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Managing Recalcitrant Parties in Arbitration

First published on 26 September 2023 – on the BBaC Website

Arbitration thrives on effective communication and cooperation between involved parties. However, managing recalcitrant parties in arbitration – characterised by uncooperativeness, defiance, or resistance to following orders, procedures, or obligations – can be daunting for any practitioner. Such behaviour, whether rooted in intentional tactics to disrupt proceedings or genuine hesitations, can slow down, if not jeopardise, the entire arbitration process. Addressing these challenges head-on ensures that proceedings maintain their efficiency and fairness. This post, part of our “Understanding Arbitration: A Guide for Businesses” series, sets out practical measures practitioners can adopt to manage uncooperative participants effectively, ensuring the arbitration process remains seamless.


Recognising Signs of Recalcitrant Behaviour

Promptly identifying and addressing uncooperative behaviour is essential for maintaining the smooth progression of an arbitration and averting potential delays and disruptions. It is necessary to distinguish between tactical strategies, which are attempts by a party to gain a legitimate advantage within the confines of established rules, and outright non-cooperation. Tactical manoeuvres, while potentially challenging, demand astute management and appropriate counteraction. In contrast, non-cooperation, marked by a refusal to comply with procedural orders or engage constructively, undermines the integrity and efficacy of the arbitration process and necessitates a decisive response, possibly involving enforcement measures or sanctions. Assessing the motivations behind a party’s actions is vital to crafting an appropriate response, ensuring that the arbitration remains free from unnecessary impediments.

Key behaviours to watch for include:

a. Persistent Delays: Continual requests for rescheduling or repeatedly missing deadlines without valid reasons.

b. Evasive Communication: Dodging direct questions or sharing incomplete information.

c. Unexplained Absences: Missing scheduled sessions without notice or valid reasons.

d. Disputing Established Facts: Contesting previously agreed-upon facts without introducing new evidence.

e. Excessive Objections: Opposing procedures, evidence, or testimonies without valid

f. Ignoring Arbitral Directives: Disregarding procedural rules or directives from the arbitral tribunal.

Recognising these behaviours is critical for upholding the arbitration’s integrity. Neglecting them can result in extended proceedings, raising the associated costs. Moreover, a party’s reputation can suffer, creating setbacks that might outlast the present arbitration. Swiftly addressing these signs ensures fairness and efficient progress of the proceedings.

Proactive Measures to Engender Cooperation

Ensuring cooperation in arbitration primarily hinges on two foundational elements: drafting the arbitration agreement and the tone of initial communications.

1. Drafting Strong Arbitration Agreements: An arbitration agreement’s potency rests in its clarity. Consider integrating a clause such as:

“Both parties hereby commit to active participation, timely communication, cooperating fully and acting in good faith during the entire arbitration process. Any departure from these duties may result in penalties as detailed in Section X.”

Such precise stipulations define expectations and underscore the consequences of non-compliance. This contractual document is also a mutual affirmation of the parties’ dedication to the arbitral process.

2. Initial Communications:

a. Setting a Constructive Tone: The initial exchanges can shape the trajectory of the arbitration. Create an atmosphere of mutual respect, highlighting the shared objective: a fair and timely resolution.

b. Clarifying Expectations: Beyond the written agreement, early communications offer an opportunity to expand on the parties’ responsibilities. Lay out clear expectations concerning deadlines, preferred communication methods, and how to address any potential disagreements. Clear, early discussions can avoid misunderstandings and unnecessary delays.

c. Mutual Benefits of Participation: Engage parties by reminding them that an efficient arbitration process benefits everyone. Emphasise the potential for time and cost savings and the shared aim of achieving a balanced outcome.

3. Selecting Experienced Arbitrators: Appointing experienced arbitrators, known for efficiently controlling proceedings and maintaining impartiality and neutrality, can facilitate cooperation and enhance trust in the arbitrator’s judgment among the parties.

While no method can guarantee cooperation, these steps can set a strong cooperative precedent. Parties are better positioned to engage positively when there is clarity and mutual respect from the beginning, making the arbitration process more seamless and effective.

