Abuse of Process in International Arbitration - Chapter 9 - Conflict of Laws in International Commercial Arbitration
Originially from Conflict of Laws in International Commercial Arbitration
Procedural flexibility is a key advantage of arbitration. However, flexibility, if abused, can also become a weakness; proceedings risk becoming endless and overly costly. Indeed, according to seasoned practitioners, instances of abuse have been on the rise in the past fifteen years or so, thus threatening to undermine arbitration’s reputation.2
Against this background it seems paradoxical that tribunals appear to have largely rejected allegations of abuse in the same period.3 This lack of positive findings, in a period where abuse is said to have increased significantly, suggests that arbitral tribunals have been either incapable of acting, or simply unwilling to do so.4
Recently, tribunals have become more active, finding abuse in circumstances where they had previously rejected similar allegations.5 This is said to be a positive trend.6 However, this development also suggests that previous tribunals have been unwilling to act, considering that nothing has fundamentally changed in tribunals’ powers to regulate the arbitral process.
The following three circumstances may serve to explain the perceived reluctance of tribunals to act to address abuse of process:
First, the absence of rules. While the procedural framework for arbitration provides for the favored flexibility, it may also lead to a tribunal’s reluctance to intervene in the arbitration in order to address an abuse of process. Arbitral tribunals lack a lex fori; procedure in arbitration principally follows the arbitration agreement, including any arbitration rules chosen by the parties, and, only failing such agreed rules, the law of the place of the arbitration.7 Arbitration agreements, in turn, typically prescribe only a basic outline of the arbitral procedure, frequently by reference to specific institutional arbitration rules, which, in turn, tend to set out only a basic framework for the proceedings. This is true also for most domestic arbitration laws; to my knowledge, none contain specific rules on abuse of process.
Second, the aspiration to render a valid and enforceable award. Abuse of process involves conduct that is consistent with the literal application of procedural rules. When a tribunal acts to address a party’s abuse, the tribunal technically restricts that party’s procedural rights. In those circumstances, a party’s threat that it will challenge the tribunal’s award may discourage it from acting to address instances of abuse.
Third, the unavailability of effective relief. While tribunals have been willing to grant provisional relief or cost awards in addressing abuse, they have been hesitant to grant (summary) dispositive relief.