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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
a) Arbitration in Korea
Korea could be a poster child for the proliferation of international arbitration. Within just a decade, international arbitration has become a permanent feature of Korea's commercial infrastructure and accepted as a norm by businesses and lawyers alike. What is perhaps most striking is that this development has occurred not by external force of circumstance but from within, in a highly organic manner.
In jurisdictions that come late to arbitration, its assimilation often starts with the inclusion of arbitration clauses in standard government contracts. That has not been the case in Korea. Arbitration clauses first found their way into the Korean commercial landscape through inclusion in agreements between private businesses.2 And what pushed these private businesses towards arbitration was not, as in other jurisdictions, dissatisfaction with inefficient or non-transparent court processes (Korean courts are reputed to be efficient, fair and transparent and may even be preferred to arbitration in certain [Page228:] circumstances3), but the realization that, when used in the proper contexts and for the right transactions, arbitration can offer benefits that are not to be found elsewhere. As Korean businesses have gained in sophistication and expanded their commercial relations overseas, they have come to appreciate the relative ease of enforcement of an arbitral award as compared with a court judgment. Similarly, they have come to value the finality of arbitral awards in the fast-paced industries in which they are increasingly involved. As regular users of arbitration, they have learnt to benefit from its flexibility, too. Given that it is these reasons, rather than external causes, that have led commercial parties to arbitration, the growth of arbitration in Korea has been shaped by the need to respond to business expectations and demands. Without wishing to sound presumptuous, in this organic and, in many ways, unique growth can be found lessons from which the international arbitration community as a whole can benefit, as this article will seek to explain.
b) South of the Han River
South of the Han River - which runs across Seoul dividing it almost symmetrically - is the now well-known Gangnam district. Gangnam debuted on the international stage in an unorthodox manner, through song. Thanks to the very popular 'Gangnam Style', Gangnam is probably more familiar to many than Seoul itself. This article, however, is about an aspect of Gangnam which, to my knowledge, was not covered in the song, namely the fact that, in addition to all its other qualities and attractions, Gangnam is home to the Korean Commercial Arbitration Board (the KCAB).
Established in 1970, the KCAB has been operating for longer than most other regional arbitral institutions. Today, it is a very busy institution, with quite an enviable caseload compared with other regional arbitral institutions. It reported administering 246 domestic and 77 international cases in 2011, 275 domestic and 85 international cases in 2012, 261 domestic and 77 international cases in 2013, and 295 domestic and 87 international cases in 2014.4 This article concentrates on the domestic arbitrations administered by the KCAB. Over time and through extensive experience, the KCAB has developed its own approach to administering domestic arbitrations, which I will refer to as the Gangnam Arbitration Model and attempt to capture in this essay.
c) An opening caveat
Any proposal to streamline arbitration proceedings must be subject to the customary caveat that in arbitration one cannot adopt a 'one-size-fits-all' approach. The nature of the dispute will dictate the procedure and structure of the arbitration and how it should be conducted and managed. It is for the parties and the arbitrators to decide whether a particular approach is suitable in light of the circumstances of the dispute. There may be cases that warrant several rounds of submissions, several rounds of expert testimony and a lengthy evidentiary hearing, while others will not require more than two rounds of submissions followed by a decision based on documents only. The discussion below is no exception: the proposal will be of benefit only if used for disputes to which it is suited.
I should add that this caveat is often misunderstood to mean that a departure from the 'regular' approach to organizing arbitral proceedings should be made only if there is a pressing need to do so. In other words, a presumption is made in favour of, as it were, a default procedure. This is problematic. In most cases there will be no great push, from either arbitrators or parties, to depart from the standard procedure - a few rounds of submissions and testimony followed by an 'all-in' hearing - which will find its way into the first procedural order and determine the structure of the arbitration. This is what Toby Landau has referred to as the industry 'collectively sleepwalking'.5
That is not the spirit in which the caveat is made. The search for the optimal procedure to follow in a particular case ought to be a proactive exercise, undertaken without any presumption in favour of a given procedure. My colleague and friend, David Rivkin, describes it best in his article dealing with the topic: 6
Economists use an effective tool known as zero-based budgeting. In that process, one does not start with the prior year's budget and simply make revisions to that budget. Instead, one builds from scratch to identify only what expenses are necessary for the coming year. The arbitration community should adopt the same approach to international arbitration procedure. We can and should all build on experience from procedures developed in prior cases. However, we should not fall into the routine, as we too frequently do, of simply using the same procedures from case to case. At the beginning of each new case, parties and arbitrators should focus exactly on what is necessary - and only what is necessary - for that specific case. Is discovery necessary at all? How about witness statements? Memorials? Oral testimony?
With that in mind, I turn now to the specifics of the Gangnam Arbitration Model.
2. The Gangnam Arbitration Model
a) Observations on the 'default' procedure
For me, the appeal of the Gangnam Arbitration Model lies in the way it addresses certain aspects of the way in which arbitrations are traditionally organized. It is these aspects, listed below, that highlight the shortcomings of the traditional approach to organizing proceedings.
