Efficient and expeditious Norwegian ad hoc arbitral process: a case for adopting elements of international arbitration practices

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Published 20 April 2022
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1. INTRODUCTION

In Norway, arbitration is a common method of dispute resolution for commercial matters. The most prevalent form of arbitration in Norway is ad hoc (i.e., an arbitration not administered by an arbitral institution).

Norway has long experience of managing petroleum resources and is the world’s sixth largest hydropower producer (the largest in Europe).[1] It follows that many of the disputes within these sectors, resolved by Norwegian ad hoc arbitrations, have very high economic values at stake and call for considerations of efficiency of the dispute settlement process and of manageability of the proceedings.

Norwegian ad hoc arbitration proceedings are governed by the Norwegian Arbitration Act (the "Arbitration act"). The Arbitration act is based on the UNCITRAL Model Law and contains mandatory and non-mandatory provisions. Regarding the rules of the procedure, the arbitral tribunal has wide discretionary powers to conduct the arbitration as it considers appropriate.[2]

Since in Norway, a rather limited circle of persons are frequently appointed as arbitrators and they tend to have a similar approach on how to administer the proceedings, what could probably be described as "Norwegian arbitration practice" has evolved.

In accordance with such practice, in the case management conference (which is held after the arbitral tribunal has been constituted), the main topic will be the procedural timetable, including when the oral hearing shall take place. Other procedural rules stipulated (if any) are also typically discussed, as well as logistical issues (e.g., language, place of the hearing and practicalities regarding the submissions). Minutes from the case management conference are often summarized by the arbitral tribunal in an e-mail to the parties' counsels.

The Norwegian ad hoc practice briefly described above, differs from common practice in international arbitration. In international arbitration proceedings, also if governed by an institute, it is common that the arbitral tribunal (or the sole arbitrator) distributes a draft Procedural Order[3] ("PO") to serve as the basis for the discussion in the first case management conference.

The parties are often invited to present their comments to the draft PO prior to the case management conference and after the said conference, the arbitral tribunal issues the finalized PO ("PO 1").[4]

Norway has two main arbitral institutions, the Arbitration and Dispute Resolution Institute of the Oslo Chamber of Commerce (the "OCC") and the Nordic Offshore and Maritime Arbitration Association (the "NOMA"). Each institution has adopted their own set of institutional arbitration rules (the "OCC Rules" and the "NOMA Rules"). In institutional arbitration, the Arbitration act is supplemented by the rules of the institution. These rules provide valuable guidance for the proceedings and the conduct of the arbitral tribunal.   

In this article, the authors explore whether Norwegian ad hoc practice could benefit from adopting procedural elements of international arbitration practice, which are often decided by the parties and the arbitral tribunal and recorded in the PO 1. The authors also discuss whether the OCC Rules and the NOMA Rules could replace the need for a PO 1.

During the course of arbitration proceedings, numerous procedural decisions will be made by the arbitral tribunal (e.g., with regard to extensions of time, document production, requests for stays of arbitral proceedings, confidentiality issues etc.). Many of these decisions are made in the form of a procedural order. For completeness, this article addresses the PO 1 only and not those procedural orders in which the arbitral tribunal renders decisions in the later stages of an arbitration proceeding.

 

2. PROCEDURAL ORDER NO 1

2.1 Introduction

There is a wide range of procedural options available to arbitrators and parties to arbitration proceedings. The parties’ freedom to agree upon the procedures of an arbitration is universally acknowledged. Furthermore, it is often stated that that an arbitrator is the master of her or his own procedure. These two widely recognized principles are of course the starting point in any arbitration proceeding, also in Norwegian ad hoc proceedings.

Broadly speaking, the PO 1 reflects what is regarded as "common practice" in international arbitration. In the authors' experience, they are therefore quite similar both with respect to the issues addressed and the content.

