Several arbitral forums have begun adopting rules explicitly allowing for early dispositive applications that allow parties to petition the tribunal for the resolution of claims and issues during the early stages of a proceeding, prior to a final hearing or a significant evidentiary stage. Early dispositive applications function similarly to a motion for summary judgement in traditional U.S.-based litigation, and some critics denigrate the concept as part of an overarching “Americanization of arbitration.” However, early dispositive applications can benefit parties by significantly reducing an arbitration’s time and costs, one of the oft-listed benefits to arbitration. This article provides practical guidance for parties seeking early disposition, both during the drafting of the initial contract containing the arbitration clause and once the arbitration is initiated.
Evaluating whether Early Disposition Is a Good Fit
Facially, early disposition seems a no-brainer: a way to stymie the costs and time involved in arbitration. However, like most legal questions, whether early disposition is the correct choice depends on the nuances of the case and the individual parties’ needs. Historically, parties have avoided early disposition out of fear that arbitral awards will be overturned on appeal stemming from a challenge to lack of due process in the proceeding. Arbitrators are sometimes wary of granting early dispositive applications, especially when it will dispose of the entire claim and arbitration is the party’s only avenue for seeking relief. There also is the risk that a party will bring an early dispositive application on an unmeritorious claim that will actually delay the proceedings, functioning to further increase time and costs, or even do so as a tactical move to preemptively “educate” the arbitrators about their claim or defense.
The advent of early disposition in the practice demonstrates it can be a good fit in the right circumstances. Financial firms often are wary of arbitration due to the perceived lack of interim measures and summary awards. However, the boom of FinTech platforms and cryptocurrency means the risk of disputes between industry members is higher than ever. In the Life Sciences industry, cross-border intellectual property issues such as joint development agreements and patent licensing agreements often mean costly and uncertain international litigation. Allowing for early dispositive application practice in arbitration cuts off the potential argument that litigation is a better method of resolution because of the possibility of summary judgment.
Considerations during the Contracting Process
Parties benefit from considering early dispositive applications during the initial contracting process. In the arbitration clause, parties can elect to send all claims to a specific arbitral body that allows for such applications. In addition, parties should include in the clause a provision that the arbitrators will be empowered to determine threshold and dispositive issues. Parties will better guarantee themselves success if this is explicit rather than by general reference to a specific set of rules. The clause also should specify whether parties will automatically be able to bring early dispositive applications, or if they will first have to petition the arbitrators and leave decisions of whether such applications can be filed to the particular tribunal’s discretion. Additionally, because parties typically can adjust a forum’s rules through contract, choosing a particular forum does not require the parties follow all of that forum’s rules. Rather, parties can use the contract’s arbitration clause to adjust the forum’s early dispositive application rule (or lack thereof) as they see fit. Note, however, that a forum without such a rule already in their procedural rules may make the filing, and granting, of such a request more difficult. Parties also can specify the issues that can be addressed through early disposition, the page limit, and the implications for discovery. Wise parties will set a cutoff date by which all dispositive issues must be brought in order to maximize efficiency. If parties decide to not make arrangements for early disposition in the initial arbitration clause, parties can later agree to the ability to file early dispositive applications through oral agreement or a written stipulation.
Forums that Allow for Early Dispositive Applications
While different forums are starting to allow for early disposition of issues, individual rules regarding standards for dismissal, timing, scope, and procedure vary.
- The American Arbitration Association (AAA)’s rules expressly provide for dispositive applications. However, a party may submit an application only after the arbitrator decides that the application is likely to (a) succeed and (b) dispose of or narrow the issues in the case. The party typically makes the request in the form of a letter. Uniquely, the AAA dispositive application rules prescribe different standards depending on the type of case. In consumer and employment cases, in which individuals arbitrate against companies, the moving party must show substantial cause that the application will succeed. In commercial cases involving companies arbitrating against each other, parties only need to show a likelihood of success.
