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One of the main duties of arbitrators is to manage and organize the proceedings in an expeditious and cost-effective manner.1 Much of their activity in this respect is carried out informally through oral or written communications which resolve procedural incidents as and when they arise or provide instructions on the conduct expected from the parties.

Although this flexible approach to procedural decision-making is one of the main attractions of arbitration, it is equally important for the procedural framework to be clear and predictable. Major decisions on the procedure will therefore need to be made in a more formal fashion. One of the skills of an experienced arbitrator lies precisely in the ability to strike a balance between the inherent flexibility of the process, which requires the arbitrator to hold back from excessive regulation and formalism, and the need to define the procedural framework unambiguously, anticipate potentially contentious issues and respond to parties’ requests through formal rulings.

Procedural orders are the means generally employed by arbitral tribunals to regulate the proceedings. However, as is also the case with awards, the ICC Arbitration Rules do not define or discuss the possible contents of procedural orders.2 This is hardly surprising given the wide range of subjects they can cover. Procedural orders are typically used to establish the procedural timetable, appoint experts and decide on parties’ requests for the bifurcation of the procedure or the production of documents. However, they can also serve other purposes. It is not unusual for procedural orders to deal with substantive, as opposed to strictly procedural, interests and rights, albeit with effects limited to the duration of the proceedings. Examples of such orders are those granting or denying parties’ requests for interim relief, or ruling on the admissibility of claims referred to arbitration in disregard of a pre-arbitral phase in the dispute resolution process.

The orders in this Supplement cover eight procedural issues: the appointment of experts; the privileged nature of documents produced, or to be produced, in the proceedings; bifurcation; the submission of allegedly new claims; the effect of short-circuiting multi-tiered dispute resolution provisions; requests for interim measures; security for costs; and anti-suit and anti-arbitration injunctions.

In international arbitration it is extremely common for arbitrators to call upon independent experts to assist them in resolving technical or legal issues. Commentators have even warned against abusing this evidentiary facility,3 which can increase the overall duration and cost of the proceedings. Even when requested by the parties, arbitrators are under no obligation to appoint experts. The recently published Guide of the ICC Commission on Arbitration and ADR, Effective Management of Arbitration, weighs the pros and cons of appointing experts from the parties’ perspective and suggests that, before doing so, arbitrators should carefully consider whether such an appointment is genuinely necessary.4 Moreover, the appointment of an expert, especially in cases where the tribunal needs assistance on a core aspect of the dispute, should not entail the abdication of the tribunal’s decision-making power.5

Once it has been decided that an expert should be appointed, the tribunal will need to determine a number of attendant issues, including the appointment process, the expert’s mandate and the time frame and form in which the expert’s findings must be presented.6 The tribunal may decide to select the expert itself (possibly after receiving the parties’ comments), or invite the parties to submit a joint proposal or an agreed list of experts from which the tribunal may select a suitable candidate. For this purpose, the services of the ICC International Centre for ADR (the ‘Centre’) are available to the parties and the arbitral tribunal.7 The parties’ input is generally sought on the expert’s terms of reference, which are likely to have a significant impact on the duration and cost of the expert proceedings. The two orders reproduced in this Supplement confirm that arbitral tribunals generally seek a consensus when appointing experts. In one of the cases (13490), the parties were required to agree on a joint nomination, or alternatively each to submit a list of three candidates for the tribunal’s consideration. In the other case (14079), the parties were given two weeks to try to agree on a joint proposal, with recourse to the Centre as a fallback. In this case, the tribunal advocated meeting in person to discuss the expert’s terms of reference and, interestingly, was keen to indicate that it would not be bound by the expert’s report, which is described as ‘only one stone in the overall “mosaic”’. [Page3:]

Document production is often regarded as the area of procedure in which the contrast between civil law and common law practices is most marked, but also where international arbitration has managed to strike a balance between the two traditions, as reflected in the IBA Rules on the Taking of Evidence in International Arbitration.8 One of the questions that sometimes arise in connection with document production is whether, and to what extent, the documents requested, particularly attorney-client communications, are covered by privilege. This is a complex issue which begs the question of the law arbitrators should refer to when addressing it – the law of the nationality, domicile or place of business of the party concerned, the law at the place where the attorney practices, the law of the seat of the arbitration, the law at the place where the communications in question were made9 or, as in one of the cases published here (13054), more than one of these laws concurrently?

