By: Atty. Julius Anthony R. Omila
Flexibility is a feature of the arbitral process, which makes it more attractive and advantageous than court litigation. As a party-driven process, the rules and procedure, including timelines, in the arbitration are agreed upon by the parties, especially in the Terms of Reference (TOR). When parties agree to institutional rules, the proceedings are governed by such rules.
Thus, parties are free to design the arbitral procedure to suit their specific cases. Absent the parties’ agreement, the arbitral tribunal can exercise its procedural discretion. Either way, the parties should be treated fairly and given a full opportunity to be heard.
So long as the parties are treated fairly, an arbitration can be tailored to meet the specific requirements of the dispute, rather than having to be conducted in accordance with fixed rules of civil procedure. To this flexibility- and adaptability- of the arbitral process, must be added the prospect of choosing a tribunal which is experienced enough to take advantage of its procedural freedom. Such a tribunal should be able to grasp quickly the salient issues of fact or law in dispute. This will save the parties both time and money, as well as offering them the prospect of a sensible award. [Redfern and Hunter on International Arbitration 33 (5th Ed., Student Version, 2009)]
Such principles are found in the UNCITRAL Model Law, specifically Articles 18 and 19, which respectively provide:
Article 18. The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.
Article 19. (1) … the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. (2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate.
Gary Born, a respected authority in international commercial arbitration, affirms that the arbitrators’ authority to determine the arbitral procedures is subject only to “mandatory protections of procedural fairness.” He quotes one U.S. court opinion:
Unless a mode of conducting the proceedings has been prescribed by the arbitration agreement … arbitrators have a general discretion as to the mode of conducting the proceedings and are not bound by formal rules of procedure and evidence, and the standard of review of arbitration procedures is merely whether a party to an arbitration has been denied a fundamentally fair hearing.
He adds,
The arbitrators’ procedural discretion under institutional rules is not unlimited. Rather, as with most national laws, institutional regimes subject the arbitrators’ procedural authority to overarching obligations to treat the parties fairly and to permit them reasonable opportunities to present their cases. [Gary B. Born, International Arbitration: Law and Practice150-51 (2012)]
However, the arbitral tribunal is generally mandated to conduct the arbitral proceedings expeditiously and in a cost-effective manner. Such inherent mandate of the arbitral tribunal is normally expressed in modern arbitration rules.
Time to render arbitral award
The UNCITRAL Rules of Arbitration, which is designed to apply in international ad hoc arbitrations, incorporates that principle:
Article 17 1. Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case. The arbitral tribunal, in exercising its discretion, shall conduct the proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient process for resolving the parties’ dispute. (Italics supplied)
The arbitration rules of modern arbitral institutions, including the Philippine Dispute Resolution Center, Inc. (PDRCI), also follow the same approach. Article 23 (1) of the 2015 PDRCI Arbitration Rules provides:
Subject to the Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and given a reasonable opportunity of presenting its case. The arbitral tribunal shall provide a fair and efficient process of resolving the dispute, avoiding unnecessary delay and expense.
To ensure the expeditious conduct of the arbitration proceedings and avoid unnecessary delay, the PDRCI Arbitration Rules also specifies in Article 42 (1) the period within which the arbitral award shall be rendered:
When there is more than one arbitrator, any award or decision of the arbitral tribunal shall be made within one (1) year from constitution of the arbitral tribunal by a majority of the arbitrators. If there is no majority, unless the parties agree otherwise, the award may be made by the Chair of the arbitral tribunal alone.
The reality of delay
Modern arbitration rules clearly take into account the reality that delay is not uncommon in arbitration.
In conducting the arbitral proceedings and to ensure the fairness of the arbitral process, the arbitral tribunal must consider, above all, the reasonableness, or lack thereof, of any possible delay that arises during the proceedings. To illustrate this point, I refer to my recent experience in two arbitrations where I sat as a member of the arbitral panel.
Upon the commencement of an arbitration proceeding, it is normally the claimant who is most prepared. Once it initiates the arbitration proceedings, the claimant is already armed with the theory of its case and knows beforehand not only the timing when it will initiate the arbitration but also everything else that is supportive of its case, such as the number and availability of its witnesses and pieces of evidence, among others. Claimant’s advantage is further emphasized when it is backed by a highly competent legal team who collaborates in the preparation of its case.
Once claimant commences the arbitration, the burden is shifted to respondent to address the claims against the latter. At times, respondent may not be able to anticipate if and when the claimant will actually initiate the arbitration. Thus, once arbitration is commenced against it, the respondent usually scampers in gathering witnesses and pieces of evidence to support its defense and counterclaims.
Delay sets in when respondent needs to locate key witnesses who are no longer available or connected with it. Vital pieces of evidence may not be that easily accessible as well.
Avoiding and resolving possible delays
In one international construction arbitration, the respondent Philippine corporation’s officers who were conversant with the disputed transaction were no longer in the respondent’s employ and already stationed abroad. Securing these former officers’ commitment to cooperate and help their former employer in the pending arbitration posed a difficult challenge to the respondent.