Hearings, both evidentiary and legal, have great impact on the strategy adopted by the parties and the content of their pleadings. In most cases, the issues in dispute crystallize only after the main hearing. It is not uncommon to find parties making scattershot openings at the start of a hearing and then filing post-hearing submissions that concentrate on just a small subset of the issues addressed in their broad opening submissions. This is because over the course of the hearing parties become better able to identify the issues that are pivotal for the tribunal. The parties' recognition (and acceptance) of the limited set of issues that are material to the dispute is what I refer to as the crystallization of the issues.
This crystallization is a result of the parties receiving feedback from the tribunal during the hearing. The feedback takes the form of questions and has become an acknowledged and formalized process, with tribunals often issuing a list of questions shortly after a hearing, indicating the issues on which they would wish to see further arguments and explanation from the parties in the post-hearing submissions.
Another reason why issues usually crystallize after the main hearing is that parties are better able to assess the opposing side's case based on the attention that opposing counsel will devote to a certain topic in opening submissions or during cross-examination. Trained as they are in being responsive to even the most subtle of indications from the opposing side or the tribunal, lawyers walk away from hearings with a better idea of the tribunal's preliminary view of which issues are material and what the thrust of the opposing side's case is likely to be.
The crystallization of issues puts parties in a better position to prepare submissions that are truly useful to the tribunal and the determination of the case, by focusing on issues that are pertinent and minimizing discussion of irrelevant issues or issues on which they are unlikely to succeed. Given these advantages the customary practice of single-hearing proceedings is not necessarily the best approach.
In most arbitrations, the legal and factual positions of the parties develop during the proceedings. Indeed, there is almost an implicit understanding among the parties and the tribunal that this will be the case, and that the parties cannot, and should not, be expected to [Page231:] present a final statement of their respective positions at the outset. Consequently, submissions made later in the proceedings have more significance than earlier submissions, and some of the value of (and effort put into) the earlier submissions is lost. Again, this fact of procedural life is not always best or adequately addressed in the traditional approach to organizing proceedings.
Most conventional approaches to arranging arbitration proceedings tend to call for sustained involvement by the parties' counsel (on the one hand) and the tribunal (on the other) at different and separate stages of the proceedings. Up to shortly before the main hearing - and sometimes even right up to the main hearing - it is expected that the arbitrators will adopt a passive approach in terms of providing feedback to the parties and engaging in internal discussions between themselves. During this time, counsel undertake the work of filing submissions and preparing for the hearing. The tribunal is expected to process the information supplied to it, but is not expected to provide feedback until the hearing. Conversely, after the post-hearing submissions have been filed, the tribunal embarks on the process of deliberation and drafting the final award, so it is the tribunal that at this stage is expected to put in time and effort, with counsel being all but dormant, having already played their part. It is only during the hearing, and shortly before and after it, that both the tribunal and counsel are actively engaged in the arbitration proceedings simultaneously.
This temporal division of activity has its disadvantages. First, interaction between the parties' counsel and the arbitrators in relation to the substantive issues in dispute is limited to a short window of time, during or just before the hearing. Second, even though the arbitrators are not prevented from sharing among themselves initial thoughts on legal and factual issues prior to the main hearing, true discussion of these issues is put off until after the hearing has been concluded or, at the very earliest, shortly prior to the start of the hearing. Although arbitrators should not arrive at conclusions before the parties have made their cases in full, they can (and, I believe, should) discuss the various aspects of the case as the submissions are made, for by taking into account the opinions of their colleagues on the tribunal they may acquire a better understanding of the case.
b) The Gangnam Principles
The Gangnam Arbitration Model takes a different and more effective approach to these aspects of the proceedings and the way it does so is by following what I will refer to as the Gangnam Principles:
1. Hearings are held to deal with various aspects of the dispute from an early stage in the proceedings.
2. Counsel are expected to be familiar with the dispute from a relatively early stage of the proceedings.
3. The arbitrators' workload is spread evenly over the entire proceedings and overlaps more frequently with that of counsel, allowing them to interact more often.
Based on my experience with the Gangnam Arbitration Model, the result is an arbitration that, in most cases, concludes within a year of initiation and is followed by a relatively quick award.
c) Features of the Gangnam Arbitration Model
In the following paragraphs, I explain the main features of the Gangnam Arbitration Model. These are the basic elements of domestic arbitration in Korea and are found in most domestic arbitrations conducted under the auspices of the KCAB. Of course, given the variety and number of cases, there will be many that deviate from the Gangnam Arbitration Model in one aspect or another, but this does not affect the underlying paradigm I will describe below.
An arbitration following the Gangnam Arbitration Model starts with the filing of initial submissions. In an international arbitration, these would be the request for arbitration and the answer to the request. The KCAB Domestic Arbitration Rules designate the initial submissions in an arbitration as the claim and the defence, with all subsequent submissions being additions to the initial submissions, filed with the leave of the tribunal. This characterization of the initial and subsequent submissions is not germane to the present discussion, as the additions to the initial submissions are functionally equivalent to the main submissions in international arbitration proceedings.