When faced with a preliminary issue, an arbitral tribunal has to decide whether to deal with it as a discrete issue in a separate phase of the proceedings (‘bifurcation’), or at the same time as the rest of the case in the final award.10 There may be more than one preliminary issue to be dealt with separately, leading to more than two discrete phases of the proceedings. Although not exclusive to international arbitration, the question of whether to bifurcate the proceedings arises more often in arbitration than in litigation as a consequence of the greater flexibility offered by the former. The benefits of bifurcation can be significant. It allows arbitrators to focus on preliminary issues whose outcome may render subsequent phases superfluous (e.g. jurisdiction or statutes of limitation concerning the entire dispute) or reduce the scope of the dispute (e.g. jurisdiction or statutes of limitation concerning certain claims only). It may also allow the parties to focus on legal or factual matters identified by the tribunal as needing prior clarification (e.g. applicable law, disputed facts). Furthermore, deciding discrete disputed issues in a separate partial award may also give the parties an opportunity to settle the case. The downside of bifurcation is that it can lead to an increase in the overall duration of the proceedings if the preliminary phase is inconclusive and the arbitration needs to continue.

Whether or not the proceedings should be bifurcated is a question that cannot be answered in the abstract. It requires consideration to be given to the specific circumstances of the case and to factors such as (i) the seriousness of the matter for bifurcation and the likelihood of its success; (ii) the relationship between this matter and the merits (preliminary matters and the merits may be so closely related that it would be difficult to deal with them separately); (iii) whether the matter can be easily disposed of on the basis of the parties’ pleadings and documentary evidence, or whether it requires substantial factual evidence, in which case the arbitrators may prefer to deal with it in the subsequent procedural phase or at the same time as the merits. The question is further complicated by the fact that most international arbitration rules, including those of the ICC, remain silent on bifurcation, with no rule or presumption for or against it.11

The procedural orders published in this Supplement refer to the above-mentioned criteria, and in particular to whether the preliminary issues were separable from the other issues to be decided in the case (14338, 18175), their impact on procedural economy and efficiency (14338, 18864) and the type of evidence bifurcation would require (14338). Tribunals are recognized as having discretion to decide on bifurcation in the absence of an agreement between the parties (14338).

When faced with a submission that one of the parties challenges as unacceptable under Article 23(4) of the ICC Arbitration Rules (or Article 19 of the 1998 Rules), the arbitral tribunal will have to rule on its admissibility in the light of ‘the nature of such new claims, the stage of the arbitration and other relevant circumstances’. First, it will be necessary to assess (i) whether the submission constitutes a ‘claim’, as opposed to merely a new argument; (ii) whether it is ‘new’, and not simply a reformulation or amendment of an already pending claim; and (iii) whether it falls outside the scope of the terms of reference. Only when all three questions are answered positively will the tribunal exercise its discretion to decide whether or not to authorize the new claim.

The reported procedural orders show arbitrators applying the above-mentioned criteria when deciding whether or not to authorize new claims. In one of the cases (17664), the claimant sought authorization to introduce two new claims. The tribunal authorized one, as it pertained to matters already dealt with in previous submissions, but not the other, as it was likely to disrupt the procedure. In reaching this conclusion, the tribunal also relied on the notions of fairness and impartiality found in Article 15(2) of the 1998 Rules.12 The arbitral tribunal in case 19105 took account of similar considerations as well as the risk of disruption and delay to the proceedings. Noteworthy in all of the reported orders is the pragmatic approach [Page4:] adopted by arbitrators. This is especially so in case 19581, where the sole arbitrator, rather than determining whether the claim was ‘new’, simply relied on its being closely linked to the already pending claims, noting that it would be inefficient and place an additional procedural burden on the parties if they were obliged to introduce the claim in separate proceedings.

Multi-tiered dispute resolution clauses, which provide for disputes to be referred to arbitration only after unsuccessful attempts to resolve them by other pre-arbitral means such as direct negotiation, mediation/amicable dispute resolution or adjudication, are very common in international commerce. Disputes over whether or not the pre-arbitral phase has been exhausted, entitling the parties to proceed to arbitration, are not uncommon. They are sometimes regarded as relating to jurisdiction (exclusion of claims introduced before the expiry of contractual time limits or not previously submitted to mandatory amicable dispute resolution or adjudication) or, according to the prevailing view, admissibility.13 While jurisdictional issues are generally resolved by arbitrators in partial or interim awards, the admissibility of claims allegedly not ripe for arbitration is frequently dealt with in procedural orders.