Using Institutional Frameworks to Your Advantage

Leading arbitral institutions have mechanisms within their frameworks to handle uncooperative parties, ensuring that proceedings remain on track.

The International Chamber of Commerce (ICC) Arbitration Rules are a prime example. Article 22(1) encourages the tribunal and parties to conduct arbitration swiftly and cost-effectively. More significantly, Article 22(2) empowers the tribunal to adopt necessary procedural measures after consulting the parties, referencing the diverse case management techniques in Appendix IV. Article 22(5) mandates parties to adhere to the tribunal’s orders.

The London Court of International Arbitration (LCIA) takes a similar approach. Article 14 allows the tribunal to ensure proceedings remain balanced, prompt, and efficient. The tribunal can adjust processes, use technology, or curtail testimonies to prevent disruptions.

The Singapore International Arbitration Centre (SIAC) adopts a firm stance, with Article 27(l) empowering the tribunal to continue with the arbitration and impose appropriate sanctions if a party disregards the institution’s Rules or tribunal’s directives.

Articles 20, 32 and 44 of the Lagos Court of Arbitration (LCA) Rules form a cohesive approach to managing arbitration effectively, especially when dealing with uncooperative parties. Article 20 mandates the tribunal to conduct the proceedings in a way that avoids unnecessary delay and expense. Complementing this, Article 32 outlines the measures for non-compliance, ensuring the process advances despite any lack of cooperation. Additionally, Article 44 details the allocation of arbitration costs, promoting good faith engagement by establishing financial repercussions for recalcitrant behaviour. Collectively, these provisions ensure the continuity and integrity of the arbitration process even in the face of non-cooperative behaviour.

To use these mechanisms effectively:

1. Stay Informed: Familiarise yourself with the specific rules of the institution governing your arbitration. Knowing them allows for swift, appropriate action when faced with party disobedience.

2. Invoke Sanctions When Required: Invoke the provisions within these institutional rules to counteract disruptive behaviour. These sanctions act as deterrents and promote active participation.

3. Maintain Open Channels: While institutional rules are available, fostering cooperation through consistent communication remains invaluable. Address issues, clarify doubts, and resort to institutional provisions when amicable resolutions are unsuccessful.

4. Work Closely with the Tribunal: Keep the tribunal in the loop about any procedural challenges. Their insight can guide the appropriate institutional rules to apply.

How Arbitrators can take Decisive Action

Managing challenging parties is a crucial aspect of an arbitrator’s role. A well-equipped arbitrator has several strategies to ensure uninterrupted proceedings.

Sanctions or penalties for non-compliance are vital tools. Arbitrators should be empowered to impose sanctions when necessary. When parties fail to follow procedural guidelines, arbitrators can impose penalties, stressing the necessity for punctuality and adherence in the arbitration process.

Another strategy is drawing adverse inferences. When a party withholds information or acts evasively, arbitrators can interpret this behaviour negatively. This approach discourages non-cooperation and aids in bridging evidentiary gaps. 

When parties miss critical deadlines, the consequences can vary depending on the offending party. For claimants, the tribunal might consider terminating the claim. If the respondent is at fault, the tribunal can decide to proceed without their continued involvement. Crucially, the tribunal must ensure that the absent party’s due process rights remain intact despite their non-participation. This balance ensures that one party’s non-compliance doesn’t jeopardise the entire arbitration while still upholding the fundamental rights of every participant, thus preserving the integrity of the eventual award.

Collaborating with Local Courts

Arbitration and local courts can work in tandem to deliver effective dispute resolution. You can harness this synergy by:

1. Seeking Judicial Intervention: Though arbitration typically operates independently, there are times when local court support is crucial. For example, when a party refuses to comply with tribunal directives or crucial evidence lies beyond the tribunal’s reach. In these instances, local courts step in to ensure the smooth progression of the arbitration.

