Report from the Morning Seminar on Arbitration Jointly Organised by the FAI and the SCC

The Arbitration Institute of the Finland Chamber of Commerce (FAI) and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) organised a joint Morning Seminar on Arbitration in Helsinki on 8 March 2017. The seminar addressed some topical issues at the both arbitration institutes. As to the SCC, the focus was in the SCC Rules Revision. As for the FAI, the seminar provided some insight into the FAI’s recent practice relating, inter alia, to consolidation of proceedings, confirmation of arbitrators, and determination of the costs of the arbitration. Also, the revision of local arbitration laws in Finland and Sweden was briefly touched upon during the seminar.

The speakers of the event included Ms Annette Magnusson, Secretary General of the SCC, Ms Anja Håvedal Ipp, Legal Counsel at the SCC, Ms Heidi Merikalla-Teir, Secretary General of the FAI, and Mr Mika Savola, Chair of the FAI Board.

 

The seminar took place at the legendary Restaurant Savoy in Helsinki. After an enjoyable breakfast and networking, the seminar was kicked off by the Secretary General of the FAI, Heidi Merikalla-Teir, who warmly welcomed all the approximately 80 participants to the seminar.

 

 

Topical Issues at the FAI and the SCC

 

The welcome address was followed by a brief introduction to the SCC’s and FAI’s arbitration trends and recent activities by Annette Magnusson and Heidi Merikalla-Teir, respectively.

 

The FAI and the SCC have both recently published their annual statistics. Merikalla-Teir and Magnusson highlighted the latest trends in the institutes’ caseload:

 

In 2016, the FAI received 64 Requests for Arbitration, which represents an increase of 23% in the caseload with respect to 2015. Especially, the share of international cases increased from 27% in 2015 to 36% in 2016. Majority of the new cases were filed under the FAI Arbitration Rules (86%). Only 8% of the cases were filed under the FAI Expedited Rules. The share of ad hoc arbitrations where the FAI only appoints the arbitral tribunal was 6%. Still, even if most of the cases were filed under the FAI Arbitration Rules and not under the Expedited Arbitration Rules, the proceedings were conducted very efficiently. The median duration of arbitrations conducted under the FAI Arbitration Rules was eight months in proceedings that ended in 2016.

 

At the SCC, the number of cases in 2016 was 199, of which 52% were international cases. The percentage of expedited arbitrations was higher than at the FAI, 28% of the total caseload. Magnusson noted that there was an increase in the number of emergency arbitrator appointments compared to the previous year: in total 13 cases were filed with the SCC.

 

The FAI and the SCC have both signed the Equal Representation in Arbitration Pledge, a global initiative by the arbitration community to promote gender diversity in arbitration. It is noteworthy that both the FAI and the SCC have a high level of gender diversity in their arbitrator appointments in international comparison. In 2016, 32% of the arbitrators directly appointed by the FAI Board were women, while of the party-nominated arbitrators 16% were female. At the SCC, the corresponding percentages were 22,5% and 11%.

 

Finally, Merikalla-Teir and Magnusson addressed some past and up-coming initiatives and activities at the FAI and the SCC. Merikalla-Teir drew attention to FAI Mediation. The Mediation Rules of the Finland Chamber of Commerce that came into force in June 2016 provide a straightforward, flexible and user-friendly framework for conducting facilitative mediation. Merikalla-Teir called for the changing of mindsets about how we see dispute resolution and the alternative dispute resolution methods available in our toolbox. The FAI will be organising morning seminars focusing on mediation in the near future. Finally, she highlighted and urged people to register for the forthcoming Helsinki International Arbitration Day 2017 (HIAD 2017) with highly distinguished speakers.

 

As a development of the SCC’s dispute resolution services, Magnusson mentioned the revised Arbitration Rules and Rules for Expedited Arbitration that were further elaborated later on in the seminar. Magnusson also reminded that the SCC turns 100 years old this year and the centennial celebrations already started in January 2017 with the premiere of “The Quiet Triumph – How arbitration changed the world”, a documentary film portraying the role of arbitration in world affairs, followed by a grand gala dinner. The SCC is also engaged in other projects during its centennial celebrations. For example, The Stockholm Treaty Lab was mentioned as a project to align international arbitration to a sustainable future.