With regard to the case management process, guidance can be sought in notes, rules and recommendations from arbitral institutions. For instance:

  1. The Chartered Institute of Arbitrators ("CIArb") guideline "Managing Arbitrations and Procedural Orders" "sets out the current best practice in international commercial arbitration as to how to establish and manage the procedure according to the specific requirements of each arbitration".[5]
  2. The UNCITRAL Notes on Organizing Arbitral Proceedings (2016) (the "UNCITRAL Notes") contain a list of matters for possible consideration in organizing arbitral proceedings.[6]
  3. Appendix IV of the 2021 ICC Rules contains "examples of case management techniques that can be used by the arbitral tribunal and the parties for controlling time and cost".[7]
  4. The ICC Commission on Arbitration and ADR Task Force on Reducing Time and Costs in Arbitration has, in the Report "Controlling Time and Costs in Arbitration" presented recommendations "designed to assist arbitral tribunals, parties and their counsel in devising tailor-made procedures for individual arbitrations pursuant to Articles 22−24 of the [ICC] Rules."[8]
  5. The International Centre for Settlement of Investment Disputes ("ICSID") has prepared a draft Procedural Order No 1 that can be downloaded online.[9]

The PO 1 should be issued shortly after the case management conference, recording what has been agreed between the parties and/or decided by the arbitral tribunal. This junction is the most appropriate time to consider the procedural options.  The PO 1 may be revised or modified if deemed necessary and reasonable by the arbitral tribunal.

 

2.2 Administrative matters

There are certain administrative matters that are normally addressed in the PO 1.

The parties' representatives and counsels are listed as well as the seat and place of the arbitration and the language of the proceedings. The arbitral tribunal will normally also address translation of documents not submitted in the procedural language. The need for interpretation of witnesses and experts also should be agreed upon. Where parties are located in different time zones, the PO 1 will state according to which time zone deadlines for filing written submissions shall be set (usually the place of the arbitration).

Sometimes, the confidentiality of the proceedings and procedures for applications for interim measures are addressed.  In the event that an administrative secretary is appointed, this will be stated in the PO 1 (subject to the approval of the arbitration institution, if any) often combined with the scope of the duties of the administrative secretary. The arbitral tribunal may in some cases include an issue definition and address joinder, consolidation and bifurcation.

Sometimes a provision on the fees and expenses of the members of the tribunal is included. The fees may be an hourly rate, a day rate or it could be a reference to the institution's schedule on fees and rates where applicable. An advance on cost is usually requested by the tribunal or the institute.

 

2.3 Procedural Timetable

A procedural timetable will normally be included in, or enclosed with, the final PO 1. While most institutional arbitration rules set time limits for the initial submissions,[10] the time limits for the submissions of later pleadings will be agreed by the parties or absent an agreement by the parties, decided by the arbitral tribunal.  The timetable sets out the date of the written submissions, the timing and steps of the document request procedure, pre-hearing organization meeting, date and place of hearing and deadline for post hearing briefs (if post hearing briefs shall be filed).

The deadlines in procedural timetable should be achievable and realistic. A detailed and well-prepared procedural timetable is a useful tool for the tribunal and the parties in its case preparations. It significantly reduces the risk of a request for postponement of the hearing, which normally will result in increased costs.

Rules regarding the procedure and entitlement to request extension of deadlines may also be included and in some cases, the impact of a failure to adhere to a time limit is included in the PO 1 (e.g., that the arbitral tribunal may disregard the factual allegations, denials and offers of evidence submitted in such manner, but is not bound to do so). A request for an extension of time to file a submission must be reasoned, and it may have an adverse cost consequence for the party requesting the extension.

An example[11] of a procedural calendar can be seen below:

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2.4 Bifurcation of the proceedings

It is common that the arbitral tribunal discusses with the parties whether it is appropriate to bifurcate the proceedings. Separating e.g., the liability from the quantum could in some cases result in a more cost-effective proceeding.  However, it may also result in a delayed and therefore more costly process. This is most likely the reason why the following is stated in the above mentioned CIArb guideline "Managing Arbitrations and Procedural Orders":

Arbitrators should, however, be wary that the parties may use a request for bifurcation as tactic to delay and obstruct the arbitration.[12]

While bifurcation is uncommon in Norwegian ad hoc arbitrations, it is an issue that parties may certainly discuss with the arbitral tribunal in the case management conference. 