In the order published here (14079), the question did not concern principal claims, but rather counterclaims and set-off claims submitted directly to arbitration. The claimant and counter-respondent regarded this as a breach of the two-tiered dispute resolution clause, which required prior recourse to adjudication. The tribunal saw no reason to treat counterclaims and set-off claims differently from principal claims, all being subject to the same mechanism. It further held that the contractual clause did not allow for exceptions to the adjudication phase, nor was there any indication that the parties had waived this requirement. Rather than adopting an unduly formalistic approach, the arbitral tribunal considered the purpose of the multi-tiered clause, seeing arbitration as a remedy against the adjudicator’s decision, not a self-standing mechanism available to the parties regardless of completion of the adjudication phase. The tribunal went on to observe that adjudication must be undertaken in good faith, with the genuine intention of settling the dispute, going as far as advising the parties on how to optimize the process through the choice of the adjudicator and definition of the adjudicator’s mandate and powers. While respecting the autonomy of the adjudication process, the tribunal asked to be kept informed of its progress.

Another area in which arbitral tribunals may need to choose between an award or a procedural order (possibly incorporated subsequently into the final award)14 is interim measures. For some of the widely diverse measures that may be granted as interim relief, arbitrators may prefer the more solemn form of an award, especially if this is likely to increase the enforceability of the decision.15 However, given their inherently temporary and provisional nature, interim and conservatory measures are often the subject of procedural orders. This dispenses with the need to submit the decision in draft form to the International Court of Arbitration for scrutiny pursuant to Article 33 of the ICC Arbitration Rules, which would take time and run counter to the urgency of the application. However, even when in the form of a procedural order, a ruling on interim measures must be reasoned.16 This fact, combined with the complexity of the parties’ requests, often results in decisions that are not dissimilar to awards in terms of structure and length. In one of the decisions reported here (13856), which extended to 47 pages, the tribunal considered that the need to leave open the possibility of revoking or modifying the decision in the light of changed circumstances, justified opting for an order rather than an award, which would have precluded that possibility. This order is paradigmatic insofar as it addresses many of the issues that typically arise when arbitral tribunals are asked to grant interim relief:

(i) the tribunal’s jurisdiction to order the measures requested, which the tribunal upheld on the basis of the almost universally accepted principle that state courts and arbitral tribunals enjoy concurrent powers to make such orders, also confirmed by the law of the place of arbitration (Switzerland), and on the basis of a prima facie analysis of its own jurisdiction on the merits of the case;

(ii) the effect of previous, similar unsuccessful applications to state courts, which the tribunal did not consider as preventing it from granting the measures sought;

(iii) the substantive requirements for granting the requested measures, which were identified by the arbitral tribunal (the ICC Arbitration Rules being silent on the question) as the likelihood of success on the merits (fumus boni iuris), avoidance of prejudgment of the merits of the case, the risk of irreparable harm to the applicant if the measures were not granted (periculum in mora), urgency and balance of interests. The tribunal also noted that there was no evidence of abuse in the applicant’s request. [Page5:]

The question of jurisdiction also arose in another of the published orders on interim relief (15219), where the requested measure (a bank guarantee covering the amount in dispute) was considered to relate to the performance of a future award and therefore to be beyond the tribunal’s jurisdiction.

Pragmatism and moral suasion, rather than formal decision-making, is illustrated in the third order for interim measures reported here (15634), where the tribunal addressed the application in a letter in which it expressed the view that an order of interim relief would be inappropriate in the circumstances but reserved the right to reconsider the matter in light of the parties’ subsequent submissions.

A category of provisional and conservatory measures that deserves separate attention is security for costs. Its purpose is to cover amounts that are likely to be awarded to a party in the event that it prevails and is awarded the costs of the proceedings. While security for costs is relatively common in certain jurisdictions,17 it is less common or even unknown in others, where it may even be regarded as impeding access to justice. Applications and orders for security for costs present distinctive characteristics in international arbitration. It is nowadays generally accepted in most jurisdictions that parties may only apply to the arbitral tribunal for security for costs, not to state courts.18 The matter has become highly topical at a time of economic downturn, when there is an increased risk of claims being brought by impecunious parties, possibly funded by third parties.19

The consensual basis of arbitration and the assumption that, when entering into an arbitration agreement, parties freely choose their contractual partner and accept the risk that they might one day be involved in arbitration proceedings, call for a restrictive approach to the ordering of security for costs in arbitration. The ICC Arbitration Rules lessen the risk by providing for the payment of an advance on the costs of the arbitration before the start of any substantial procedural activity20 (see case 12732). However, this does not fully protect a party against the cost of defending unfounded claims, as the advance on costs is in principle shared equally between the parties and covers only the costs of arbitration stricto sensu, i.e. the fees and expenses of the arbitral tribunal and the institution’s administrative fee, but not the parties’ own costs (see case 13359).