The initial submissions are sufficiently detailed to give the tribunal, once constituted, an initial picture of the dispute. In practice, these submissions are more detailed than the request for arbitration and answer usually filed in international arbitral proceedings. Initial submissions following the Gangnam Arbitration Model should definitively state a party's causes of action and the relief sought. At the time the initial submissions are filed, the parties and their counsel are expected to have familiarized themselves with the case and to have arrived at a sufficiently detailed and final strategy for proving their position. In my opinion, this is a crucial feature of the Gangnam Arbitration Model, as the tribunal cannot draw up an efficient plan for the proceedings unless it knows how the parties intend to go about proving their case. 7
After the initial submissions, an arbitral tribunal is constituted, either by agreement or with the assistance of the KCAB, and proceedings move on as soon as possible to the first hearing. At this hearing, which lasts a day, or even less, each side presents an overview of the case. Counsel make oral submissions explaining the dispute to the tribunal, the lines of argument they intend to pursue, what aspects they believe the case will turn on, the legal principles applicable, and the major pieces of evidence they consider determinative. Essentially, the parties lay out the approach they intend to take to prove their case. The tribunal is free to ask questions and seek further details from the parties. For example, a party can explain to the tribunal why it believes the case is essentially about contract interpretation, without any need for extensive factual inquiry. Or a party can present the tribunal with correspondence in which the opposing side accepts liability, and explain that the only real issue in the case is the quantum of that liability. Parties will generally explain to the tribunal the legal principles on which they rely. For example, a party can explain that the quantum of its liability is nominal, as the other side did not mitigate its damages, and then go on briefly to introduce the principle of mitigation in claims for damages.
This initial review has the advantage of clarifying the issues in dispute at a relatively early stage of the proceedings. The arbitrators and the parties benefit from hearing focused summaries of the parties' positions. The arbitrators typically ask questions and seek clarification on the spot. This allows the parties not only to assist the arbitrators in understanding the case, but also to assess where they stand in terms of their understanding of the background of the case, the law and the issues in dispute and the degree to which various aspects of the case will need to be developed in subsequent submissions. This first hearing is not intended to be exhaustive or to preclude further arguments, yet it is expected to be representative of the parties' positions in the arbitration. It also serves as the case management conference. Compared to case management conferences in most international arbitration proceedings, the tribunal here, having heard the parties briefly on the substance of the case, is in a much better position to decide on the structure of the arbitration.
The occurrence of an initial review so early in the proceedings might seem alien at first. However, not only is it supported by court practice in a number of jurisdictions, but also concords with recent efforts in international arbitration to encourage parties to make early presentations of their respective positions. In this respect it closely resembles the 'Town Elder model' proposed by David Rivkin, in which he suggests that the arbitrators should meet with the parties soon after their appointment to have the facts of the case presented to them, so that they may develop a roadmap for the arbitration that fulfils the [Page234:] parties' needs.8 Joerg Risse, in his very popular article on measures to make arbitration more efficient, has also suggested that a substantive oral submission be allowed at the very outset of the arbitration proceedings as part of the organizational hearing.9 Likewise, the Kaplan Opening calls for early discussion of the substantive issues to catalyse a better understanding of the dispute.10 However, I understand the Kaplan Opening as being intended for a slightly later stage of the proceedings, which puts it closer to one of the subsequent steps in the Gangnam Arbitration Model, so I will discuss it further in that context.
A distinctive feature of the first hearing is that counsel limit their discussion to a broad overview of the case. Although this is not a hard-and-fast rule (if it were, it could be counterproductive), delineating the discussion in this manner makes sense. First, since it takes place very early in the proceedings, it is much more feasible for counsel to present their positions only on the broader aspects of the case, as it leaves them with more time to scrutinize the detailed facts of the case at a later stage. Second, an overview is much more accessible to the arbitrators at this stage; they are not inundated with a mass of facts and arguments yet are given enough to understand the case, which makes them better placed to interact with counsel and structure the arbitration.
Once the first hearing has taken place, the parties then file their written submissions. There is no fixed sequence in the Gangnam Arbitration Model for filing written submissions. Often, the tribunal will set a cut-off date by when both parties are expected to have filed their submissions, effectively resulting in simultaneous submissions. These submissions are expected to be thorough and supported by documentary evidence. Witness statements are not filed at this stage, however. The parties are free to allege any facts they deem pertinent, and make their submissions based on those facts.
Even though these are comprehensive submissions and no page limits are imposed by the tribunal, they rarely exceed a manageable length. In my experience, page limits, especially in earlier rounds of [Page235:] submissions, are counterproductive. They cause the parties to cram all their arguments into the limited number of pages available, for fear of leaving out any arguments that might have the slightest chance of influencing the tribunal's decision. Yet this often results in less coherent submissions and, besides, parties are likely to be more comfortable providing short arguments, knowing that they can expand upon their arguments in subsequent submissions or at the hearing.