 

2.5 Written submissions

2.5.1 The form and order of written submissions

The written submissions must be presented within the deadlines of the procedural timetable, and in the format agreed by the parties (electronic copies/hard copies, searchable PDF-documents, font size, submission by e-mail, etc.). Such formatting requirements are stated in the PO 1 as well as the consecutive numbering and the naming of the factual exhibits, legal exhibits and witness statements. The naming of the exhibits and witness statements will usually be as follows:

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The PO 1 will also state the manner in which the parties’ submissions shall be exchanged (i.e., simultaneous or sequential submissions). 

 

2.5.2 The content and scope of written submissions

The arbitral tribunal will normally include rules regarding the content of the parties' written submissions. It is not uncommon that the arbitral tribunal requests that the Claimant in its first main submission (Statement of Claim) should include written witness statements from fact witnesses and any expert reports. All the facts and legal arguments should be presented in the first submission.

The second submission should primarily be restricted to respond to the Respondent's main submission (the Statement of Defence). Often the parties will only have the possibility to file two main submissions (excluding the request for arbitration and the answer to request for arbitration). This may discourage "unsolicited" submissions and other communications which is also a way to manage costs and time.

It is not uncommon in Norwegian ad hoc arbitration to agree on two main written submissions from each party. It is, however, uncommon to agree on firm rules on the content of the submissions and when witness statements (if any) should be submitted.

In the authors' view, there are advantages with the stricter approach adopted in international arbitration. First, it provides the Respondent with a better understanding of the Claimant's case when all facts and witness statements are included in the first submission. The Respondent is therefore in better position to focus on the disputed facts and arguments and provide relevant evidence to support its position. This procedure also prevents expert reports being presented late in the proceedings, which may give reason for a request for postponement. There is normally no legitimate reason why the Claimant should not be able to present its case in full if given sufficient time in the procedural timetable and the same applies for the Respondent after having received the Statement of Claim.

The second round of submissions would primarily be limited to respond to allegations of fact and law made by the other party, including comments to the expert report(s). This procedure forces the parties to focus on the other party's arguments and it reduces unnecessary repetition of what has already been stated.

It is normal to have a "safety valve" for a situation where new evidence becomes known to either of the parties after its second and last submission. A party may therefore request that the arbitral tribunal allows such new evidence. The other party will be allowed to respond and submit evidence in rebuttal.  

 

2.6 Document Production

In Norwegian ad hoc arbitration, it has not been common to agree on rules or procedures for production of documents. Document requests are normally included and responded to in the various submissions. It is the experience of the authors that arbitral tribunals are proactive and usually set deadlines for the parties to respond.

In international arbitration, the document production procedure often follows a much stricter regime set out in the PO 1 and the procedural timetable. It is normally agreed that the parties shall exchange requests for production of documents within a date and exchange reasoned objections a few weeks later. Usually this takes place after submission of the Statement of Claim and the Statement of Defence.

The IBA Rules on the Taking of Evidence in International Arbitration ("IBA Rules") are often referred to as a guide for the arbitral tribunal's decisions. The IBA Rules can be incorporated in the PO 1 either in full, or in part.

It is also quite common that the arbitral tribunal instructs the parties to use a Redfern schedule for its requests. In the Redfern schedule, the parties provide a description of each document or category of documents sufficiently to identify it, a description of how the document is relevant and material to the outcome and a confirmation that the document is not within the requesting party's control. This first exchange of document requests normally does not involve the arbitral tribunal. Documents that a party have available shall be submitted within the deadline in the procedural timetable unless a party has objections to the production.

