Speed is one factor that prompts parties to opt for arbitration. However, in reality, arbitration can last years or, in extreme cases, decades. To avoid this, many arbitral institutions have established rules for fast-track arbitration.
Alongside its 2018 Arbitration Rules (for further details please see "2018 DIS Arbitration Rules – one year on"), the German Arbitration Institute (DIS) issued a revised set of fast-track arbitration rules – the DIS Rules for Expedited Proceedings (DIS REP). The appeal of these rules is that parties can expect a binding award within six months of the first case management conference. Parties are free to agree on the application of these rules to all kinds of dispute, irrespective of the amount at issue. The DIS REP thereby provide parties with a high level of autonomy. However, parties should exercise their discretion wisely as the DIS REP are not suitable for all disputes.
Characteristics of proceedings under DIS REP
Compared with the previously applicable DIS Supplementary Rules for Expedited Proceedings (DIS REP 2008), the newly launched DIS REP are more streamlined and address only the basics of expedited arbitration. The number of provisions has been significantly reduced to five short articles.
In line with the arbitration rules of other institutions – such as the International Chamber of Commerce, the Vienna International Arbitration Centre and the Hong Kong International Arbitration Centre – the DIS REP have been incorporated into the DIS Arbitration Rules as Annex 4. The DIS REP are therefore not an alternative to the DIS Arbitration Rules; instead, they supplement the DIS Arbitration Rules at the choice of the parties.
The five articles of the DIS REP contain the following rules:
- The final award will be made no later than six months from the conclusion of the case management conference (Article 1).
- When establishing the timetable for the proceedings, the arbitral tribunal must always take into account the parties' specific interest in the acceleration of the proceedings (Article 2).
- Each party can present only two written submissions (Article 3).
- Only one oral hearing will be permitted; in addition, an oral hearing may be dispensed with if all parties agree (Article 4).
- The arbitral tribunal must inform the DIS and the parties if the six-month time limit for rendering the award cannot be met. However, the arbitral tribunal will not lose its jurisdiction if it fails to render the award within that timeframe (Article 5).
Viewing these provisions in the context of the DIS Arbitration Rules, parties' choice of the DIS REP thereby serves as a strong signal to the arbitral tribunal that the parties want their dispute to be resolved swiftly. In addition, even though an arbitral tribunal retains its jurisdiction if it fails to render an award within the six-month timeline, its failure to do so may have pecuniary consequences. Because the DIS REP only supplement the DIS Arbitration Rules, the general rule in Article 37 of the DIS Arbitration Rules remains applicable, whereby the DIS may reduce the fees of one or more arbitrators based upon the time taken by the arbitral tribunal to issue its final award. Failing to render an award within the six-month deadline – absent compelling reasons for the delay – may thus cause the DIS to reduce the arbitrators' fees.
Of the five articles, the truly remarkable features are the six-month timeline for the rendering of an award and the limitation of written submissions. Having only one oral hearing is not extraordinary; in fact, it is rather the norm, even in non-expedited proceedings. In addition, even under the 'normal' DIS Arbitration Rules, the parties can agree not to hold an oral hearing.
In comparison with the previously applicable DIS REP 2008, the DIS REP no longer provide that, as a rule, disputes should be decided by a sole arbitrator. Also, a limitation to counterclaims no longer exists. Both changes reflect the DIS REP's focus on party autonomy.
Reality check: opportunities and challenges
Conducting expedited arbitration proceedings under the DIS REP involves both challenges and opportunities.
The opportunities are as follows:
- Time is of the essence. The dispute will at best be settled within a short timeframe of six months from the case management conference (as opposed to possibly years in non-expedited arbitration proceedings).
- The procedure is characterised by efficiency. Short deadlines and a limited number of permissible submissions force the parties to focus on the relevant issues, leaving less opportunity for procedural shenanigans.
- The number of arbitrators can vary. As opposed to other sets of fast-track arbitration rules, the dispute will not automatically be resolved by a sole arbitrator. Instead, the DIS REP leave the number of arbitrators to the sole discretion of the parties. This approach provides the parties with flexibility – however, in practice, parties usually opt for a sole arbitrator. In 13 of the 16 DIS REP proceedings commenced in 2019, the parties agreed on a sole arbitrator.
- Parties may avoid excessive costs where the number and complexity of issues are limited. A shorter and more efficient procedure with a focus on the key points in dispute, shorter submissions and, as the case may be, the absence of an oral hearing can reduce expenditure.
However, the following disadvantages also exist:
- The short deadlines, which are necessary to enable the arbitral tribunal to render an award within six months from the case management conference, can present a challenging pace for everyone involved.
- Parties will not be able to present their case in as much detail as a 'regular' arbitration; in particular, obtaining expert evidence may be difficult and document production is unlikely to fit into the accelerated schedule.
