ICC announces new costs consequences for unjustified delay in submitting awards
On 5 January the ICC Court announced new costs consequences which will apply where there has been an unjustified delay by a tribunal in submitting a draft arbitration award to the Court.
The Court stated that arbitral tribunals were expected to submit draft awards within three months of the last substantive hearing in an arbitration or, if later, the filing of the last written submission (excluding costs submissions). For arbitrations presided over by a sole arbitrator, draft awards will be expected within two months.
In a ground breaking move, the Court said that if a draft award is submitted later then, unless that delay is justified by "factors beyond the arbitrators' control" or "exceptional circumstances", the Court may lower the arbitrators' fees as follows:
- Up to seven months after the last substantive hearing or written submissions: fees may be reduced by 5 to 10%.
- Between seven and ten months: fees may be reduced by 10 to 20%.
- More than ten months: fees may be reduced by 20% or more.
Interestingly, the Court has also said that arbitrators' fees may be increased above the amount that would otherwise be due if the Court considers that the tribunal has conducted the arbitration expeditiously.
The time it takes to receive a final award from an arbitral tribunal, and the lack of any penalty encouraging efficiency by arbitrators, has been a major complaint amongst many parties and arbitration practitioners for some time now. The move by the ICC to expressly set out its view on when parties should expect to receive an award, together with financial penalties for tribunals who do not comply, is bold and will no doubt be attractive to commercial parties considering which institutional rules to adopt in their contracts.
It will be interesting to see whether other institutions follow suit and whether the new guidelines will affect arbitrators' willingness to accept appointments. One of the reasons for delay in submitting an award is that the best arbitrators are kept extremely busy, often juggling multiple cases at any one time. This is particularly so in areas which require highly specialist expertise such as insurance and reinsurance.