The Gangnam Arbitration Model allows the size of submissions to be reduced in a more organic manner, thanks to the discussion at the first hearing. Having already explained the case to the tribunal at the first hearing, the parties can dispense with overly lengthy introductions and groundwork and have a better awareness of the issues on which the opposing side will concentrate and which the tribunal is likely to consider pivotal. This allows them to make relatively focused submissions. Lastly, since the parties are likely to have taken a critical look at the merits of their arguments when preparing their oral submissions for the first hearing, they are less likely to include arguments that are unlikely to succeed and which they left out in their earlier oral submissions.
Thereafter, the parties will meet for a half-day or one-day hearing, at which counsel for both sides present their positions as stated in their written submissions and respond to the opposing side's submissions. The tribunal puts questions to counsel, focusing discussion on issues over which it requires further clarification. Since the written submissions filed prior to the hearing are comprehensive and also include the relevant facts, the tribunal is in a position to interact with the parties and ask questions relating to both the law and the facts. Party representatives are present at this hearing, including, usually, the individuals that each side intends to present as witnesses. The tribunal will often seek input directly from the party representatives or the intended witnesses. Where the parties have retained expert witnesses, they will also be present at the hearing.
Hearings in Korean arbitrations are interactive and inclusive, with everyone present participating in a debate, of sorts, regarding the case. Thus, a hearing will often see the party representatives themselves explaining complicated technical or commercial topics to the tribunal. I find that there is much to be said for this approach, as it reduces the amount of witness testimony required on matters that are not in dispute but still need to be explained to the tribunal. I was recently involved in an international commercial arbitration in which, during counsel's explanation at the opening, the tribunal enquired about the market conditions prevalent in the industry under discussion. This was a complex topic over which there was no dispute. Party representatives from each side were asked to explain the market conditions to the tribunal and were well placed to do so. One of the advantages of arbitration is that arbitrators are highly experienced individuals, fully capable of correctly evaluating statements by counsel, witnesses [Page236:] and party representatives. This allows parties to present more varied sources of information to arbitrators, than they would to juries or some judges, as there is little risk it will confuse them or distort their understanding of the case. Moreover, the parties themselves and their representatives have more sophisticated knowledge and are capable of interacting with the tribunal in a manner that does not disrupt the hearing. The Gangnam Arbitration Model capitalizes on these advantages by allowing hearings to take the form of open discussions.
However, a word of caution is in order here, as it would be all too easy for a hearing held as an open discussion to spiral into chaos, with everyone trying to have a say in the discussions, at the expense of form and structure. Certainly not every arbitrator will be capable of conducting a hearing in the form of an open discussion, while making sure it remains effective. Nonetheless, from my recent experience in a few cases, most experienced arbitrators are up to the task and ensure that in such discussions topics are addressed issue by issue in an orderly fashion and with a balanced sharing of time between each side.
By the end of the hearing, the tribunal will be sufficiently familiar with the parties' positions. If it believes there are issues on which the parties should elaborate, it will invite them to do so in a further round of written submissions. At this stage, the tribunal will also invite the parties to apply to the tribunal to present witness testimony. Either at the hearing or shortly thereafter, it will tell the parties which fact witnesses it would like to hear from, and the topics which it expects the fact witnesses to address. The parties are of course free to differ from the tribunal, and they can explain to the tribunal why certain other witnesses should also appear, or why certain other topics should also be addressed. Often, the tribunal will err on the side of inclusiveness yet still be a fair margin away from wastefulness.
I find that this intermediate hearing is very similar, in both form and function, to the proposal recently made by my esteemed colleague, Neil Kaplan. Known as the Kaplan Opening, this proposal is best explained in its author's own words: 11
At a convenient time in the arbitration, probably after the first round of written submissions and witness statements but well before the main hearing, the tribunal should fix a hearing at which both counsel will open their respective cases before the tribunal. They may be required to serve skeleton arguments in advance. After the openings any expert witness should make a presentation of his or her evidence and explain the areas of difference from the expert of like discipline on the other side.
What are the advantages of this proposal?
1. It will ensure that the whole tribunal will read into the case at a far earlier stage than hitherto.
2. It will enable the tribunal to understand the case from that point on, and will inform its subsequent case preparations.
3. It will enable the tribunal to have a meaningful dialogue with counsel about peripheral points, unnecessary evidence and gaps in the evidence.
4. It will facilitate the tribunal in putting points to the parties which they will then have time to consider and to respond to.
5. It will enable the tribunal to meet and discuss the issues far earlier than hitherto and thus meet the aspirations of the Reed Retreat.
6. It will assist in ensuring speedier and, I would suggest, better awards.
7. Bringing the parties together, with their trial counsel, well in advance of the hearing, means that there is a chance that at least part of the case may be settled, or points of disagreement minimized.
Further, the fact that the parties are physically in front of the tribunal tends to engender more of a reasonable approach, which is quite different to the aggressive way that lawyers often communicate with each other when not before the tribunal. Much of what is produced as a result of this aggressive display is not helpful to the tribunal. It is worth pointing out that whereas it is easy to write offensively it is far harder to replicate this verbally in front of three arbitrators and the other side without losing credibility or sympathy.