The next step of the procedure, is exchange of objections to document requests. The objections shall be reasoned, which will allow the other party to comment on the objections. A schedule with all outstanding requests, objections, and responses to the objections shall thereafter be submitted to the arbitral tribunal for decision.

As mentioned above, a PO 1 often includes wording to the effect that in determining issues relating to the taking of evidence, the arbitral tribunal will seek guidance from the IBA Rules. The ICCA Drafting Sourcebook for Logistical Matters in Procedural Orders presents four options of clauses which can be used where the parties wish to adopt the IBA Rules.[13] The IBA Rules sets out a procedure for document requests in Article 3 that has many similarities with the process described above.

There are advantages and disadvantages with this procedure. In the view of the authors, the main advantage is that the document requests are handled separately from the main written submissions. The process forces the parties to be more specific and explain the reason for the requests, and the objections, which prevents unnecessary and overly broad requests.

 

2.7 Evidence and examination

2.7.1 Introduction

The only provision in the Norwegian Arbitration Act dealing with evidence is section 28, which states that "[t]he parties are responsible for clarifying the facts of the case and are entitled to present such evidence as they wish." If no specific rules are agreed upon, it is to a great extent for the parties to decide how and when they will present the evidence, within the limits of the applicable law.

Each of the parties must present the evidence it relies upon. In the authors' view, generally, the rules of the proceedings should ensure that the evidence, including any expert report, is presented as early as possible in the procedure, unless case-specific reasons merit the evidence being presented at a later stage.

Evidence and expert reports are sometimes submitted late in the proceedings. It is evident that a late submission is sometimes made as a tactic with a view to surprise the opposing party or to limit opposing counsel's time to review the evidence and prepare appropriate rebuttal evidence. The arbitral tribunal should seek to avoid that situation, which is most likely a reason why the submission of evidence is regulated in international arbitration proceedings and a reason why Norwegian ad hoc proceedings may consider adopting a similar approach.  

 

2.7.2 Submission of documents

Further to factual exhibits, the Norwegian ad hoc practice is aligned with that of international arbitration practice. All documents shall be presented as part of the written submissions, or as exhibits to the witness statements.

As to presentation of sources of law, the Norwegian ad hoc practice deviates from international arbitration practice. While it is of course normal procedure that written submissions include references to and sometimes quotes of, the legal authorities on which the parties rely, in Norwegian ad hoc practice, the legal sources are normally presented during the last part of the oral hearing.

 

2.7.3 Fact witnesses

Written witness statements from witnesses of fact are sometimes submitted in Norwegian ad hoc arbitrations, provided that the witness will be available for questioning during the oral hearing. However, it is not common that the witness statements have the status of main evidence and usually, fact witnesses only testify in the oral hearing without any prior written submission.

In international arbitration it is much more common that witness statements are prepared, and also that the written witness statements have the status of evidence in chief. Where the IBA Rules serve as guidance, the content of the witness statements follows from the IBA Rules Article 4 (5). It follows from Article 4 (5)(b) that the statement shall include:

[A] full and detailed description of the facts, and the source of the witness’s information as to those facts, sufficient to serve as that witness’s evidence in the matter in dispute. Documents on which the witness relies that have not already been submitted shall be provided

It is normal in international arbitration that the parties, within the deadline set out in the procedural timetable, shall notify each other as to witnesses (and experts) to be called for cross examination. A decision not to call a witness to appear for cross examination, shall not be considered as a concession of the substance of the written witness statement. This is sometimes explicitly stated in the PO 1, but it also follows from the IBA Rules Article 4 (8).

Written witness statements will reduce the time needed for direct examination and most of the time in the oral hearing allocated to fact witnesses, will then be spent on cross examination. Cross examination is not limited to the witness statement. It may also include questions about any evidence which the witness could reasonably expect to have personal knowledge of. The PO 1 may also include rules for redirect examination. Redirect examination will normally be limited to matters that have been addressed in cross examination.

In both ad hoc arbitration and international arbitration, it is normal practice that witnesses are not allowed to be present in the hearing before giving their oral evidence. 