Also, ensuring the availability of those witnesses on specific hearing dates when respondent can no longer compel them to do so (the officers were no longer in respondent’s employ) posed an equally challenging task. There was also the practical yet very vital side of this issue—persuading those witnesses to faithfully recall, gather, and study vital pieces of evidence that will support respondent’s position in that arbitration, not to mention the incentive, or lack of it, on the part of these former officers to fully cooperate in the arbitration.
Thus, in that arbitration, respondent was prompted to request the panel of arbitrators that it be given enough time to require its former officers, who will now serve as its vital witnesses in the arbitration, to submit their witness statements and vital pieces of evidence, among others.
In effect, given its unique situation, respondent asked the arbitral tribunal to give it some leeway and time extensions, invoking its right to be heard and present its case. For its part, claimant objected by pointing out that the time extensions requested by respondent were too long and would cause so much delay in the arbitration.
The arbitral tribunal was thus faced with the task of balancing between expediting the arbitral proceeding and conducting it in such manner that the substantive and procedural rights of the parties, including the respondent, were not prejudiced.
In that case, the arbitral tribunal considered the respondent’s situation, found that respondent’s request for time extensions was reasonable, and granted it. Foremost, the arbitral tribunal found that the parties, especially the claimant, would be not be prejudiced if respondent were allowed more time to submit the written statements of its witnesses and its pieces of evidence.
Even if respondent’s request for time extensions were granted, the arbitral tribunal would still have enough time to prepare and issue its award within the period agreed upon in the TOR and the applicable institutional rules.
In another domestic arbitration administered by PDRCI, respondent corporation promised to produce on the last hearing date allotted to it the last set of evidence, consisting of documents that respondent would secure from the Bureau of Internal Revenue (BIR). On the scheduled hearing date, however, respondent failed to produce the promised documents and, instead, asked for one “last chance” to secure the documents from the BIR, citing that the documents were vital to its defense and counterclaims and that tedious government bureaucracy caused the delay in securing the BIR documents. Claimant vehemently objected, stating that respondent should deemed to have waived its right to produce the documents.
The arbitral tribunal found the grounds raised by respondent as “good reasons” and granted the latter’s request.
The arbitral tribunal considered these circumstances together: the hearings were not yet declared closed at that time and, in compliance with the PDRCI Rules, the tribunal had more than enough time to prepare and issue its award within the period agreed in the TOR. The claimant would likewise not be prejudiced if respondent were given additional time to secure the identified documents.
On the other hand, respondent would be prejudiced if it were not allowed to present its documents, which were vital to its defense and counterclaim. Thus, the tribunal accorded the respondent its right to be heard. As promised, respondent produced the promised documents on the next hearing date. Thereafter, with no further evidence from the parties, the arbitral tribunal declared the hearings closed.
The tribunal relied on Article 39 (1) of the PDRCI rules, which provides:
The arbitral tribunal may inquire of the parties if they have any further evidence to offer or witnesses to be heard or submissions to make and, if there are none, it may declare the hearings closed.
Most importantly, in both instances cited above, the arbitral tribunal considered the respondents’ procedural behavior and “good faith” during the proceedings, particularly the way respondents cooperated during the arbitral process.
Full opportunity to be heard
Equal treatment of the parties and full opportunity to be heard are both duties of the arbitral tribunal and a right of the parties, including the respondent, in the arbitration.
How “full” is full opportunity to be heard? How is it distinguished from “reasonable” opportunity to be heard, as may be found in some arbitration rules?
A commentary on Article 17 of the UNCITRAL Arbitration Rules is instructive on this point:
… the reference to a full opportunity naturally draws meaning in contradistinction to an incomplete opportunity. One would certainly not expect any difference in behavior between arbitrators called on to afford a full opportunity and those called on to afford a reasonable opportunity to present a case. Where reference is made to ‘full’, ‘reasonable’ or adequate’, the opportunity must be a complete one, allowing each and every tenable argument to be presented in an appropriate format. Whichever adjective is used, the intent is never to afford an unlimited opportunity as to timing, extent or manner of presentation of a case. (Clyde Croft, et. al., A Guide to the UNCITRAL Arbitration Rules, 2013, page 177; italics supplied)
Certainly, the expeditious conduct of the arbitration and resolution of the dispute cannot be done at the expense of the parties’, including the respondent’s, right to be heard.
About the author
Atty. Julius Anthony R. Omila is a PDRCI member. He is a Trustee of the Philippine Institute of Arbitrators (PIArb) and a member of the Chartered Institute of Arbitrators (CIArb). He is also the corporate secretary of the Philippine International Center for Conflict Resolution, Inc. (PICCR) and an accredited arbitrator of the Construction Industry Arbitration Commission (CIAC) and Wholesale Electricity Spot Market (WESM).