The orders published here, including the rare few in which the measures sought were granted, show that very strict criteria must be met before security for costs will be ordered. The applicant’s interest in enforcing an award on costs must be weighed against the claimant’s (or counterclaimant’s) right of access to arbitration (15218). Tribunals have sometimes described their power to grant security for costs as being ‘exceptional’ (14020). A simple showing of financial weakness, or even insolvency, is generally not considered sufficient. The bar of the burden of proof is generally set very high: applicants are required to demonstrate that the other party would not be able to comply with an award on costs (13359). Mere reference to losses recorded in a company’s annual report or a lack of liquidity is not sufficient, as this does not reveal the company’s entire financial situation. The creation of a shell company, divestment of funds, or a change of domicile to avoid liability are sometimes regarded as indicators of a serious risk that would jeopardize the enforceability of an award on costs and hence justify ordering security for costs (14993).

Given the assumption that parties to arbitration agreements are deemed to have accepted the risk of not recovering the costs of the proceedings from impecunious counterparts, tribunals often require the demonstration of a change of circumstances, i.e. a deterioration in the other party’s financial situation after entering into the arbitration agreement. Moreover, applicants are generally required to come with clean hands: tribunals may be wary of granting security for costs if the applicant itself has not complied with its payment obligations under the ICC Arbitration Rules, as when the applicant has not paid its share of the advance on costs (13620), or has itself contributed to its opponent’s impecuniousness (14433, 15218).

Two orders published in this Supplement address requests for anti-suit/anti-arbitration injunctions. Such orders are very frequent in practice and constitute another kind of interim measure as they are generally requested urgently, before the arbitral tribunal (and the court or tribunal in the parallel proceedings) rules on its own jurisdiction, to prevent the harm that the parallel proceedings, and consequent aggravation of the dispute, would cause. At the same time, they can be regarded as a means of enforcing the arbitration agreement, as the requests assume that the other party has commenced parallel litigation or arbitration proceedings in breach of the arbitration agreement. [Page6:]

The two reported decisions reached different conclusions on the applications before them. In the first case (14581), the tribunal found there was no reason to conclude that the commencement of arbitration proceedings before a local arbitral institution was abusive and in breach of the ICC arbitration agreement. Given that arbitral tribunals are empowered to decide on their own jurisdiction only, not on that of other tribunals, the tribunal noted that it could accede to the applicant’s request only if the parallel proceedings undermined its own jurisdiction, which was not the case. In the second case (18563), the tribunal reached the opposite conclusion with respect to state court proceedings initiated after the commencement of the ICC arbitration. In so doing, it applied criteria different from those traditionally applicable when granting interim relief (urgency, prima facie case on the merits, likelihood of irreparable harm) and issued the requested measure given the existence of a valid arbitration agreement and the likely aggravation of the dispute that would be caused by the parallel proceedings. The contrasting conclusions reached in the two cases are at least in part explained by the ambiguity of the arbitration agreement in the first case.

The two orders contain interesting references to the role of certain provisions of the ICC Arbitration Rules in relation to anti-suit/anti-arbitration injunctions. In the first case, the tribunal observed that the prima facie jurisdictional analysis of the ICC Court under Article 6(2) of the 1998 ICC Rules is extremely liberal and implies neither a final finding nor a presumption in favour of the jurisdiction of the ICC arbitral tribunal. In an obiter dictum in the second case, the arbitral tribunal referred to the Emergency Arbitration Provisions of the 2012 ICC Rules (Article 29 and Appendix V), not applicable to the case at hand (which was governed by the 1998 Rules), as a potentially useful tool to obtain anti-suit injunctions before the commencement of the arbitration proceedings per se. Subsequent practice under the Emergency Arbitration Provisions, which have been used on several occasions to obtain anti-suit injunctions, confirms the accuracy and far-sightedness of this observation.21

The orders published in this Supplement provide good examples of the versatility of this procedural tool. Unlike awards, procedural orders are generally not made on the basis of a specific national law. As the reported orders show, in regulating the proceedings, arbitrators exercise an almost unfettered discretion and tend to base their decisions on general and independent standards, often inspired by principles such as procedural economy and efficiency, fairness and due process. In this respect, even more than awards, procedural orders can be regarded as the best expression of the ‘the art of arbitration’.22

1
See Article 22(1) of the ICC Arbitration Rules: ‘The arbitral tribunal and the parties shall make every effort to conduct the proceedings in an expeditious and cost-effective manner...’

