Selecting an arbitration institution: What to look out for

There are quite literally hundreds of administering bodies to choose from with many associated to chambers of commerce. In recent years there has been an explosion of new arbitration institutions being established. However, it tends to be the long established and well-known institutions, such as the ICC, LCIA, SCC, SIAC, HKIAC, CIETAC, ICDR and ICSID, that handle the majority of international arbitration cases in the more popular seats of arbitration such as London, Paris, Stockholm, Singapore, Hong Kong, Beijing, New York and Washington.

There are no hard and fast rules for selecting an institution. A good institution will provide an impartial apparatus (unbiased toward any particular economic or political interest bloc) for the administration and supervision of the arbitration. As we noted in last month´s edition, some  institutions may provide services that include assistance in the selection of a suitable tribunal, overseeing the payment of the expenses of the arbitration, fixing the fees of the arbitrators, holding deposits as security for the costs of the arbitration, providing support and guidance for the arbitrators and the parties, reviewing the award and keeping hitches in the running of the arbitration to a minimum.

Some general points to consider, however, in selecting an arbitration institution include:

Longevity - An institution must be expected to remain in existence for the duration of the arbitration. The demise of an institution before disputes arise may result in it not being possible to implement the procedure for the appointment of the tribunal, thus preventing the arbitration proceedings from progressing (unless the arbitration law of the country concerned allows its courts to appoint the tribunal). It is for this reason that particularly careful thought should be given to any proposal to appoint one of the smaller or new and untested regional or national arbitration institutions.

Rules - Another factor in the choice of institution will be the arbitration rules it applies. The arbitration rules of the principal institutions are designed to ensure the efficient conduct of an arbitration through to the making of an enforceable award. The rules contain provisions which will ensure that a tribunal is appointed to deal with the arbitration, that a party cannot frustrate the arbitration by refusing to co-operate and that an arbitrator cannot do so either.

Whilst the rules of the leading institutions adopt a broadly similar approach, there are differences between them, and not only on minor points of detail. For example, some institutional rules impose no restrictions on the nationality of the arbitrators whiles others do. The administrative procedures themselves may be time consuming and involve additional steps that may not make them suited to arbitrations where speed is of the essence, although many institutions now provide for expedited arbitration within their rules.

Some institutions are also prepared to administer arbitrations conducted under the United Nations Commission for International Trade Law (UNCITRAL) Arbitration Rules and not just under their own rules, but many other institutions do not.

Although the rules of these bodies may be fairly innocuous, it is worth checking for traps in the rules of any other institution which may be proposed. For example, provisions that provide that, unless otherwise agreed by the parties, hearings shall be in a particular location, or in other places with the approval of the Secretary General of the institution. In any case, the desired rules should be explicitly and accurately mentioned in the arbitration clause. The best way of doing this is by using the institution´s own standard clause, amended as required. In the process, it is well to specify whether, if the institution amends its rules between the contract date and the date of arbitration, the old or the new' rules will govern.

While the temptation may be to use only tried and tested institutions, parties may be faced increasingly with having to consider alternative arbitral institutions to administer any dispute between them. Careful consideration of the above points should be taken when considering any new or unfamiliar institution to ensure that it is a credible and practical option for administering the arbitration.