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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
DOCDEX is an expert-based dispute resolution system for documentary credits established by the International Chamber of Commerce in response to a clear call from the international banking community. The system was developed by an ICC Working Party and approved by the ICC Commission on Banking Technique and Practice. The system is administered by the International Centre for Expertise.
This new dispute resolution mechanism provides a low-cost, speedy and reliable alternative to international litigation and arbitration, which are often considered unnecessarily heavy for the kinds of disputes that arise in documentary credit practice. The DOCDEX system is document-based and anonymous; it is a private, non-binding option which ICC urges banks to respect on a voluntary basis. If parties wish to increase the enforceability of DOCDEX decisions, they may specify in advance that such decisions will be binding between them.
Winfried Holzwarth, who chaired the ICC Working Party that developed the DOCDEX Rules, gave an interview to Documentary Credits Insight (DCI) before the final adoption of the system, which came into force on 1 October 1997. A short version of this interview is reproduced here with permission, as an introduction to DOCDEX. The full text of the Rules follows.
Winfried Holzwarth on DOCDEX1
DCI:
What are some of the reasons it was thought necessary for the ICC to develop special Rules, called DOCDEX, to settle L/C disputes?
Holzwarth:
In many ICC meetings, questions have been raised as to how L/C disputes could be solved out of court. Generally the response was to point to the ICC Rules for Expertise, as well as the possibilities offered by the ICC International Court of Arbitration. But apparently many practitioners were looking for some system which would be speedy enough to resolve a conflict or dispute while the letter of credit was still operative, and specialized enough to win the confidence of banks. That's how DOCDEX was born.
Could you take us briefly through the steps a party to an L/C dispute must take to seek and receive a DOCDEX decision.
The first thing I want to say is that the Initiator could be one or more parties to the dispute who decide that they have the same cause to argue.
The Initiator submits the request, with any relevant documents, to the ICC International Centre for Expertise. The other party, called the Respondent, can, if he chooses to, submit an answer to the Initiator's request, with a summary of his claims and all the relevant documents he deems necessary. The Centre confirms that the request and the answer, if any, have been received, as well as any supplementary documents that the Centre may call for. After that, three ICC-appointed experts draft a decision, which, after consultation with the Banking Commission's Technical Adviser, is transmitted by the Centre to the parties. This process from request to decision can take very little time.
Since we are discussing time, it is true, nonetheless, that not all requests will be the same. Let' s take a typical case which might come up. How much time is likely to pass, on average, from the time the Initiator files his request to the time a DOCDEX decision is received by the parties?
It depends very much on the parties. If they want to speed up the process, they can submit one joint request and expect a decision within 40-50 days. [Page52:] If they allow for an answer and even supplements, they cannot delay it much more than, let us for argument's sake say, 100-120 days beyond the date of receipt of the request by the Centre.
So you would say that it is the outside limit, even in a delayed process, we're looking at no more than 3 to 4 months?
Right.
How does this compare with the time a typical court case involving a disputed letter of credit might take?
It varies from country to country and depends on what kind of proceedings you have in mind. Take, for example, proceedings in the UK. There I have the impression that you can, within six to eight months, get a judgement. If I go to Germany, my impression is that you would easily need one year for the first instance judgement. Looking at France, one to one-and-a-half years may be a reasonable estimate. These are only examples, of course. As I said, it depends on the individual case and on the court, as well as on the proceedings you choose.
[Is it] envisioned that all of the experts will be bankers?
Definitely not. In the Working Party itself, there frequently were as many non-bankers as bankers.
I noticed in the Rules that the names of the experts will not be known to the parties of the dispute. In most systems where expertise or arbitration is employed, even though the procedure may be confidential, the parties at least know who will be involved in their case. Why have you chosen anonymity for the experts in the DOCDEX procedure?
Well, point number one: we wanted to invent something different from all existing systems because we did not want to compete with any system already in place, either the ICC International Court of Arbitration or other systems outside the ICC.
Point number two: many bankers may not be prepared to act as arbitrators among two banks, because this might affect the business relationship between their banks and a correspondent bank.
Finally, what we I -I in mind was to make a DOCDEX decision an opinion of the ICC rather than simply a decision handed down by one or three experts - an ICC opinion concerning the UCP or Bank-to-Bank Reimbursement Rules (URR), of which the ICC is a guardian.
Article 1.5 of the Rules says that in the DOCDEX procedure the Initiator' s and Respondent's communications with the ICC Centre for Expertise will be conducted exclusively in writing. Why is there no oral hearing involved in this process? In arbitration proceedings, for example, you always have oral hearings.
One reason is obvious. Bearing in mind your last question, you cannot keep the experts anonymous if you provide for an oral hearing. The other is that our aim was to corne to a decision as speedily as possible, and the way we thought this could be more easily done was to conduct the whole process in writing. That applies to communication to and from the Centre in both directions, to and from the Initiator and Respondent, as well as to and from the appointed experts.
The DOCDEX procedure can be conducted even though one party to the dispute may not agree to participate in it. Correct?
Yes.
Because the Rules only say that the Respondent may submit an answer. What would be the motivation, for example, for an issuing bank to initiate a procedure if the other bank does not agree to be involved in it?
