Early dismissal procedures can be used in international arbitration to dispose of defective claims and defences, without incurring the costs of a full hearing.
Speed and efficiency are the main attractions of international commercial arbitration, but there is increasing concern about how long it takes to resolve a dispute, especially in matters where costs are disproportionate to what is at risk.
As part of ongoing efforts to adapt to the evolving needs and concerns of the international arbitration community, leading arbitral institutions from around the world, including those based in South Africa, are introducing early dismissal procedures into their rules.
Although types of early dismissal procedures are popular in litigation, especially in common law countries, it is a largely foreign concept in international arbitration. This is mainly because of uncertainty about the nature of the procedure.
The best way to understand what is meant by "early dismissal" is to pinpoint its defining characteristics. An early dismissal application promotes speed and efficiency in resolving disputes that are either manifestly deficient in their entirety, or contain claims or defences that are baseless in law. It enables arbitrators to decide issues based on limited evidence, which removes the need for a full exploration of all the evidence in relation to the particular claim or defence. Across different jurisdictions, this type of procedure has been given different labels, such as early dispositions, motions to dismiss, summary judgments or dispositive motions. This article uses the term "early dismissal", which is in line with the wording of the rules for most leading arbitral institutions.
Parties may have certain reservations regarding the early dismissal procedure. As early dismissal may involve an arbitrator taking a decision on the merits of a dispute early on in the proceedings and without necessarily affording the parties a chance to present their cases fully, there arises the concern that such an award may be more easily challenged on appeal (if provided for in terms of the relevant arbitration agreement) or at the point of recognition and enforcement of the award. Such a challenge would at best prolong and complicate the finalisation of the matter and, at worst, send the parties back to square one.
This concern extends to the arbitrators. Owing to the flexibility of arbitrations and the wide discretion afforded to arbitrators in conducting the proceedings, arbitrators are likely to prefer to ensure that parties have had a chance to present their cases fully and as a result may be wary of dismissing a defence or claim early in the proceedings.
From a South African perspective, the concern regarding possible challenges to an early dismissal award at the recognition and enforcement stage can be countered by the argument that our courts are generally hesitant to interfere with parties' agreement as to arbitration rules, the choice of procedure under such rules, as well as the arbitrator's discretion, when it is exercised in a reasonable manner. To secure the enforceability of an award, the arbitrators must decide what is reasonable in all the circumstances during their deliberations. If arbitrators apply their minds to the issues when exercising their discretion in fashioning the procedure, as well as when applying the standard of review to the facts of the dispute, this will significantly reduce the risk of a successful challenge against an award that summarily dismisses a claim or defence in the early stages of a proceeding. Further our courts are familiar with early dismissal procedures in their own practice.
The growing trend among leading international arbitral institutions to expressly incorporate early dismissal procedures into their rules also allays fears about embracing this procedure. Operating within the framework of major international arbitration conventions, arbitral institutions consistently revise their rules to reflect the modernization and globalization of commerce and trade. The credibility of the institution bolsters the way in which arbitrators, parties and national courts view early dismissal procedures, which reinforces the legitimacy of this procedure and encourages its use in practice to increase the overall efficiency of international arbitration. Closer to home, the Arbitration Foundation of Southern Africa is taking steps to include this procedure in its draft revised international arbitration rules.
Early dismissal is an exciting development in the realm of international arbitration as it is intended to provide a way to resolve disputes efficiently and in a cost-effective manner. This evolution of procedure recognises how there can be no objective reason why parties should be burdened with long and costly proceedings when dealing with frivolous claims or defences. If a correctly-timed early dismissal application can avoid an arbitration going the full length, it will result in efficiency, flexibility and cost reduction, further bolstering its appeal for international businesses, and public and private institutions seeking a swift resolution of disputes.
Written by Kirsten Wolmarans, Senior Associate at Webber Wentzel