By now, the arguments for and against the adoption of summary disposition rules in international commercial arbitration are familiar. Proponents of summary disposition, largely from the U.S. and other common-law jurisdictions, argue that it will reduce the length and cost of international arbitration by providing parties with the means to dispose of meritless claims and defenses early in the dispute resolution process. Proponents argue that even when a summary disposition application is unsuccessful, it nonetheless encourages settlement by focusing the parties and the tribunal on potentially dispositive issues, or at least on factually or legally specious claims.

Opponents of summary disposition, largely from civil-law jurisdictions, counter that parties will turn the procedural tool into a vehicle of harassment and delay, producing groundless summary disposition applications and adding another rote procedural step to the arbitral process. Opponents also contend that summary disposition presents due process concerns by denying defending parties the full opportunity to be heard, thereby potentially placing awards at risk of challenge under the New York Convention.

Due to the lack of available statistics, the arguments for and against summary disposition procedures in international arbitration have largely remained unexamined hypotheses. However, May 12, 2018 marked the 10th anniversary of the first decision issued under the International Centre for Settlement of Investment Disputes (ICSID) summary disposition rules. With over 10 years of accumulated public data from ICSID, it is now possible to conduct at least an initial quantitative analysis of the impact of summary disposition applications on international arbitration.

ICSID Rules of Procedure for Arbitration Proceedings 41(5) and (6) ("Rule 41(5)" and "Rule 41(6)") permit a party to "file an objection that a claim is manifestly without legal merit" within 30 days after the arbitral tribunal is constituted and before the tribunal's "first session." After the parties have "opportunity to present their observations on the objection," the arbitral tribunal must issue its decision at that first session or "promptly thereafter[.]"1

Between its implementation in 2006 and the end of 2018, twenty-six decisions on Rule 41(5) applications have been issued. The data to date is intriguing. Fears that summary disposition would become a routinely abused procedural tool is, thus far at least, unsupported Moreover, the summary disposition process remains relatively expedited, lasting, on average, less than three and one-half months from start to finish. Most interestingly, ICSID arbitrations in which summary disposition applications have been made are resolved, on average, over a year earlier than the average ICSID arbitration-regardless of whether the applications are successful.

A longer and more detailed version of this article originally appeared in the May 2019 issue of Dispute Resolution International. Readers interested in a more fulsome presentation of, and evidentiary support for, the statistics presented below are encouraged to review the Dispute Resolution International article.

A. Summary Disposition Has Not Become a Rote Tool of Harassment

Parties were slow to begin invoking summary disposition following Rule 41(5)'s implementation in 2006. For ICSID arbitrations registered between 2007 through 2011, no more than two Rule 41(5) objections were filed. Its use caught on in 2012, when it was invoked five times, and remained relatively steady at four to five arbitrations each year until 2015, after which its use appears to have declined again. Overall, Rule 41(5) has only been invoked in 6.1 percent of arbitrations through 2018; at its peak, in 2013, it was only invoked in 12.5 percent of ICSID arbitrations registered that year.

Rule 41(5)'s low usage rate, extending now for over a decade, should allay fears of summary disposition becoming a rote and widespread tool for harassing or dilatory tactics in international arbitration. It should be noted, however, that two characteristics of ICSID arbitration safeguard against this potential for abuse: (1) Rule 41(5) imposes the high legal standard that a claim must be "manifestly without legal merit"; and 2) ICSID tribunals, like most international arbitration tribunals, are authorized to award costs to the prevailing party. The imposition of a high legal standard within Rule 41(5) itself limits the spectrum of claims to which the rule apply, and the prospect of bearing the opposing party's costs seems to provide an effective deterrent to aggressive or groundless Rule 41(5) objections.

Footnote

1. Rules 41(5) and (6) state in full:

(5) Unless the parties have agreed to another expedited procedure for making preliminary objections, a party may, no later than 30 days after the constitution of the Tribunal, and in any event before the first session of the Tribunal, file an objection that a claim is manifestly without legal merit. The party shall specify as precisely as possible the basis for the objection. The Tribunal, after giving the parties the opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, notify the parties of its decision on the objection. The decision of the Tribunal shall be without prejudice to the right of a party to file an objection pursuant to paragraph (1) or to object, in the course of the proceeding, that a claim lacks legal merit.
(6) If the Tribunal decides that the dispute is not within the jurisdiction of the Centre or not within its own competence, or that all claims are manifestly without legal merit, it shall render an award to that effect.

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Originally published by New York Dispute Resolution Lawyer on May 2020

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