2. Enforcement of Decisions: When a tribunal issues an order or interim measure, local courts play an essential role in affirming the tribunal’s authority by ensuring its decisions are respected and enforced

Concluding Proceedings with a Recalcitrant Party

1. Navigating Ex-parte Proceedings:

Conducting proceedings with an unresponsive party offers challenges and opportunities. One key advantage of ex-parte proceedings is efficiency. Without the delay of a non-cooperating party, the tribunal can expedite the decision-making process. However, this efficiency comes with the risk of reduced enforceability, as decisions made in the absence of one party may face challenges during enforcement. To mitigate this, the tribunal must adhere strictly to due process requirements, giving the absent party every reasonable opportunity to participate.

2. Pursuing Post-Award Measures:

The challenge may persist after the tribunal issues its award, particularly if faced with an uncooperative party. There might be reluctance or outright refusal to abide by the award. In such scenarios, local courts become a crucial ally. If a party fails to honour the tribunal’s decision, seeking enforcement through local courts can ensure that the award holds weight. This step reinforces the efficacy of the arbitration process, underscoring its role as a viable alternative to traditional litigation.

Enforcing Awards and Remedies: Strategies for non-cooperative parties

When arbitrators identify a recalcitrant party during proceedings, they must be forward-thinking in drafting awards and granting remedies to ensure successful enforcement. Key considerations include:

1. Specificity in Award Wording: The award must be clear, specific, and closely aligned with the relief sought to eliminate ambiguity.

2. Stipulating Deadlines: Setting deadlines for fulfilling obligations and complying with the award strengthens the enforceability of the tribunal’s decision.

3. Moderate Punitive Measures: Using moderate punitive measures, such as a daily interest rate on any unpaid amount awarded, can deter non-cooperation and reinforce the enforceability of awards. This approach incentivises timely compliance and maintains fairness and proportionality in the enforcement process.

Other Strategies for Enforcement Against a Non-cooperative Party:

a. Asset Search: Conducting a comprehensive search for the non-cooperative party’s assets to evaluate the feasibility of recovery is advisable, even before the tribunal delivers its decision.

b. Amicable Settlement Discussions: Given the cost and time associated with enforcement, parties should consider engaging in amicable settlement discussions.

c. Employing Legal Mechanisms for Compliance: When amicable methods fail, utilising legal mechanisms such as seeking court enforcement and asset seizure can aid in recovering arbitration costs and legal fees incurred during enforcement.

Using Past Experiences to Prepare for Future Engagements

After concluding an arbitration, taking stock of the experience is crucial for refining future strategies. Here’s how to extract the most value from past engagements:

1. Post-arbitration Debrief: Assess the recently concluded process. Identify the effective strategies and those that faltered. Seek feedback from all participants (or as many as practical), as diverse viewpoints can highlight unnoticed challenges or successes. Recognise the elements contributing to favourable outcomes and understand the reasons behind setbacks.

2. Adapting Future Agreements: Using insights from the debrief, make informed adjustments to subsequent arbitration agreements. Perhaps the scope of arbitrator powers could benefit from adjustments, or another venue might be more suitable. Consider whether refining timelines or clarifying roles can create a smoother arbitration experience next time.

Final Thoughts

Arbitration, by its nature, demands foresight and flexibility. While we can’t predict every challenge, we can certainly prepare for them. Lessons from past proceedings underscore the necessity of adaptability and highlight the importance of consistent preparation. Stay prepared, stay adaptable, and strive for excellence in every engagement.


Disclaimer:

The insights presented in this blog post aim to furnish readers with a broad understanding of arbitration within the context of global business. This material does not purport to provide legal advice, but rather serves as an informative resource. Specific decisions concerning arbitration and its relevance should always be made in consultation with qualified legal experts. Given the intricate variations and legal implications of arbitration across different jurisdictions, it is paramount to collaborate with legal professionals well-acquainted with the precise legal framework pertinent to your circumstances.

If you find this content valuable and have further questions, or if you require guidance on the detailed aspects of arbitration, please feel free to reach out to our dedicated team at [email protected]. We stand ready to guide you through these processes and address any areas of concern.

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