Modernising the arbitral process
The new Rules expressly allow remote arbitration proceedings which, though necessitated by the COVID-19 pandemic, continue to be popular even as the pandemic restrictions look to ease. The provisions for remote proceedings are likely to reduce time spent by parties to an arbitration in negotiating and agreeing the possibility of electronic communications and remote hearings. For example:
- Methods of service: The new Rules permit service of notices or communications by email and the need for physical delivery of notices or communication has been removed, although this still remains an option if still desired (Rule 3.1).
- Deemed notice: Following the flexibility of service other than in physical form, the new Rules also improve the ‘deemed notice’ provisions and the calculation of time periods for service (Rules 3.2 – 3.4).
- Remote hearings and case management conferences: Remote case management conferences and hearings (e.g. by telephone or video conference) are now explicitly allowed (Rules 17.3 and 25.3).
- Electronic signatures: Tribunals no longer need to meet in person to sign any award or effect corrections and they may sign awards electronically, unless any party requires otherwise (Rule 34.4).
Improving timeliness
In order to streamline the arbitration process and promote efficiency, the new Rules prescribe that proceedings are to be deemed closed following final closing submissions, and establish a deadline by which the tribunal must make its final award:
- Deemed close of proceedings: Arbitration proceedings will be deemed closed after the lapse of three months from the date of any final written submissions of final hearing (Rule 27.1).
- Deadline for awards: Tribunals must now make the final award within three months from the close of proceedings (Rule 34.1). We note however, that the tribunal remains entitled to refuse delivery or release of the award until all outstanding fees have been paid or if fees are unsecured (Rule 34.5).
Cost and procedural efficiency
The new Rules introduce a range of measures to increase certainty around costs and cost effectiveness, and to limit procedural tactics that can delay or derail arbitrations:
- Number of arbitrators: To reflect shipping practice, two arbitrators may now proceed with the arbitration and a third arbitrator may be appointed (if necessary) only for the oral hearing if one is held (Rules 8.4(c) and (d)). For documents-only arbitrations, the two arbitrators may see an arbitration to its conclusion with no third arbitrator needing to be appointed at any time (Rule 33.2).
- Oral hearings: Oral hearings are no longer mandatory and the tribunal has the discretion not to hold one, unless one is requested by any party (Rule 25.1).
- Power to prevent change of counsel: To mitigate abuse of process by parties changing representatives late in arbitration with the intent to derail proceedings, tribunals can now withhold approval for change of counsel, which may prejudice the conduct of the arbitration or the enforceability of any award (Rule 4.4).
- Increased limit for expedited procedure: An expedited procedure with a threshold dispute value of US$300,000 (excluding interest and costs) replaces the small claims procedure in the old Rules, which has a threshold of US$150,000. The expedited procedure is intended to provide quick and cost-effective resolution to disputes using a sole arbitrator with the award issued within 21 days where no oral hearing is required (Rule 44). This change follows growing consensus that it was inefficient to arbitrate disputes valued at under US$150,000 as the costs of arbitration itself would rise or exceed that sum.
- Standard Terms of Appointment: To ensure greater certainty and transparency in the appointment of arbitrators, the SCMA Standard Terms of Appointment now apply to all arbitrations by default, unless otherwise agreed (Rule 40). The Procedure Committee’s rationale here was to replace provision for booking fees with agreed cancellation fees in a standard form agreement. The change puts the onus on prospective arbitrators to state their terms and charges at the outset.
Conclusion
The new edition of the SCMA Arbitration Rules represents a significant update to the former edition. We anticipate they will prove popular with users and provide an attractive choice for resolving disputes in the maritime industry.
Lianjun Li (partner, Hong Kong) and Timothy Cooke (partner, Singapore) are members of the SCMA Procedure Committee and were actively involved in the drafting of the new SCMA Arbitration Rules.
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Client Alert 2021-312
