What happens in a commercial dispute when there’s no merit in your opponent’s case? When one side’s case is so weak, isn’t it fundamentally unreasonable for the other side to go to the time and expense of fully pursuing or defending the claim? In circumstances like this, the courts have the power to issue summary judgments to avoid the cost of a trial. But what if – as is increasingly common – the case is being decided through arbitration?
In this article, we look at how one party in an arbitration can apply for what’s called an ‘early determination’ of a dispute where one side’s case is apparently without merit. Although similar to an application for summary judgment in civil litigation proceedings, early determination has important differences. For example, in many instances it is more difficult to appeal against an early determination than it is to challenge a summary judgment.
Note that we’ll refer specifically to the procedure in arbitrations run under the auspices of the London Court of Arbitration (LCIA) – the body we are most familiar with.
Early Determination: The LCIA Rules
In 2020, the LCIA updated its arbitration rules. We’ve looked previously at the effect in terms of efficiency these changes are likely to have. One of the most significant aspects of the new rules is the way they formalised the wide discretion an LCIA-constituted tribunal already had to manage all aspects of procedure. In particular, Article 22 of the rules now gives the Tribunal the power:
‘..to determine that any claim, defence, counterclaim, cross-claim, defence to counterclaim or defence to cross-claim is manifestly outside the jurisdiction of the Arbitral Tribunal, or is inadmissible or manifestly without merit; and where appropriate to issue an order or award to that effect (an “Early Determination”)..’
The updates came into effect on 1 October 2020. The LCIA’s annual report for 2020 indicated that, while there were no applications for early determination between Oct and Dec 2020 parties had started to use the provisions and this uptick would be reflected in future annual reports. At Nath Solicitors, we have been involved in at least one application for early determination since the provisions came into effect.
Other Approaches To Early Dismissal Of Arbitration Proceedings
Compared to other international arbitration bodies, the LCIA’s formalisation of the power of early determination comes relatively late. Other international arbitration bodies have established mechanisms for disposing early of claims without merit, including:
- The International Centre for Settlement of Investment Disputes (ICSID). Singapore International Arbitration Centre (SIAC)
- China International Economic and Trade Arbitration Commission (CIETAC)
- Hong Kong International Arbitration Centre (HKIAC)
The way each institution approaches this type of application varies widely. Sometimes, only the claimant (not the defendant) can seek dismissal of a claim, and some organisations only allow an application at certain points of the case. In addition, precise grounds for dismissal differ considerably from institution to institution.
Comment
The LCIA rule change is relatively recent. It’s not altogether straightforward to predict how arbitrators will approach claims for early determination in practice. However, if we look at other arbitral institutions approach that have had a mechanism in place for some time for summarily dismissing undeserving claims, it’s clear that there’s a high bar to cross if wishing to obtain early determination or similar.
ICSID tribunals for example have, since 2006, had the power to dismiss claims that have a ‘manifest’ lack of merit. Tribunals have repeatedly made clear that ‘manifest’ means ‘evident’ or ‘obvious’. The party wishing to have a claim or defence dismissed must set out its case ‘clearly and obviously, with relative ease and despatch’.
Succeeding in a claim for early determination (or similar) will hugely impact your opponent. And so it’s understandable that arbitrators set a strict test for establishing that a claim lacks merit – they make it hard to succeed in a claim for summary dismissal. By way of illustration, the ICISD has reported that in 2021 40 arbitrations included a request to dismiss. In only seven of these cases were the applications completely successful.
Time will tell whether LCIA tribunals will adopt a similarly strict approach to granting early determination.
Contact Us
For advice on LCIA and other arbitration/ADR procedures please contact Shubha Nath at Nath Solicitors on 44 (0) 203 983 8278 or get in touch with the firm online.