To my knowledge, the Kaplan Opening was not inspired by Korean domestic arbitration practice, but the author does inform us that it draws inspiration from domestic court practice.12 The Gangnam Arbitration Model draws heavily on Korean court procedures. It is therefore not surprising that both should be similar in this aspect. I believe that the Kaplan Opening is probably the best expression of how the intermediate hearing in the Gangnam Arbitration Model should be adapted for use in international arbitration. I would therefore refer to the Kaplan Opening for this step of the proceedings.
David Rivkin has also suggested that in the 'Town Elder model', the arbitrators should aim to hear the parties first and then decide on which issues they want to have further submissions or fact testimony. That is essentially the aim of the intermediate hearing. (However, I should mention that this is only one of the aspects of Rivkin's Town Elder model, and it would be an oversimplification to state that this is the extent of his proposal.) 13
All of these suggestions derive from the Town Elder model that I have posited. If one were simply sitting with the Town Elder and describing the case, the Town Elder would first think what evidence he or she needs to decide the dispute as presented. Where only limited evidence is necessary because a preliminary issue may be determinative, the Town Elder would ask only for such evidence. If in fact the evidence does not prove that a claim should be determined in this certain way, then the Town Elder could move on to hear whatever other evidence is necessary.
If the tribunal has invited the parties to elaborate on certain issues in a further round of written submissions, it is expected that those submissions will be limited to the issues in question and not repeat or restate other arguments that the tribunal believes have already been set out in sufficient detail in previous submissions. In my opinion, ongoing interaction between the tribunal and counsel at hearings, in the presence of the parties, acts as a deterrent against the filing of lengthy and repetitive submissions. By this time, the parties and their counsel are aware of the tribunal's approach to the issues in dispute and often reluctant to burden it with arguments they know have already been communicated to it and on which it does not need further submissions.
Turning to witness statements, the practice in the Gangnam Arbitration Model is to have each side submit only the questions that it intends to put to its witnesses on direct examination, and then to proceed directly to a hearing, at which direct examination and cross-examination of the witnesses takes place.
A similar procedure has also been proposed by Joerg Risse as one of his insightful measures for reducing time and costs in arbitration: 14
In its first procedural order, the arbitral tribunal instructs the parties not to submit any written witness statements. Instead, the parties must 'offer' a witness by specifying who the witness is and to which (concrete) facts the witness can testify. The arbitral tribunal then decides whether this testimony, as it is offered, can possibly be relevant for the outcome of the case. If so, the witness is called to testify in a hearing solely on the specific facts the witness has been offered for. Details are provided in a procedural order. In the hearing, the arbitral tribunal takes the lead and questions the witness first; only follow-up questions are asked by the parties' counsels.
The Gangnam Arbitration Model's method of dealing with witness testimony is again borrowed in large part from Korean court practice. I find this procedure extremely useful as it limits the number of witnesses and the length of their testimony, greatly reducing the costs incurred by the parties. As Dr Risse points out, it is an expensive and time-consuming exercise to prepare witness statements and have witnesses appear at hearings. In the Gangnam Arbitration Model, thanks to the tribunal's familiarity with the dispute and the greater focus on issues achieved through the hearings, redundant, repetitive and irrelevant witness testimony is excluded, which significantly reduces the cost.
However, I believe that an adjustment should be made to the Gangnam Arbitration Model to allow for a round of written statements by witnesses prior to appearing at the evidentiary hearing. This helps to reduce the duration of the evidentiary hearing, and also ensures that counsel have sufficient time to scrutinize the direct testimony of the witnesses before cross-examining them.
The last leg of the arbitration proceedings will be the evidentiary hearing. This is perhaps the stage at which the Gangnam Arbitration Model most resembles a more orthodox arbitration, yet with some important differences.
In international arbitration parties are usually expected to file written opening submissions prior to the hearing. Such submissions are unusual under the Gangnam Arbitration Model. They would be largely redundant, given that the tribunal has already had the opportunity to hear from the parties and, if felt necessary, received written submissions focused on the issues in dispute. Instead of written submissions prior to the hearing, the Gangnam Arbitration Model encourages an interactive discussion between the tribunal and counsel at the hearing. This allows counsel to explain their case orally to the tribunal and gives the tribunal an opportunity to ask follow-up questions and seek any clarification or further explanations it may feel are needed.
Fact witnesses should not serve an advocacy function; their role should be limited to presenting or corroborating evidence. All too often, parties rely on their witnesses to present the narrative of the case to the arbitrators, in the hope that having it presented by a lay witness rather than a lawyer will give it added strength. Not only does this unnecessarily inflate the (oral and written) testimony, it also means that those witnesses who are less adept at advocacy are less likely to be presented to the tribunal. Counsel and arbitrators should, to the extent possible, try to limit witness testimony solely to providing evidence, and rely on the lawyers' submissions for placing the evidence in a party's overall narrative. Not only does this reduce costs and save time, it also maximizes interaction between the tribunal and counsel.