 

 

New SCC Rules in force as of 1 January 2017

 

The floor was then given to the representatives of the SCC to elaborate on their new Rules, which came into force on 1 January 2017. The revision process by an international revision committee started in 2014. As Magnusson put it, the object of the revision process was to store ‘the DNA of SCC Arbitration’, while updating the rules to meet the needs of the changing business environment. Magnusson stressed that the users of SCC Arbitration should feel home when using the new Rules. Still, the surrounding business world has developed into a more complex and speedy environment compared to the time when the previous rules were drafted. These changes call for even more efficient arbitral proceedings. Also, based on the SCC’s decade long practice on the preceding Rules, certain changes to the old Rules were considered necessary.

 

Håvedal Ipp further elaborated on the revision by looking into the concrete amendments to the Arbitration Rules. A leading principle in the revision process was the promotion of efficiency throughout the proceedings, which was expressly included in the new Rules as a new article, the Article 2. The efficiency standard is reflected in many other provisions of the Rules as well. E.g. the new Rules require the arbitral tribunal to promptly hold a case management conference and establish a timetable for the conduct of the entire arbitration. Also, the default provision on the number of arbitrators was changed from the presumption of a three-member tribunal. The New Rules empower the SCC Board to flexibly decide the number of the arbitrators.

 

A novel tool introduced in the Article 39 of the Rules, which also aims at improving efficiency, is the Summary Procedure. In brief, the arbitral tribunal may decide issues of fact or law without undertaking every procedural step and the tribunal is free to determine whether and how to proceed summarily. A request for Summary Procedure can be filed any time during the proceedings and the Rules do not impose any deadline for the arbitral tribunal’s decision. As there is no practice on the summary procedure yet, the pros and cons of the new tool were speculated among the seminar participants. Ideally, summary procedure brings efficiency in the arbitral proceedings. On the other hand, concerns were expressed about the possible abuses of the tool. The arbitral proceedings could be delayed by filing unfounded requests for Summary Procedure.

 

Other changes to the Rules mainly concerned the codification of the SCC’s existing practice. The New Rules allow multi-contract cases, joinder and upgraded rules of consolidation. Also, the arbitrators’ fees and the administrative fee of the SCC have been increased after ten years. The need for the revision in this respect arguably existed, since Magnusson had heard even from some general counsel comments on the low fees of arbitrators.

 

Overview of recent FAI practice

 

The Chair of the FAI Board, Mika Savola, turned the focus back to Finnish arbitration by providing a concise description of the FAI’s recent practice. Savola used anonymised FAI cases to illustrate the FAI Board’s reasoning in certain relevant decisions. You may find some of the anonymised case commentaries on the FAI website. Savola had chosen three aspects of FAI practice for consideration: consolidation, confirmation of arbitrators and objections and challenges thereto, and FAI arbitrators’ procedural conduct. Finally, Savola also commented on the costs of FAI Arbitration.

 

The FAI Rules that came into force on 1 June 2013 contain express provisions on multi-party arbitration, including provisions regarding joinder of additional parties, claims between multiple parties, claims under multiple contracts and consolidation of two or more arbitrations under the FAI Rules into a single arbitration proceeding. Since the FAI Rules came into force, the FAI Board has considered five requests for consolidation and ordered three consolidations. In 2016, the FAI Board issued its first decision to order consolidation over the objection of respondent parties.

 

Secondly, the FAI Rules include the system of confirmation of arbitrators. According to the FAI Rules, all nominations of an arbitrator made by the parties or party-nominated arbitrators as well as the appointments by the FAI Board are subject to confirmation by the FAI. As of the date of the seminar (8 March 2017), the FAI has confirmed 230 arbitrators under the new FAI Rules. In total 14 objections to confirmation have been filed since the mechanism was introduced (6% of all confirmations). In eight cases, the FAI dismissed the objection, while, in one case, the objection was sustained. Further, in five cases, the arbitrator candidate has voluntarily withdrawn before the Board needed to decide on the confirmation. In seven cases the objection was directed at a sole arbitrator selected by the FAI Board, whereas in the other seven instances one party opposed the confirmation of a co-arbitrator nominated by the other party. The only case where the objection was sustained concerned a party-nominated arbitrator.

