The purpose of this bulletin, the fourth in our "Dispute Resolution Clauses - Two Minute Drafting Tips" series, is to provide parties involved in negotiating commercial agreements with quick, actionable tips for crafting effective dispute resolution clauses. This bulletin discusses procedures for appointing arbitrators that can avoid delays.
The timely appointment of arbitrators is an important aspect of ensuring an efficient and cost-effective arbitration process. One way to simplify drafting and avoid pitfalls is to include a model arbitration clause from a reputable arbitral institution. These model clauses incorporate by reference a set of rules that:
- will provide a framework for the appointment of arbitrators; and
- may provide for the institution to appoint arbitrators, even where the institution is not administering the arbitration itself.
Institutional Rules Offer a Structured and Efficient Appointment Framework
Arbitral institutions, such as the International Centre for Dispute Resolution (ICDR), the Vancouver International Arbitration Centre (VanIAC), the International Chamber of Commerce (ICC) and the ADR Institute of Canada (ADRIC), have established rules and procedures for appointing arbitrators. Typical approaches include:
- Party-appointed Arbitrators Appoint the Chair: Each party involved in the dispute nominates one arbitrator. The nominated arbitrators then select a third arbitrator who acts as the chairperson.
- Institutional Appointment of Arbitrator: If the parties cannot agree on who will serve as sole arbitrator, or the party-appointed arbitrators cannot agree on a Chair, the arbitral institution may appoint them.
Institutions Can Provide Appointment Services Even for Non-Administered Arbitrations
Having an arbitral institution administer an arbitration has obvious advantages, but it does come with a cost. As such, some parties prefer unadministered or "ad hoc" arbitrations. Some institutions have published rules for unadministered arbitrations that can be adopted by agreement (e.g., UNCITRAL Arbitration Rules), and others contemplate that parties may agree to opt out of administration (e.g., ADRIC Rules). If rules like those are not adopted, the parties must develop their own appointment process or rely on the process under the applicable arbitration laws.
A common approach used in dispute resolution clauses contemplating ad hoc arbitrations is to specify that party-appointed arbitrators will appoint a Chair. This often works, but it also necessitates having three arbitrators when one might suffice.
As an alternative, arbitral institutions may offer a service where, even if an arbitration is not administered by the institution, it will appoint arbitrators. VanIAC's service is a good example of this. The VanIAC Domestic Arbitration Rules outline a specific procedure for appointing a sole or presiding arbitrator, which includes providing a list of previously considered arbitrators, delivering identical lists of proposed arbitrators to each party, and allowing parties to express their preferences and objections. VanIAC then appoints an arbitrator based on these preferences or provides a second list if necessary.
Conclusion
Using one of the model dispute resolution clauses of an arbitral institution, like those noted above, ensures that there are rules in place for appointment. If that approach is not used, it is critical to specify in the dispute resolution clause a pragmatic appointment process that assumes at least one party will be uncooperative when a dispute arises.
In Case You Missed It
For more insights, check out our previous bulletins in the "Dispute Resolution Clauses - Two Minute Drafting Tips" series:
- Bulletin #1 - Using Model Arbitration Clauses and "Administered" Arbitrations
- Bulletin #2 - Addressing Panel Size and Arbitrator Qualifications
- Bulletin #3 - Mandating Arbitration and Clarity of Scope
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