- The International Court of Arbitration (ICC) allows tribunals to determine “manifestly unmeritorious claims or defenses on an expedited basis” under Article 22 of the ICC Rules.
- The Judicial Arbitration and Mediation Services’ (JAMS) Rule 25 allows a party to submit an early dispositive application if either (a) all parties agree or (b) one party requests and the arbitrator permits it.
- The International Institute for Conflict Prevention & Resolution’s (CPR) Rule 12.6 allow parties to file applications for early disposition of issues. The application must include “the issues to be resolved, the basis for the [application], the relief requested, how early disposition would ‘advance efficient resolution of the overall dispute’ and a proposed procedure for resolving the issues.”
City, region, and subject-matter-specific forums also allow early disposition.
- The International Centre for Settlement of Investment Disputes (ICSID) allows early dismissal when a claim is manifestly without legal merit, under its Arbitration Rule 41(5). There is a high threshold: Respondent needs to establish its objection “clearly and obviously, with relative ease and dispatch.”
- The Financial Industry Regulatory Authority (FINRA) is the only common forum whose rules generally prohibit early dispositive applications, except under certain exceptions.
- The Singapore International Arbitration Centre (SIAC)’s Rule 29 allows for early dismissal if a claim or defense is manifestly without legal merit or manifestly outside the Tribunal’s jurisdiction.
- The Arbitration Institute of the Stockholm Chamber of Commerce (SCC)’s Rule 39 allows for summary procedure rule but does not specify the form it must take; thus, tribunals adopt the procedure they deem appropriate.
- The Vancouver International Arbitration Centre (VanIAC) adopted rules in June 2022 allowing a party to bring an early dispositive application, in addition to other interim measures.
Suggested Framework for Deciding whether to Seek Early Disposition
Parties considering early disposition can use the below framework to evaluate the decision on whether to incorporate, or excise, early disposition from their arbitration agreements.
- Determine whether the selected arbitral rules provide for early disposition.
This consideration limits the risk that the resulting award will be set aside or declared unenforceable, as national courts defer to party-agreed procedural rules when assessing whether there have been due-process violations. If you are planning to apply for early disposition, in selecting arbitrators identify and consider selecting those who have demonstrated willingness to award summary disposition in the past, or who at least have considered an early dispositive application in the past.
- Consider whether bifurcation of the claim could be a better resolution method.
Bifurcating the claim can allow for a narrower consideration of the issue without adding an extra procedural layer of analysis to the proceedings.
- Evaluate whether the issue can be resolved efficiently and fairly through an early dispositive application.
The biggest considerations at this step are the difficulty and cost of establishing the issue in question. To weigh this concern appropriately, parties should look into the amount of evidence and argument needed for an early decision to be reached. Additionally, they should consider the effect that early disposition of the issue can be expected to have on the proceedings that will follow.
- Confer with the opposing party to determine whether they are also interested in seeking an early dispositive application.
While early dispositive applications can sometimes be pursued unilaterally with approval of the Tribunal, bilateral agreement between parties will guarantee an easier path, should the parties desire it.
- Ensure the argument supporting the application is strongly rooted in good faith.
Arbitrators are aware of the usage of early dispositive applications for tactical reasons. The dismissal of an early disposition application due to bad faith could prejudice the Tribunal against a party. Thus, it is key to ensure the opposing party will not be able to assert a bad-faith argument against the application.
- Evaluate the strategic impact the early dispositive application may have on the overall case.
The timing of an early dispositive application may make a skeptical arbitrator reject an otherwise sound legal argument. Additionally, the novelty of the practice could lead to issues with eventual enforcement in court of the arbitral award. It is important for parties to consider whether the benefit of an early dispositive application is worth these risks, where such an award, if entered, would be enforced and/or challenged, and what the governing law says on the issue.
While early dispositive applications can help parties reduce the time and costs of an arbitration, they are not always a perfect fit. Whether during the contracting process or after the arbitration has already begun, it is key for parties to take into account the specific nuances of the case and evaluate the potential risks before seeking early disposition.