Should Arbitration Fees Be Capped?

This discussion is around the capping of the fees for tribunal members from the perspective of an arbitrator. We consider this specifically within the African landscape. I may however draw upon other jurisdictions in my considerations of the topic. Should you need assistance with any of the issues discussed, please contact us today.

Although adjudication is increasingly common, the history of dispute resolution in Africa has had and continues to have a heavy focus on arbitrations. Arbitration remains the dominant chosen method for dispute resolution throughout the region.

In my experience arbitrations have tended to become long and expensive. There are a few reasons for this, but they include a lack of use of nomination bodies and the adequacy of mechanisms to manage the procedures.

That is not to say that Tribunals have not managed their own costs. But it is often the surrounding factors that have caused unnecessary delay and expense to proceedings. As a result, capped fees are almost impossible to achieve.

What contributes to the tribunal being unable to fix/cap fees?

In conducting a limited amount of research, common criticisms of arbitration proceedings in Africa were:

• Attempts to delay the proceedings by respondent counsel.
• Appointment of arbitrators that are unfamiliar with the substantive subject matter of the dispute.
• Tribunal costs.
• Costs of the arbitration.
• Dealing with dilatory parties and lawyers who import litigation rules into arbitration.
• Enforcement of the award.
• Unclear text of local laws on arbitration.
• Length of proceedings.
• Too frequent recourse to the courts during the arbitration proceedings.
• Repeated appointments of some arbitrators.
• Lack of diversity.

The issue of tribunal costs was a popular and repeating theme in my research but as noted this may be as a consequence of the surrounding issues.

All these issues result in difficulty of capping tribunal fees.

Might it be that the causes wholly contributed to the resulting effect? For example – tribunals are unable to cap fees or indeed provide certainty in this regard.

Our limited research however, concluded that the theme of tribunal costs repeats in African arbitrations.

If we look at other arbitration areas and their development, would this allow a move to capping the fees of a tribunal in Africa?

The DIAC and Fees

The Dubai International Arbitration Centre currently includes capped fees and expenses for the tribunal, on lower value disputes. The benefit of this is that the tribunal and the parties are aware of the fees at the onset and this may allow greater access to arbitration. The DIAC marshal the process, to ensure that parties follow the process to allow effective management.

This has followed from similar initiatives with the ICC and LCIA.

This may beg the question of whether tribunal members have a ‘subconscious meter’ running. Is it the case that they simply don’t act after the hours allowed have been expended? I don’t think this is the case. Tribunal members are familiarised with the dispute. When correctly selected it may be that they can manage within the allocated hours.

However, in debating this further it may be that part of the answer rests with the nominating bodies and the procedural agreement.

Thereafter, does the balance of the issue rest with the tribunal upholding their duty in the pre and post appointment stages?

If we consider the role of the nominating bodies, ICC and LCIA have made significant strides to driving dispute management and the tribunal fees. We have also seen the ICC Commission Report on Controlling time and costs arbitration.

Bodies in Africa

In returning to Africa the most popular nominating bodies as concluded in my research were:

• Arbitration Foundation of Southern Africa (AFSA);
• Cairo Regional Centre for International Commercial Arbitration (CRCICA);
• Ouagadougou Arbitration and Mediation & Conciliation Centre (OAMCC);
• OHADA Common Court of Justice and Arbitration Centre (CCJA); and
• Kigali International Arbitration Centre (KIAC).
• Lagos Court of Arbitration (LCA), and
• Nairobi Centre for International Arbitration (NCIA).
• International Centre for Arbitration and Mediation Abuja (ICAMA).

The choice of nominating body and their provisions in respect of cost management and tribunal fees is important. It would most definitely be a consideration for the parties to a dispute and the arbitrators sitting on the panels.

