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Fortior Arbitration Guide - Lecture 5 - Common Procedural Applications

This lecture covers three most common applications in international arbitration: application for an extension of time, application for security for costs and application for a partial award.



In this lecture, I will discuss the most common types of applications or request for procedural orders from the Tribunal. Samples of some of those applications together with the draft responses are available as part of our Arbitration Guide.

Application For An Extension of Time


The first application I wanted to discuss today is an application for an extension of time. This is by far the most common application of all. Parties may be busy with other work, they might be on holidays, there might be personal circumstances which mean that the deadline cannot be complied with, or the arbitration can be too complex to complete it within standard time limits. Hence, parties often seek to extend the time limit prescribed to them by applicable law, arbitration rules or orders of the Tribunal. Arbitral Tribunals normally have the wide discretionary powers to rule on procedural matters, especially when time limits are concerned. Applications for an extension of time may be made simply by email or informal correspondence.


Factors Relevant To Whether Or Not The Extension Will Be Granted


Parties do not normally cite and the Tribunals do not require any legal argumentations to support these applications. However, when deciding whether or not to grant an application, the Tribunals will normally ask themselves the following three questions.


Firstly, is there a good excuse for a party’s failure to meet the deadline. Illness, hearing of other matters, holidays, especially in the Christmas period in Europe and travel arrangements are considered to be good excuses. But if it is not a good excuse simply to forget the deadline.


Secondly, the Tribunal will ask itself whether by making an application the party merely seeks to delay proceedings. Where the Tribunal thinks that the party seeking to delay proceedings, it will be unlikely to grant multiple or long extensions of time.


And finally, the Tribunal will consider whether an extension of time will affect the rest of the procedural timetable or the final hearing. Tribunals, especially those consisting of seniors or famous arbitrators, are often very busy. Hearings are scheduled and every service provider are engaged many months in advance. Therefore, the Tribunals do not look favorably upon the party’s attempt to waste procedural effort or disrupt the procedural timetables.

Application For Security For Costs


The second application I would like to discuss today is an application for security for costs. These applications are appropriate where the respondent is faced with the claim from the Claimant who is a shell company or the company that has no money. Arbitration is an expensive process, if the respondent successfully opposes the claimant’s claim, it will normally get a cost order against the Claimant. But the Claimant’s shell company may simply disappear as the result the cost order will be unenforceable in practice. To avoid such situations, the Tribunal has the power to order the Claimant to make a deposit or provide a guarantee for the Claimant’s potential obligation to pay the respondent’s costs. These orders are called orders for security for costs.

Factors Relevant To Whether Or Not The Claimant Will Be Ordered To Provide Security For Costs


When considering whether or not to make an order for security for costs, the Tribunals will normally ask themselves the following four questions.


Firstly, is the party seeking security the claimant or the respondent. Tribunals have no power to make orders for security against respondents, this is to do with their right for a fair trial. One cannot deny the respondent an opportunity to defend itself, simply because the respondent has no money to provide security.


Secondly, the Tribunal will consider how likely it is, at first sight, that the claim will succeed. Upon the application for security for costs, Tribunals do not spend much time considering the details of the claim. However, if it appears to the Tribunal that the claim is very likely to succeed, the Tribunal will not make an order for security against the claimant.


Thirdly, the Tribunal will consider what evidence there is, so the respondent will face difficulties in enforcing the costs order against the claimant. The evidence might consist of the Claimant’s prior breaches of court orders or the evidences that the Claimant’s balance sheet is weak, or it has other unpaid debts.


Finally, Tribunals are normally not entitled to make orders for security, simply because the Claimant is based in certain jurisdiction. However, Tribunals are entitled to make orders for security, if in the jurisdiction where claimant’s assets are based, enforcement of arbitral force is abnormally difficult.

Requirements For The Application And Standard Orders

An application for security for costs may be made in the letter to the Tribunal, with the copy to the Claimant or counter-claimant. A sample of such letter is available as part of our Arbitration Guide. The application should be accompanied by the Claimant’s account if available, evidences to support the other issues as I discussed earlier, and the statement of the respondent incurred and anticipated costs, in order to allow the Tribunal to determine the amount of security. A sample statement of costs is likewise available as part of our Arbitration Guide.


An order for security for costs will normally provide that the Claimant must either pay an amount of money into an escrow account or provide a guarantee of a first-class international bank within the specified time limit. If the claimant fails to do so, the respondent may apply for, what is called peremptory or the unless order. That is an order, that if the claimant fails to provide security within the extended time limits, usually a week or two, the claimant’s claim will be struck out. The Tribunal’s power to such as peremptory orders and ultimately to strike out the claimant’s claim for failure to provide security, make an application for security for costs a very powerful tool in arbitration.

Application For A Partial Award


The third application I would like to discuss today is an application for a partial award. Arbitration is a long process, in my experience, it is rare for arbitration to last for less than a year. Arbitration often involves complex, time-consuming and expensive procedures, such as a search for disclosure of documents, preparation of witness statements, cross-examination of witnesses and their like. But some claims in defences might be straight forward, so the Tribunals can deal with them without these time-consuming procedures. Therefore, Tribunals are often entitled to deal with simple claims by way of partial awards. A partial award, as the name suggests, is an award on part of the issue in the dispute. While such awards are also sometimes called interim awards, they are in fact final awards as to the issues which they cover.

Factors Relevant To Whether Or Not The Tribunal Will Make A Partial Award

When deciding whether to make a partial award, the Tribunal will normally consider the following 3 factors.


Firstly, it will be appropriate to make a partial award where there is no defence to part of the claim. This may be a case, for example, where the respondent fails to address one of the claims in his defence. Where there is a defence, but it does not cover the full amount of the claim. Where there are a claim and counterclaim, the respondent's only reason for the refusal to pay on the claim is the counterclaim, but the counter-claim is smaller than the claim, or when the defence is based on the legal theory which is clearly wrong.


Secondly, the Tribunal will consider whether deciding the matter at the earlier stage might save the time and costs of the future conduct of the reference. There are often several legal theories on which the Tribunal might determine the case. For example, the Tribunal might dismiss the case because it is without merit, or it might dismiss the case because the Claimant has been statutory or contractual limitation period. Determining the case on the merits might require an expensive disclosure exercise and a costly hearing. If the Tribunal might decide the case on the basis of limitation period without these costly procedures, then it will normally do so.


And finally, the Tribunal will consider whether it is necessary to have witness evidences to decide the case, the Tribunals do not make partial awards where the witness evidence is required.


I hope this lecture was useful. If you require more information, please download our Arbitration Guide at www.fortiorlaw.com. Our Arbitration Guide provides more information as to how to commence the arbitration proceedings and it contains template notice of arbitration and the template response to the notice. Alternatively, get in touch with one of our lawyers at info@fortiorlaw.com.

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