First, as I said earlier, the Initiator might be all parties to the dispute. Therefore, in such a case, you would not necessarily have a Respondent at [Page53:] all. But suppose there is only one party going ahead, and the other party is still undecided. In our Working Party discussions, we had first thought that we should try to avoid such a situation, that the request should contain a statement that the Initiator has agreed with the Respondent to the application of the DOCDEX Rules. But in the end - and in particular taking into account many comments received through ICC National Committees - our impression was that there is also a need for freedom in that if one party puts in the request, the other party should still have the chance to participate at a later time.
Of course, the second party could also say, for example, that the facts as stated by the Initiator are true and correct, since the second party receives a copy of the request. In such a case, the second party could choose to remain silent.
This takes us to the question of binding and nonbinding decisions. The DOCDEX Rules say the decision of the experts is not binding on the parties unless they agree to have it so. Suppose that you have an Initiator and a Respondent who agree to participate in the proceeding. The decision comes down. One bank does not accept it. What can the other bank do?
The decision will not normally be enforceable in law because it does not have the formal qualities of an arbitration award. Therefore, the Working Party believed that any such decision can only be final if the parties thereafter live up to it, because you cannot contract out of the proper jurisdiction of courts, unless you opt for arbitration.
And with regard to arbitration, what you are describing in DOCDEX, basically differs considerably from, for example, the US programme, the ICLOCA, which is an arbitration system for letter of credit disputes. Are there advantages for DOCDEX over an arbitration system or just simply differences?
At our first meeting, the Secretary of the ICC International Court of Arbitration made it clear that during his experience with the Court, there had seldom been letter of credit cases. On the other hand, I believe that, in most instances, arbitration is too time-consuming and too costly for such questions.
There are other procedures. The ICC International Centre for Expertise can recommend one individual expert and this expert will then deal with the parties to solve the problem. Under that procedure, there have been several L/C cases over the last year. However, a decision is given by one expert only, whereas the DOCDEX decision is handed down by three experts and it's checked by the Banking Commission's Technical Adviser. This gives a lot of weight and security to each DOCDEX decision.
Can we talk about the relation of DOCDEX decisions to future court action. When the Banking Commission of the ICC hands down decisions under its queries and responses, these are not legally binding but we find quite often that the courts refer to them in their decisions. How will courts, in your view, look upon DOCDEX decisions?
I would hope that the DOCDEX decision will receive the same attention by courts as the responses to queries formerly made by the ICC Group of Experts and now considered by the Technical Adviser and approved by the full Banking Commission. The Banking Commission responses to queries are rendered only, however, in cases where the ICC is convinced that there is no litigation pending or threatened.
The influence of DOCDEX on the courts also depends upon whether the DOCDEX experts plus the Banking Commission's Technical Adviser limit themselves to questions where the experts have more expertise than a normal court would have. The more this is evident in the DOCDEX decision, the more I'm sure it will be helpful for the court as a guidance with respect to international letter of credit practice.
The queries answered by the Banking Commission are generally published either in this newsletter or in a book every two years or so. Is there any provision for DOCDEX decisions to be published?
In DOCDEX Article 9.2, we say that ICC may publish any DOCDEX decision. There is only one proviso: the identities of the parties to the dispute must not be disclosed, and the identities of the experts cannot be disclosed for reasons mentioned earlier. [Page54:]
Can we go to the question of costs. To initiate the DOCDEX process, how much does the Initiator have to deposit with the ICC, and is that a fixed and firm and final cost?
The standard fee is now fixed at US$ 5000. We arrived at that figure after considerable discussion. At an earlier stage, we considered having different price scales for different letter of credit amounts at stake. And finally we decided to choose the lowest figure that would be appropriate, and to take one fee for all cases in order, again, to enable the Initiator to pay the costs immediately so that the procedure can start at once by sending out the request and any answer to the experts.
However, we anticipated that there might be some very difficult, very complex questions involving a lot of papers, and/or the appointed experts having to consult other practitioners in a special field. If that is so, and if the letter of credit amount at stake is more than $ 100 000, only then the cost may be increased up to - but this is not the normal increase or the necessary increase - another $ 5000. But this is the ceiling for any cost in DOCDEX procedure.
Is there any provision for the experts to decide whether the costs can be split between the parties, for example.
There is not, in the sense that the experts do not make, any decisions on costs whatsoever. But of course the parties, at any stage, can agree that any party pays part of the amount or all of the amount. From the ICC point of view, the only important thing is that the standard fee of $ 5000 has arrived, whoever has paid it. This applies to the additional fee, if any, as well.[Page55:]
DOCDEX RULES
The ICC DOCDEX Rules, originally issued in 1997, were revised in 2002. For the revised version of the Rules, as currently in force, click below or on the Rules button above.
1 Documentary Credits Insight (Vol. 3 No. 1). Published in its official English version by the International Chamber of Commerce. Copyright © 1997-International Chamber of Commerce (ICC), Paris. Subscriptions available from: ICC Services., 38 Cours Albert ler, 75008 Paris, France, Tel: +33 1 49 53 29 23, Fax: +33 1 49 53 29 02, E-mail: pub@iccwbo.org