In returning to South Africa, I have already mentioned the work of CAASA in respect of low value adjudication disputes. We should also mention the work of AFSA who amended its rules for international arbitration in the past 12 months:

• Article 10 empowers the AFSA Secretariat to shorten any time limits under the Rules. It also vests the Tribunal with the power to decide the dispute based on documentary evidence alone. This is unless the Tribunal deems a hearing appropriate, and further allows for judgment in summary form.
• Article 12 of the Rules promotes efficiency by providing for the early dismissal of a claim or defence, if it is either manifestly without legal merit or outside the jurisdiction of the Tribunal. This allows an early escape to any litigant trapped in claims or defences that are plainly without merit. It also helps avoid substantial legal costs and wasted time.

AFSA International new rules came into effect on 1 June 2021. They are a welcome move that will help to grow South Africa’s reputed position as an international arbitration seat. Importantly they should also assist parties in understanding costs and tribunal fees.

Conclusion

The lessons in this area are still evolving and will continue to evolve. Knowledge can also be drawn and gained from the experiences in other jurisdictions.

In concluding and in my final analysis, I would like to consider the developments of the American Arbitration Association:

1. A fixed fee arrangement, with proposed staged fixed fees for the pre-hearing, hearing and post-hearing phases of the arbitration.
2. A capped fee arrangement, with a proposed fee cap for the entire arbitral process.

Both options must be approved by the parties. As details of the proposed fees are provided prior to appointment of the arbitrator, they can be taken into account in arbitrator selection. The AFA invites arbitrators from its panel to submit their fee proposals to the parties.

However, the rules do provide scope for discussion with the parties and, ultimately, termination of the AFA or fee revision. This may arise where the dispute turns out to be more complex than originally thought and so do not provide absolute certainty on cost.

The take-up of AFA options, and how far they assist in controlling arbitration costs remains to be seen. Similar to other major arbitral institutions introducing measures of their own in due course. As with any arbitral process, adoption of these measures requires the consent and cooperation of both parties.

However, a point to consider which should be highlighted perhaps? If your case is good, why worry about costs?

The capping of tribunal fees must be considered with reference to the tribunal itself, the parties, the party representatives, the choice of nominating body and the procedures used.

It appears to me that Africa is developing the issue of tribunal fees but is presently behind some of the other jurisdictions.

Dispute Fee Toolbox

Finally, my own toolbox for low costs in arbitrations and capped fees:

• Hoping that the parties settle the dispute if possible.
• Provide for a sole arbitrator rather than three.
• Use experienced and cost-effective lawyers. (74% of party costs in arbitration can be attributable to legal fees.)
• Use fast-track arbitration clauses in lower value contracts.
• Consider using third-party funders.
• Stress the importance of avoiding the bifurcation of the arbitration proceeding to your counsel.
• Encourage your lawyer to select cost-effective experts.
• Revise the arbitration agreement with the opposing party when an arbitration has arisen.
• Suggest that there be no hearing or that the oral hearing be limited in duration.
• Request a limitation in terms of document production or no document production at all.
• Encourage limitations to the length of written submissions and rounds of written submissions.
• Ensure your lawyer avoids unnecessary correspondence.
• Select experienced international arbitrators.
• Ensure your legal counsel has a modern and organised system for retrieving documents. Provide the most relevant documents with clear explanations of relevance.
• Encourage the arbitrator and the adverse party to agree to short and realistic time periods and limits for awards.
• Keep arbitration clauses simple.
• Use the model clauses of a major international arbitration institution when possible.
• Avoid ad hoc arbitration.
• Select arbitrators with enough time available to do their work properly.
• Try to agree on using one language per case.
• The Chairman or President should take procedural decisions alone.
• Ask for meetings to take place online.
• Encourage legal counsel to set out the case as fully as possible at the outset of the proceedings.
• Encourage keeping hard copies to a minimum.
• Agree on non-certified translations.
• Limit the number of witnesses and exchanges of witness statements.
• Choose the best location for the hearings.
• Consider abandoning post-hearing briefs.