 

2.7.4 Expert witnesses

A PO 1 will normally set out rules for expert witnesses reflecting Article 5 of the IBA Rules. The expert report shall contain a description of the instructions, a statement of independence, a statement of the facts it bases its opinion on and the opinions and conclusions. Although in ad hoc arbitration, there is no established rules for the content of expert reports, it is the authors' experience that expert reports in general meet the requirements set out in the IBA Rules.

Examination of experts will normally follow the same procedure that has been agreed for witnesses of fact. This means that the direct examination will be brief, and primarily be focused on cross examination.

 

3. OCC RULES AND NOMA RULES

Article 12 of the OCC Rules provides that the arbitral tribunal shall prepare a so called "plan for the further arbitral proceedings following discussions with the parties." The provision also states that it shall be clarified with the parties whether the arbitral proceedings and the decisions of the arbitral tribunal shall be confidential.

With the exception of the aforementioned instruction to the arbitral tribunal to clarify confidentiality issues with the parties, the OCC Rules (just as most other arbitration rules) do not set forth specific issues to be discussed and recorded in a PO 1. Instead they clarify that it is within the arbitral tribunal's discretion to decide the types of issues which are generally addressed in a PO 1.

The NOMA Rules are based on the UNCITRAL Arbitration Rules. They do not contain detailed provisions regarding the conduct of the arbitral proceedings with regard to issues which are usually decided by the parties and/or the arbitral tribunal and recorded in a PO 1.

Article 15 of the NOMA Rules provides that the arbitral tribunal, in exercising its discretion (to conduct the arbitration in such manner as it considers appropriate) "shall conduct the proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient process for resolving the parties’ dispute" and take into consideration the Best Practice Guidelines of NOMA (the "NOMA Guidelines").[14]

The NOMA Guidelines aim to "ensure a predictable, transparent, cost-efficient and fair arbitration process, within the framework of the [NOMA Rules]."[15]

Section 3 (Case management conference) of the NOMA Guidelines contains guidelines for the arbitral tribunal to consider in the case management conference. Many of the topics discussed above in chapter 2, are included Article 3.5 of the NOMA Guidelines. This provision sets forth a list of matters to be discussed during the first case management conference. Article 3.5 of the NOMA Guidelines provides, in relevant part, as follows:

During the first CMC, the following matters should be discussed and sought to be agreed upon: (a) Whether the whole or parts of the decision can be determined on documents only; (b) Whether separate issues or claims should be subject to decided separately; (c) The length of the main hearing; (d) Scheduling of the main hearing; (e) Venue for the main hearing; (f) Language; (g) Translations of evidence and sources of law; (h) Deadlines for statement of claim, statement of defence, subsequent pleadings, and for presentation of new arguments and evidence pursuant to 3.7 e) hereof, etc.; (i) Whether any of the parties intends to present written witness statements; (j) Expert witnesses and potential expert reports, and if a joint expert should be appointed; (k) Possible allocation of time during the case preparation for mediation/settlement discussions; (l) Security for the arbitrators’ fees and cost; (m) Potential termination fee to the arbitral tribunal; (n) Document management during the case preparations; (o) Confidentiality of the Award; and (p) Other items to facilitate a quick and cost-effective procedure to achieve a resolution of the dispute.

Article 3.6 of the NOMA Guidelines provides that the arbitral tribunal, following the case management conference, shall issue a procedural order or minutes of meeting, reflecting the agreement reached in the case management conference or any orders issued by the arbitral tribunal.

Article 3.7 of the NOMA Guidelines provides a list of guidelines that shall apply, subject to stipulations in the case management conference or any PO issued by the arbitral tribunal. This list contains inter alia, proposed time limits for the submission of pleadings and also sets out the cut off dates for the presentation of new arguments and new evidence.

NOMA has also prepared the "NOMA Rules on the Taking of Evidence", which are based on the IBA Rules. These said rules address some of the issues mentioned above.