2
The ICC Arbitration Rules do not identify the possible contents of arbitral awards. They merely clarify that the term ‘“award” includes, inter alia, an interim, partial or final award’ (Article 2(v)).

3
J.-F. Poudret & S. Besson, Comparative Law of International Arbitration (Sweet & Maxwell, 2007) at 561.

4
See Effective Management of Arbitration: A Guide for In-House Counsel and Other Party Representatives, page 47: ‘Whether or not to appoint experts can be a complex question requiring consideration of a number of factors, including the nature of the issues, the legal and cultural background of the tribunal, the availability of experts, case strategy and the impact of time and cost. A key consideration will be whether the cost and time associated with expert witnesses is justified by a genuine need in the case at hand.’

5
See Starrett Housing Corp. v. Islamic Republic of Iran, Iran-US Claims Tribunal, Award of 14 August 1987, Iran-US C.T.R., 1987, p. 197: ‘It is fundamental that an arbitral tribunal cannot delegate to [the expert] the duty of deciding the case.’

6
G. Born, International Commercial Arbitration (Kluwer, 2014) at 2280.

7
The new ICC Expert Rules, which entered into force on 1 February 2015, consist of three separate sets of rules governing the proposal of experts, the appointment of experts and the administration of expert proceedings by the Centre. When the Centre is requested to propose an expert to an ICC arbitral tribunal, the service is offered at no additional cost to the parties.

8
See, in particular, Article 3(3)(a)(ii), which requires that the party requesting the production of documents describe ‘in sufficient detail (including subject matter) ... a narrow and specific category of Documents that are reasonably believed to exist’.

9
K.-P. Berger, ‘Evidentiary Privileges: Best Practice Standards versus/and Arbitral Discretion’ (2006) 22:4 Arbitration International 501.

10
See, recently, M. Benedettelli, ‘To Bifurcate or Not to Bifurcate? That is the (Ambiguous) Question’ (2013) 29:3 Arbitration International 493; L. Greenwood, ‘Does Bifurcation Really Promote Efficiency?’ (2011) Journal of International Arbitration 105.

11
The 1976 UNCITRAL Arbitration Rules established a presumption that jurisdictional objections would be treated as a preliminary issue and would be dealt with in a separate phase of the proceedings. This presumption disappeared in the 2010 Rules, which give arbitrators full discretion to decide whether the proceedings should be bifurcated.

12
Article 15(2) of the 1998 ICC Arbitration Rules corresponds to Article 22(4) of the 2012 Rules: ‘In all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.’

13
J. Paulsson, ‘Jurisdiction and Admissibility’ in G. Aksen et al., eds., Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in honour of Robert Briner (ICC, 2005) 601.

14
On this hybrid solution, see J.D.M. Lew, ‘Commentary on Interim and Conservatory Measures in ICC Arbitration Cases’ (2000) 11:1 ICC International Court of Arbitration Bulletin 23, § 36.

15
A. Carlevaris, ‘The Recognition and Enforcement of Interim Measures Ordered by International Arbitrators’ (2007) IX Yearbook of Private International Law 503.

16
Article 28(1) of the ICC Arbitration Rules: ‘Any such measure [interim or conservatory measure] shall take the form of an order, giving reasons, or of an award, as the tribunal considers appropriate.’

17
E.g. English Arbitration Act, 1996, section 38(3).

18
Ibid. For a landmark case prior to the 1996 English Arbitration Act, see Coppée-Lavalin SA/NV v. Ken-Ren Chem. & Fertilizers Ltd (1994) 2 All ER 449 (House of Lords).

19
See the recent RSM v. St. Lucia ICSID case, where an arbitrator was challenged on the ground that the opinion he appended to the 13 August 2014 decision on security for costs in a case involving third-party funding revealed bias against the funded claimant. The order for security for costs was granted by a majority decision.

20
Article 36 of the ICC Arbitration Rules and Article 1 of Appendix III to the Rules.

21
See A. Carlevaris & J.R. Feris, ‘Running in the ICC Emergency Arbitration Rules: The First Ten Cases’ (2014) 25:1 ICC International Court of Arbitration Bulletin 25 at 34; three of the first ten ICC emergency arbitration cases concerned requests for anti-suit injunctions.

22
See J.C. Schultsz & A.J. van den Berg, eds., The Art of Arbitration: Essays on International Arbitration, Liber Amicorum Pieter Sanders (Kluwer, 1982).