The evidentiary hearing in the Gangnam Arbitration Model will usually be shorter than is customarily the case, due to a smaller, more concentrated selection of witnesses and a more limited and focused list of topics to be addressed. Many of the issues that are usually addressed in opening submissions or closing discussions will already have been presented and considered at previous hearings, so do not need to be reiterated. Typically, the hearing lasts one or two days, and includes brief opening submissions from both sides followed by the examination of the witnesses. If the tribunal has any questions, it will be expected to engage in direct exchanges with the witnesses. It also usually puts questions to counsel on any legal issues that need to be clarified. Towards the end of the hearing, the tribunal will enquire whether counsel wish to have another round of submissions following the hearing and tells them whether it would like to receive further submissions on particular questions.
I understand that even when there are no issues that need elaborating upon at the end of a hearing, many lawyers like to use post-hearing submissions to present the results of their cross-examination to the [Page240:] tribunal in a more arranged manner. Any post-hearing submissions are likely to be of a manageable length and, given their limited scope, are expected to be filed relatively quickly.
It is not unusual to receive an award within weeks, rather than months, of the close of proceedings conducted in accordance with the Gangnam Arbitration Model. By the close of the proceedings, the arbitral tribunal will have already had several opportunities to hear from the parties, express its tentative views to them, and engage in internal discussions between its members on the issues in dispute. I believe this may considerably shorten the time required for the tribunal's deliberation, and the actual writing of the award should be facilitated by the various focused submissions made in light of the tribunal's feedback at hearings.
In the Gangnam Arbitration Model, awards are typically much shorter in length than in international arbitration, as they do not attempt to restate the parties' positions in full. Most international arbitration awards restate the procedural history and the parties' positions at length and devote much less space to the tribunal's reasoning. The additional time required to draft the parts restating the parties' arguments adds considerably to the overall time required to draft the award. Gangnam Arbitration Model awards usually include a one-page summary of the parties' cases (which can be vetted by the parties before inclusion), and then move on to the tribunal's reasoning. This results in awards that are around 40-50 pages long, even in complex cases.
As a general rule, from initiation to award, domestic arbitration proceedings following the Gangnam Arbitration Model last one year. It is my opinion that this efficiency is a direct result of the use of the Gangnam Principles listed above.15
3. Adapting the Gangnam Arbitration Model to international arbitration
The importation of procedures intended for domestic arbitration into international arbitration may give rise to logistical and procedural concerns, which I address below.
a) Cost of holding additional hearings
It has to be acknowledged that one reason for keeping hearings to a minimum, as is customary in international arbitration, is to avoid costs. Depending on where they are held, international arbitrations may require arbitrators, parties and counsel to undertake often lengthy [Page241:] journeys, which leads to expenditure on travel and accommodation as well as legal costs. It is therefore commonly believed that more hearings increase the overall cost of the arbitration.
I believe that this is not necessarily the case. In most international arbitrations, legal fees (the cost of attorneys) incurred on work other than hearings constitute the largest slice of the overall costs. If these legal fees can be reduced by ensuring that submissions are not repetitive and do not deal at length with irrelevant questions, the overall cost of the arbitration will decrease. If following the Gangnam Arbitration Model will cut the duration of the arbitration in half, there is little question that the overall cost will be reduced. Neil Kaplan when proposing the Kaplan Opening makes this point well:16
One possible objection may be that it will increase the cost of the arbitration. I do not believe that this is necessarily so, as it may in fact result in the dropping of some issues and may assist in ensuring that the main hearing proceeds more expeditiously and thus more economically. But in any event it will ensure a better informed tribunal which will assist in ensuring a better award and a speedier one too. But even if it does increase the costs marginally it is surely a worthwhile price to pay to enjoy the obvious benefits it will provide.
In any event, there are ways of limiting the cost of additional hearings, such as holding the hearing at a place other than the seat of the arbitration or using videoconferencing. Ultimately, the benefit to be gained from having the arbitrators fully involved from the outset, which opens the possibility of an early settlement, is likely to outweigh any additional cost that will be incurred by following the Gangnam Arbitration Model. Moreover, there will be situations in which a speedy award will have a beneficial impact on the parties' commercial relations more generally, which will overshadow the comparatively marginal costs arising from additional hearings.
For all these reasons, I believe that the cost of holding additional hearings is not an obstacle to the use of the Gangnam Arbitration Model.
b) Arbitrator availability
Another concern is that arbitrators may not be available for prolonged periods of time to hold in-person hearings. This concern relates primarily to three-member tribunals, where a hearing is contingent on finding a hearing date on which all three arbitrators are available to travel and attend the hearing. I admit that it is likely to be much easier for arbitrators in domestic arbitrations to find coinciding dates, as they usually reside in the same city.