In the view of the authors, neither the OCC Rules nor the NOMA Rules would be an alternative to a PO 1. Since one of the greatest (if not the greatest) advantages of international arbitration is flexibility of procedural rules, it is key to international arbitration proceedings that there is leeway for adapting procedures to the needs of the parties. 

The NOMA Guidelines are a pragmatic approach which rather than being an alternative to a PO 1, work as a tool for arbitral tribunals in issuing a PO 1.

 

4. CONCLUDING OBSERVATIONS

One of the main tasks of an arbitral tribunal is to conduct the proceedings in an efficient and cost-effective manner. This task is widely recognized and codified in national arbitration acts in many jurisdictions and institutional arbitration rules.

In the aforementioned ICC Commission Report "Controlling Time and Costs in Arbitration", the task force noted that:

[I]f the overall cost of the arbitral proceedings is to be reduced, special emphasis needs to be placed on steps aimed at lowering the costs connected with the parties’ presentation of their cases. Such costs are often caused by unnecessarily long and complicated proceedings with unfocused requests for disclosure of documents and unnecessary witness and expert evidence. Costs can also be unnecessarily increased when counsel from different legal backgrounds use procedures familiar to them in a manner that leads to needless duplication.

In the authors' view, the PO 1 is an important tool to achieve the goal to conduct the proceedings in an efficient and cost-effective manner. Partly because it requires arbitrators to be proactive in case management techniques and also because it provides the arbitral tribunal with tools to control the process.

 

[1] The information is available on the website of the Norwegian Ministry of Foreign Affairs, Norway in the UN: https://www.norway.no/en/missions/un-rome/values-priorities/energy-marine-res/ (last visited on 5 April 2022).

[2] The Arbitration Act § 21 sets out that "Within the framework of the parties' agreement and the provisions of this Act, the arbitral tribunal shall conduct the arbitration in such manner as it considers appropriate."

[3] This will often be referred to a Procedural Order No 1 and it is followed up by additional Procedural Orders as the case progress.

[4] As an alternative to the PO 1, the arbitral tribunal may circulate an agenda for the first case management meeting, which will include the same matters as set out in the PO 1.

[5] CIArb Guideline 6, Managing Arbitrations and Procedural Orders, 2016, Introduction. Guideline 6 is available at: https://www.ciarb.org/media/4198/guideline-6-managing-arbitrations-and-procedural-orders-2015.pdf (last visited on 5 April 2022).

[6] The UNCITRAL Notes are available at: https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/arb-notes-e.pdf (last visited on 5 April 2022).

[7] 2021 ICC Rules, Appendix IV: Case Management Techniques.

[8] The ICC Arbitration Commission Report on Techniques for Controlling Time and Costs in Arbitration is available at: https://iccwbo.org/publication/icc-arbitration-commission-report-on-techniques-for-controlling-time-and-costs-in-arbitration/ (last visited on 5 April 2022).

[9] The ICSID draft procedural order No. 1 is available at: https://icsid.worldbank.org/sites/default/files/Draft%20Procedural%20Order%20No%201.pdf (last visited on 5 April 2022).

[10] See e.g. Article 5 of the ICC Rules; Article 2 of the LCIA Rules, Article 4 of the Swiss Rules.

[11] In the example, no counterclaims are made.

[12] CIArb Guideline 6, Managing Arbitrations and Procedural Orders, 2016. Guideline 6 is available at: https://www.ciarb.org/media/4198/guideline-6-managing-arbitrations-and-procedural-orders-2015.pdf (last visited on 5 April 2022).

[13] The ICCA Drafting Sourcebook for Logistical Matters in Procedural Orders, ICCA Reports Series, Volume 2 (International Council for Commercial Arbitration; ICCA & Kluwer Law International 2015) p. 3.

[14] The NOMA Guidelines are available at: https://www.nordicarbitration.org/_files/ugd/b8353b_fb9321b577784585989dd04d942d4d26.pdf

[15] Article 1.1 of the NOMA Guidelines.