplated for the constitution of an arbitral tribunal in conventional cases under the WIPO Arbitration Rules).
It is envisaged that two forms of application might be brought under the WIPO Emergency Relief Rulesex parte and inter partes. The need for an ex parte procedurethat is, one in which the allegedly aggrieved party would seek relief without serving notice or providing for the participation of the other partyis considered to be essential for those cases in which there is evidence of bad faith on the part of the other party, or an indication that notice would entail the risk that vital evidence might be destroyed or other irreparable damage done. An ex parte procedure and any order made in it by the emergency arbitrator would not, however, be enforceable under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The order would have a contractual status only. Such a status causes some commentators to doubt the utility of the procedure. However, only the most audacious, if not reckless, lawyer would counsel a client not to abide by the order, even if it has merely a contractual status, especially if the order is backed by a sanction of liquidated damages in the event of its breach. Furthermore, the order could be converted, at short notice, into an enforceable award by providing for an inter partes procedure and hearing immediately following service of the order on the other party.
The inter partes form of application in the proposed WIPO Emergency Relief Rules envisages a very quick procedure conducted within strict and very short time limits. While it is not a question that is free from doubt, the better view seems to be that an award given by an emergency arbitrator in such a procedure would be enforceable under the New York Convention if the award is considered to be an enforceable award in the jurisdiction in which it is granted.
The contractual status of an ex parte order and the residual doubt about the enforceability under the New York Convention of an inter partes emergency award have led some to question whether arbitration institutions should offer an emergency procedure such as that contemplated under the proposed WIPO Emergency Relief Rules. Our view on this matter is the availability of such a procedure from arbitration institutions offers the best way forward for arbitration. The revision of the New York Convention represents, of course, a more certain way forward, but it is unlikely that such a revision could be accomplished in less than five years, while the process of subsequent accessions or ratifications to give the revision widespread application might be expected to require decades thereafter. We therefore believe that the availability of an emergency procedure would work in the interests of the promotion and development of arbitration as an effective and comprehensive means of dispute resolution for international commercial disputes.
Electronic Dispute Resolution
The second project that we are currently working on is the development of an Internetbased, electronic system for the administration of arbitrations and mediations. Here, the need for speed arises not because it is necessarily required by the circumstances of the dispute (as is the case for emergency relief), but rather because it is a natural response to the way in which business is increasingly being done around the world. The impetus to our involvement in this project arose in a specific context, that of disputes concerning Internet domain names.
An Internet domain name is simply a registered address which permits you to access another computer on the Internet. The domain name system is indispensable to the routing of traffic on the Internet. But, while domain names were intended to perform the technical function of interconnection, they have spontaneously mutated into a form of business identifier. Television or newspaper advertisements and billboards now commonly carry domain names as part of the process of identifying a business. In consequence, domain names often come into conflict with business identifiers in the "real" world, such as trademarks, the names of famous persons, the names of places or, in short, with the intellectual property of the image that has developed in the non-virtual world.
The WIPO Arbitration and Mediation Center has been developing a web-based system which will permit procedures for domain name disputes to be conducted on-line. In developing this system and in talking to various users, it dawned on us that one of the slowing factors in international commercial arbitration is distance. The parties, the arbitrators and the arbitration institution are often or usually located in different parts of the world. It occurred to us that speed is simply distance divided by time, and that we are surrounded by an explosion of technologies that are directed at eliminating distancethe fax, the mobile telephone, e-mail, the Internet, audio and video conferencing. I do not comment on whether these technologies are always beneficial. I mention simply that Henry Thoreau remarked in the 19th century that they were building a telegraph line from Maine to Texas, but that it might be that Maine and Texas had nothing to say to each other. Whether this is the case or not, however, these technologies are with us and it seems to us that greater use could be made of them in the service of rendering one of the slowing factors of international commercial arbitration, distance, less troublesome.
We believe that the use of an electronic system will not only be effective in reducing delays, but will also reduce costs. The following table illustrates well how cost efficiencies can be achieved by the use of e-mail transmissions:
SENDING A 42 PAGE DOCUMENT:
COST (US$) |
TIME |
|
New York to Tokyo |
||
Air Mail Courrrier Fax Internet E-Mail |
7.4 26.25 28.83 0.1 |
5 days 24 hours 31 minutes 2 minutes |
New York to Los Angeles |
||
Air Mail Courier Fax Internet E-Mail |
3 15.5 9.86 0.1 |
2-3 days 24 hours 31 minutes 2 minutes |
Source: ITU, Challenges to the Network
When one considers the amount of documentation transmitted between parties and the arbitral tribunal in the course of an ordinary arbitration, it is clear that an Internet-based system of document transmission and management can be very cost-effective.
We believe that the on-line system that we are developing may have applications well beyond disputes concerning Internet domain names and may apply more generally to commercial disputes. Although we would not advocate a complete substitution of the arbitral process by on-line procedures, it does seem that there are certain elements at least of the ordinary arbitral process that can be conducted with the use of these technologies, with consequent cost- and time-effectiveness.
Over the last six months you will have noticed that there have been a number of major reports on electronic commerce, including the European Ministerial Declaration in July 1997 on global information networks, President Clintons report on "A Framework for Global Electronic Commerce," and the Japanese Ministry of International Trade and Industrys statement on "The Age of the Digital Economy." These three reports all express the view that economic activities will become increasingly possible without the physical movement of persons, goods or money. Furthermore, it may be noted that this sort of economic activity is inherently international in nature, involving consequently many jurisdictional problems for which arbitration might provide a suitable solution. In addition, the value of the transactions in many cases is such that it does not justify the physical movement of persons and things to consummate the transaction. It should less be the case that a dispute in relation to that value should justify such physical movement.
Let me conclude on this with certain questions. The use of on-line procedures and other technologies of this nature raises a series of questions which are technical, legal and human.
As far as the technical questions are concerned, there is the problem of authentication, that is, knowing who it is that you are dealing with, and there are the problems of security and confidentiality. I would make just two remarks here. First, technology is certainly far in advance of the law. There are technological solutions available; it is just that we have not constructed the appropriate legal framework for dealing with those technological solutions. A second comment is that we grossly over-estimate the security of the telephone and the fax and the postal service. We suddenly become very conscious of security in relation to on-line procedures, but we face the problem more generally in more traditional media of communication without undue concern.
As far as legal problems are concerned, it appears likely that the electronic administration of arbitration will have an implication for the rules of arbitration institutions. There is the problem of due process in general, the availability of the medium on a sufficiently widespread basis, the enforceability of awards under the New York Convention and the use of traditional expressions, such as "writing." We are in the process of addressing these questions at the moment.
Finally, there is the human dimension that was mentioned by Johnny Veeder this morning. In relation to this, I would suggest that we can only proceed by experience and see to what extent the human dimension is really indispensable to the arbitral process.