However, I think most of my colleagues who serve as arbitrators will agree with me that it is generally easier to fit in two or more one-day hearings than to find a suitable date for a three- or five-day hearing. [Page242:] Often, arbitrators and counsel will be able to arrange one-day hearings around major events or conferences they are all intending to attend. The shorter but more frequent hearings in the Gangnam Arbitration Model may therefore in fact be more convenient, from a scheduling perspective, and especially if they will also reduce the length of the final evidentiary hearing. Fundamentally, it is a question of attitude and commitment. If arbitrators believe that the parties will benefit from conducting arbitrations under the Gangnam Arbitration Model, it is safe to assume that they will adjust their approach to scheduling so as to accommodate frequent but shorter hearings. One sees this already in traditional arbitration practice where even the busiest of arbitrators, if convinced of the usefulness of a one-day hearing following the filing of post-hearing submissions, will usually be able to find, and persuade his or her colleagues to find, a convenient date soon after receipt of those submissions.
c) Challenges to arbitrators and attempts to set aside awards
Understandably, arbitrators in international arbitration are often worried that if they express their opinions on a case early in the proceedings, they might be accused of prejudging the case, laying the arbitrator and the award open to challenge by the losing party.
However, as David Rivkin has pointed out, most international arbitration rules now encourage arbitrators to structure proceedings in light of their assessment of the case. While arbitrators should definitely allow parties to present the case as they see fit, they should also act to prevent time and money being wasted on issues that are irrelevant to the tribunal's decision.
Arbitrators remain generally reluctant to take such steps. Many continue to believe that in arbitration they must allow the parties to present the evidence they feel is relevant, whether or not it will play a role in the ultimate determination. However, arbitrators have recently been given the tools and the encouragement to do just that, in the cases where it is appropriate. AAA International Arbitration Rules, rule 16, provides that the arbitrators may 'direct the parties to focus the presentations on issues the decision of which could dispose of all or part of the case'. Similarly, the IBA Rules of Evidence provide, 'Each arbitral tribunal is encouraged to identify to the parties as soon as it considers to be appropriate, the issues that it may regard as relevant and material to the outcome of the case, including issues where a preliminary determination may be appropriate'. The LCIA Rules give arbitrators the power to 'take the initiative in identifying the issues and ascertaining the relevant facts and the applicable law or rules of law', and they also reflect the general duty of arbitrators set forth in the English Arbitration Act 1996 'to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay or expense'.17
Besides, courts in most jurisdictions are unwilling to entertain frivolous challenges that are filed late in the arbitration with the intention of avoiding an unfavourable award.
So long as arbitrators do not prevent parties from making submissions on issues that are likely to affect the arbitrators' decision, the exclusion of irrelevant testimony or arguments should not undermine the integrity of an award.
d) Complex hearings
I believe the Gangnam Arbitration Model is suitable for handling complex disputes with extensive discovery and/or expert witness testimony.
While most Korean arbitrations do not include extensive discovery, given that practitioners are more accustomed to minimal discovery as in civil law jurisdictions, the Gangnam Arbitration Model actually facilitates discovery insofar as arbitrators are better informed from an early stage of the proceedings and so better able to decide on requests for document production from the parties. There is no cut-off date for document requests in the Gangnam Arbitration Model, so parties can file requests whenever they consider appropriate. Since the arbitrators are well informed of the facts and arguments in the case, they can quickly and appropriately decide whether a particular category of documents that is being sought will be of use to their assessment of the case, and there is often no need for a Redfern Schedule to record the parties' requests and objections as the tribunal will immediately know whether certain documents are relevant and material. So the Gangnam Arbitration Model is well suited to cases involving extensive discovery.
When it comes to experts, Korean arbitrations use them sparingly and only for technical matters. I have found that parties often retain experts to lend added support to submissions that can easily be made by counsel alone. An example is the use of legal and quantum experts in cases that do not necessarily require expertise on issues of law or quantum. The purpose of expert testimony should be to provide information on the technical aspects of the case. Placing that information in a party's overall narrative should remain the lawyer's job. Thus, once an expert has presented his or her testimony, the tribunal should question not only the expert but also counsel over the expert witness's testimony. These exchanges between counsel and the tribunal will help to ensure that post-hearing submissions, which are prepared by counsel, reflect the discussions at the hearing, instead of presenting post facto interpretations of the evidentiary hearing.
In the Gangnam Arbitration Model, the tribunal has the opportunity to decide whether it wants to hear from an expert witness on a certain topic. Since this decision is made after the intermediate hearing, it can use that hearing to question the experts (who are expected to be present at the hearing) on the issues they believe would require exposition, and on which the experts differ. Thus, as with fact witnesses, the arbitration can be made more efficient by optimizing the testimony to be presented by expert witnesses.
Lastly, the Gangnam Arbitration Model can be particularly helpful when a case involves many large issues. At the outset, the arbitrators can decide to deal with each issue in separate hearings, but will not be expected to render separate awards on each issue, as this adds considerably to the length of the arbitration. Rather, the purpose of addressing each issue separately would be to allow the parties and the arbitrators to address each issue in the most adequate manner and avoid the need for lengthy hearings or submissions, which tend to obstruct the quality of counsel's presentations and the arbitrators' understanding.
In this article I have tried to describe the essential characteristics of Gangnam-style proceedings and to address the main concerns that I believe can arise when considering use of the Gangnam Arbitration Model. In my opinion, these initial concerns are not, in fact, obstacles to conducting international arbitrations along the lines of the Gangnam Arbitration Model. My proposal seeks to respond to increased criticism of international arbitration as being too costly, time-consuming and rigid.
