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The purpose of this bulletin, the sixth 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 the potential to provide for expedited arbitration procedures for certain types of disputes.
Expedited arbitrations can be very effective for the right case. But at the contract drafting stage, it is important to consider the types of cases best suited to these processes, and to ensure the dispute resolution clause addresses key considerations that maximize the benefits.
Benefits and Potential Drawbacks of Expedited Arbitration
Streamlined processes, involving fewer procedural steps, reduced documentation, limited discovery, and tight timelines all contribute to faster resolution and lower overall costs. However, these same features that deliver speed and are cost-effective can create challenges in mounting an effective claim or defense in a large or complex case. It is generally good to consider the types of disputes that are likely to arise under the contract before deciding whether to provide for these processes.
Tips for Drafting Dispute Resolution Clauses Contemplating Expedited Arbitration
Broadly speaking, there are two ways to address expedited processes in a dispute resolution clause: (1) the parties can develop their own ad hoc processes, or (2) the parties can incorporate by reference the rules of an arbitral institution that already include expedited procedures, such as the rules of the International Centre for Dispute Resolution (ICDR), International Chamber of Commerce (ICC) or the Vancouver International Arbitration Centre (VanIAC). Option two will be simplest in terms of drafting, but note that the processes will vary among institutions.
An effective expedited process will contemplate the elements listed below.
- Eligibility requirement: Consider which disputes should be addressed in an expedited manner. It is common for arbitral institution rules to use a monetary threshold, which has the advantage of being objective (albeit open to debate when a specific amount is not claimed). ICDR Canada rules use $500,000 USD while the VanIAC rules use $250,000 CAD. The ICC threshold is much higher, currently $3M USD.
- Single Arbitrator: A single arbitrator will save considerable costs. Under the ICDR Canada and VanIAC expedited rules, a sole arbitrator will be appointed even if the arbitration agreement specifies otherwise.
- Expedited Timeline: Specifying tighter timelines for certain procedural steps keeps the process moving, although it is important to confer discretion on the arbitrator to vary those timelines to avoid unforeseen issues. The ICDR Canada, VanIAC expedited rules take this approach. The ICC rules leave most timelines unspecified, but contemplate a six month deadline for an award.
- Procedural Simplicity: Document production or other discovery are significant drivers of delay and cost. Both ICDR Canada and VanIAC expedited rules contemplate limited document discovery only and default to a written hearing unless otherwise agreed or ordered by the arbitrator. The ICC rules contemplate that an arbitrator has discretion to limit discovery and may decide the case on written evidence alone.
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.