 

Savola stressed that objections should be distinguished from challenges of arbitrators. The term “challenge” mentioned in Article 22.1 of the Arbitration Rules denotes an act whereby a party requests that the FAI remove an arbitrator from office for his or her alleged lack of impartiality or independence, or failure to fulfil any requisite qualification on which the parties have agreed. Parties can invoke the challenge procedure only after an arbitrator has been confirmed; prior to that, they can only object to the confirmation. After the objection procedure was introduced in the FAI Rules, only one arbitrator has been challenged after his/her confirmation. The FAI Board did not sustain the challenge. The representatives of the SCC were quite surprised by the small number of objections to the confirmation of an arbitrator, let alone challenges of arbitrators in FAI practice. In SCC practice, within the year 2016, 16 challenges of arbitrator and 4 request for release were launched.

 

Next Savola gave some remarks on FAI arbitrators’ procedural conduct. He started by pointing out that it is common for the arbitral tribunals to take use of the cut-off date provision in the FAI Rules (Article 33.3 of the FAI Rules), which enhances swift and cost-efficient resolution of the dispute. The other remarks concerned the closing phase of the proceedings. Arbitrators sometimes mistakenly fail to close the proceedings as prescribed by Article 39 of the Arbitration Rules. Also, some arbitrators tend to declare the proceedings closed “otherwise than in respect of the parties’ cost submissions”. According to Savola, if such practice is adopted, the arbitral tribunal should make it clear to the parties that they are not allowed to present any new arguments or evidence on the merits of the dispute in their cost submissions. Otherwise the tribunal may have to reopen the proceedings after the closing so as not to infringe the equal treatment of the parties, and to grant each party a fair and sufficient opportunity to present its case. Finally, Savola encouraged the arbitrators to submit more specific requests for cost determination disclosing sufficiently detailed information about the case and the measures undertaken in order to avoid the risk of being undercompensated for their work.

 

Savola closed his part by addressing the costs of FAI arbitration. He commented on the criticism heard at times that the costs of arbitration would have increased during the past years. In fact, this is not true for the arbitrators’ fees and the FAI administrative fee, as the FAI analysis of the division of different types of costs in FAI arbitration demonstrated. According to the statistics, the party costs clearly comprise the largest share of the overall costs. For instance, in 2016 86,9% of the overall costs were party costs, whereas the percentage of arbitrators’ fees and expenses was only 10,7% and the FAI administrative fee no more than 2,4% of the total costs of arbitration. In fact, based on the feedback received from the market, and compared to other arbitration institutions’ fee schedules, there may be a need to increase the level of arbitrators’ fees to some extent. Consequently, in line with other leading arbitration institutions, such as the ICC and the SCC, the FAI is also in the process of revising its fee schedules after four years have passed since the launch of the new Rules.

 

Revision of local arbitration laws

 

In the final part of the seminar Merikalla-Teir and Magnusson, consecutively, addressed the revision of local arbitration laws in their home jurisdictions. In both countries, the arbitration community strongly promotes the revision of arbitration laws. In Finland, the Finland Chamber of Commerce, whose independent institute the FAI is, has recently issued an extensive written submission for the consideration of the Finnish Ministry of Justice, proposing that Finland adopt and implement the UNCITRAL Model Law on International Commercial Arbitration. As to Sweden, Annette Magnusson told that the process of revising the Swedish Arbitration Act is still pending. The bill is under the review of the Swedish Ministry of Justice.

 

Thank you

 

Merikalla-Teir closed the morning seminar by thanking all the participants for their active participation and greeted all the women in the audience for the International Woman’s Day that was celebrated on the same day.

 

Reported by Anna-Maria Svinhufvud, trainee at the FAI

 

 

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