There are no culprits to blame for the creeping calcification of international arbitration. Standardization - now seen as the precursor to the 'collective sleepwalking' that may be ailing the industry - originally came about for considered and well-thought-out reasons. In fact, standardization and international best practices have helped arbitration to develop in jurisdictions that were latecomers to arbitration (Korea included), and they continue to do so. The rigidity that comes from excessive reliance on standardized procedures is nothing more than an unwelcome side-effect.
Yet, if allowed to continue, the creeping calcification of international arbitration could be a serious threat to its future. The parties who, in countless contracts over past decades, have placed their trust in international arbitration, will have to settle for less than the best it can offer. Those of us - counsel and arbitrators alike - who have contributed to the development of international arbitration will find it increasingly difficult to rely on efficiency as one of the qualities of the service we provide. Those who require efficiency will have no choice but to consider less ideal but more efficient alternatives for resolving disputes.
However, I am optimistic that this will not happen and that international arbitration will maintain the reputation it has earned for efficiency and flexibility. Essential to international arbitration is the community of international arbitration practitioners. This most diverse of communities has already demonstrated its insightfulness, responsiveness and ability to self-regulate. Through innovation, inclusiveness and the effective cross-pollination between domestic and regional practices, it has contributed to the development of international arbitration as [Page245:] the preferred means of dispute resolution in international commerce. As evidenced by the literature cited in this article, the international arbitration community is already taking steps to prevent complacency from setting in and making proposals to avoid stagnation. Inspired by such efforts, I am confident that international arbitration practice will adapt to meet the needs of its users.
It is particularly apposite that my confidence in the future of international arbitration should be expressed in a book in honour of John Beechey, who, as President of the ICC International Court of Arbitration, has been a leading proponent of innovation and development in international arbitration, striving tirelessly for quality, efficiency and responsiveness to users' needs. It is a privilege to add my contribution to these efforts and those of the international arbitration community to give international arbitration the future it and its users deserve.
Head of Bae, Kim & Lee's international arbitration and cross-border litigation practice; Vice-President of the ICC International Court of Arbitration; firstname.lastname@example.org.The author thanks Umaer Khalil, foreign attorney in the international arbitration and cross-border litigation practice at Bae, Kim & Lee, for his assistance in writing this article.
See c. 1.1, 'Korea's Emergence as an Arbitration Power' in K.-Y. (Kevin) Kim & J.P. Bang, eds., Arbitration Law of Korea: Practice and Procedure (New York: Juris, 2012) 1.
The World Bank's Doing Business ranks Korea as fourth worldwide in terms of ease of enforcing contracts. It lists the cost of enforcing contracts in Korea at 10.3% of the claim amount, and the average cost of enforcing contracts in OECD high income economies at 21.4% of the claim amount and in East Asian and Pacific economies at 48.6% of the claim amount. It also lists the average time required for enforcing contracts to be 230 days in Korea, 539.5 days in OECD high income economies and 553.8 days in East Asia and the Pacific. See http://www.doingbusiness.org/data/exploretopics/enforcing-contracts.
See K.-Y. (Kevin) Kim, J. Morrison, Y. Shin, 'Korea' in ICCA Handbook on International Commercial Arbitration, Supplement 84 (May 2015).
K. Karadelis, 'Singapore hears pleas for procedural variety' (2013) 9:1 Global Arbitration Review 43 at 43.
D.W. Rivkin, 'Towards a New Paradigm in International Arbitration: The Town Elder Model Revisited' (2008) 24:3 Arbitration International 375 at 378.
The ICC Commission Report, Controlling Time and Costs in Arbitration (2012), also recognizes this and encourages parties to file a detailed statement of case, as this can help to optimize the first case management conference (Report of the ICC Commission on Arbitration and ADR, § 15).
K. Karadelis, 'Singapore hears pleas for procedural variety' (2013) 9:1 Global Arbitration Review 43: 'Rivkin suggested arbitrators should meet with claimants and respondents as soon as they are appointed to have the facts and cases set out before them. They should use this meeting to develop a roadmap that fulfils the needs of the parties in dispute.'
J. Risse, 'Ten Drastic Proposals for Saving Time and Costs in Arbitral Proceedings' (2013) 29:3 Arbitration International 453 at 456, 457: 'At the outset of the proceedings, the parties are instructed to prepare a max. 1 hour oral pleading of their case for the terms of reference meeting/organizational hearing. The pleadings are followed by a discussion with the arbitral tribunal. Within two weeks after the terms of reference meeting, the arbitral tribunal issues written recommendations as to topics to be discussed in the submissions and the format of evidence presented.'
N. Kaplan, 'If It Ain't Broke, Don't Change It' (2014) 80:2 Arbitration 172.
Ibid. at 174.
Ibid. at 172.
D.W. Rivkin, supra note 6 at 381.
J. Risse, supra note 9 at 458.
See section 2.b) above.
See N. Kaplan, supra note 10 at 174.
D.W. Rivkin, supra note 6 at 380.