- The preferred arbitrators may not be available since fast-track arbitration is intensive and requires more attention than regular proceedings.
- The six-month time limit for rendering the award can turn out to be unrealistic. Should this become apparent, the parties have no means of accelerating the process. Article 5 of the DIS REP merely provides that in such case, the arbitral tribunal will not cease to have jurisdiction and the final award will be made as soon as possible.
Statistics show that at least some parties have relied on the opportunities. In 2019 16 arbitrations were commenced pursuant to the DIS REP.
Unlike other fast-track arbitration rules, the DIS REP will not apply by default if the value of the claim falls below a certain threshold. Instead, the DIS has chosen a more flexible approach by imposing the decision on whether to apply the DIS REP solely upon the parties, which are free to agree the application of the DIS REP in their arbitration agreement. Otherwise, Article 27.4(ii) of the DIS Arbitration Rules provides that, in the interest of procedural efficiency, the arbitral tribunal will discuss with the parties the application of the DIS REP at the case management conference. The possible benefits and drawbacks of both options are set out below.
Option A: designating DIS REP in arbitration agreement
Users which have a specific interest in resolving their dispute by way of accelerated proceedings may proactively refer to Annex 4 in their arbitration agreement. This approach offers the major benefit of the procedure being determined from the outset and avoids the difficulty of parties being unable to agree on anything once a dispute has arisen.
However, a party that assumes that it is likely to be the respondent if a dispute occurs should carefully consider whether to commit to expedited arbitration because a claimant may have months to prepare for the arbitration by collecting documents and retaining experts (among other things) – all before the six-month time limit is triggered. A respondent that is taken by surprise may have insufficient time to properly defend itself.
If users intend to agree on the DIS REP in the arbitration agreement, they would usually be well advised to choose the model clause for expedited arbitration as the starting point (available on the DIS website). However, depending on the conceivable disputes, clearly specifying which types of dispute will trigger expedited arbitration and which disputes are to be resolved without recourse to the DIS REP may be advisable. Tailoring the clause in such a way would require the parties to carefully consider, in collaboration with arbitration experts, which types of dispute may arise in future.
Option B: opting in at case management conference
Unlike under the previously applicable DIS REP 2008, it is now possible to postpone the decision on whether the DIS REP should be applied until a dispute has arisen. Article 27.4(ii) of the DIS Arbitration Rules encourages parties to take this decision at the case management conference after having consulted with the arbitral tribunal.
More often than not, foreseeing whether a future dispute, if any, will be suitable for expedited proceedings is difficult. Therefore, some parties prefer to postpone their decision until the relevant specifics – such as the amount in dispute and the availability of counsel, witnesses and experts – are known. On that basis, the appropriateness of expedited arbitration proceedings can usually be better assessed than at any earlier stage.
A possible drawback of this option is that once the parties meet at a case management conference, the positions have often become entrenched and the parties cannot agree on anything, even if potentially beneficial to both sides. Also, one side – usually the claimant – often portrays the situation as clear cut and simple and thus suitable for expedited proceedings, whereas the other side needs to refer to more details to present its position. These factors may be the reason why in all DIS REP proceedings commenced in 2019, the accelerated proceedings had been agreed in the arbitration agreement.
Some – if not most – disputes are too complex for expedited resolution. A dispute usually evolves because the situation is not clear cut. Fast-track arbitration should be avoided if, for example:
- the determination of the factual issues of the dispute requires significant witness or expert evidence; or
- document production is required or desirable, since exchanging respective document requests and objections, as well as finding sufficient time for the tribunal to make a meaningful decision on these requests, would be challenging within six months.
Parties should further consider the demands associated with a substantially expedited schedule. If suitable arbitrators cannot dedicate the time required and produce an expedited award, non-expedited proceedings might serve the parties better. The same applies if counsel and management are not ready to commit the required intensively compressed time.
The (potential) amount in dispute may, of itself, be one – but should certainly not be the only – factor when considering expedited proceedings. Sometimes the value of the claim does not reflect the complexity of the underlying dispute. High-value claims may address a narrow issue and thus be appropriate for expedited proceedings, while low-value claims may address complex issues.
Irrespective of the value of a claim, the parties may have a desire to resolve their dispute quickly for commercial reasons. This can hold true particularly for joint venture disputes in an ongoing project when referring the dispute to traditional arbitration or litigation processes could delay the project, making quick resolution vital. The same expediency may also apply in construction cases in an ongoing project, although the fact that extensive expert evidence is often needed in such cases speaks against expedited arbitration.
As the expedited procedure under the DIS REP is available for claims of any size, every case is eligible for fast-track arbitration. In practice, parties should carefully consider whether their case would benefit from resolution within a tight timeframe. Conducting arbitration proceedings under the DIS REP offers advantages when a dispute is relatively straightforward and parties are willing to limit their submissions and forgo certain procedural stages in order to pursue a quick resolution.
