Originally from American Review of International Arbitration - ARIA

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I. THE CASE

Our firm represented one of the two principal parties in what has been called the first “fast-track” ICC arbitration. We indeed rode a fast train down a fast track. The request for arbitration was served on our client on November 18, 1991, and we received the award on January 7, 1992. It took the three arbitrators just 18 days to issue the award from the time the chairman was appointed — and those days included the Christmas and New Year holidays. The speed of the proceeding was all the more remarkable in light of what was at stake: the viability and enforceability of a long-term contract involving hundreds of millions of dollars.

Our client is a Canadian seller under long-term contracts with an intermediate party which resells our client’s product to U.S. purchasers. Parallel contracts govern the relationship between our client, the intermediate party, and the U.S. purchasers. The contracts in question provide for annual redetermination of a portion of the selling price and, absent agreement, an expedited arbitration of that price. The contracts contemplate the completion of the arbitration in 60 days but limit the issues which can be arbitrated on (what later came to be called) the fast-track to the redetermination of the relevant pricing provisions.1

In prior years, the parties had been able to redetermine the relevant price by agreement. The parties were unsuccessful in 1991, in our view, because for the first time the U.S. purchaser in question sought to use the redetermination process to do far more than redetermine the relevant price. Relying on the fast-track arbitration provisions of the contracts, the U.S. purchaser brought an arbitration seeking to rewrite the contract or to declare the contract frustrated. Thus, although our client had only agreed to an expedited arbitration of a portion of the contract price, it was served with a request for arbitration which sought to rewrite or throw out its long-term contract; and the request demanded that the arbitration be completed in 60 days.

Our client had a clear desire to arbitrate the relevant pricing issues within the 60-day period. But it had no desire to arbitrate issues as fundamental as the continued validity of the contract on this schedule.

Since this appears to have been the first fast-track arbitration of its kind, there was no clear procedure under ICC rules for resolving disputes concerning which issues were subject to expedited arbitration. With our answer to the request for arbitration, we filed a request to dismiss so much of the request for arbitration as sought to arbitrate issues in addition to the relevant price redetermination. Unfortunately, the tribunal decided to withhold decision on our request until after it heard all of the evidence.

In ICC and other international arbitrations, the question of what is to be arbitrated would ordinarily be considered when drafting the terms of reference.2 Here a critical issue from our point of view was the question of what was subject to expedited arbitration. But there was simply no time to resolve that issue in connection with the terms of reference and still complete the arbitration on schedule. The Chairman proposed an open-ended terms of reference which simply left open the question of what was to be arbitrated. We were able to insert a reservation of our rights and positions concerning what was properly before the tribunal. This was not an entirely happy solution. But since we believed that the redetermination of the relevant price could and should go forward, we agreed to the open-ended terms of reference subject to our reservation of rights and positions.

Ultimately, the tribunal limited its award to the relevant price redetermination provisions which were subject to expedited arbitration. Through the efforts of the ICC, the tribunal and the parties, we were able to obtain the expedited arbitration contemplated by the contracts. And although we were forced — under protest — to respond to the U.S. purchaser’s other, more fundamental issues, we ultimately succeeded in limiting the expedited arbitration to the issues specified in the contracts.