A need for speed? The possible use of expedited dispute resolution procedures in the energy sector

By Garreth Wong, Matthew Atkinson, Louise Lanzkron, Chris Lavey


Bird & Bird & First for Disputes

The majority of disputes benefit from being resolved quickly and those arising in the energy sector are no exception. Protracted disputes can be costly, drain management time and resources, jeopardise the success of projects, damage on-going business relationships and even undermine the operational and financial futures of the companies involved. Courts and arbitral institutions are now offering new, faster ways to resolve disputes and this is a much-welcomed development.

Recently, the English High Court unveiled the Shorter Trials Scheme ("the STS"), a two year pilot initiative to manage business-related litigation more effectively and at reduced cost.  The STS pilot began on 1 October 2015 in the Technology and Construction Court, the Chancery Division and the Commercial Court. Cases can, if suitable, be heard under the scheme at the request of the parties or the court. In February 2016, the first case was transferred to the STS. In his judgment on the transfer, Birss J indicated that "comprehensive disclosure and a full, oral trial is often unnecessary for justice to be achieved" and that the STS should "improve access to justice by producing significant savings in the time and cost of litigation".1  It is anticipated that cases will be brought, heard and concluded under the STS within ten months.

The STS is intended to streamline the litigation process by, among other things, limiting the length of pleadings, limiting disclosure and witness evidence to certain key issues and using 'docketed' judges, who remain with the case from start to finish to improve continuity and judicial familiarity with the issues. Cases involving complex factual issues or contested expert evidence, fraud or multiple parties will be unsuitable for the scheme. Some cases in the energy sector will therefore be unsuitable, particularly where complex expert evidence is involved. Cases that are well suited include contractual or commercial cases where there is only limited dispute as to the factual background, or lower value cases where the parties agree that there is benefit to using the STS. 

A new Flexible Trials Scheme ("FTS") pilot was also introduced at the same time as the STS in the High Court, in which disclosure is reduced, the focus is on written rather than oral evidence and submissions, and the trial is time-limited. The FTS is something of a middle way between the STS and more standard High Court proceedings and should be considered in cases where it is unnecessary to drive "a Rolls-Royce from A to B".2

Further, the STS and FTS are of course only one of several means in the English High Court of streamlining proceedings to avoid delay. Part 8 of the Civil Procedure Rules has long been in place for cases where there is no significant dispute of fact. Also, the Court has jurisdiction under CPR 3.1(2)(l) to order an early trial of specific preliminary issues, the determination of which is likely to resolve the case altogether or to prompt the settlement of the litigation as a whole.  

However, as things stand, arbitration is the most popular means of cross-border dispute resolution in the energy sector. The popularity of arbitration in part stems from concerns over the costs and delays of litigation. Unfortunately, the complexity and procedural challenges of modern arbitration can, in some large disputes, also lead to significant costs and delays.  

To address these drawbacks, expedited or 'fast-track' processes are becoming increasingly common and have been introduced by various arbitral institutions, including the SCC, SIAC, HKIAC, ACICA and JCAA. Fast-track arbitration is intended to condense and simplify the process by using accelerated procedural timetables, limiting the potential for a party to seek time extensions, allowing the tribunal to determine the case on a documents-only basis, and requiring an award to be issued in a fixed timeframe and (in some cases) with reasons stated in summary form. It is particularly suitable for relatively simple lower value disputes, matters where there is urgency or where the parties are agreed that a quick resolution is desirable, or cases where there is one issue amidst a larger dispute which the parties would benefit from being resolved swiftly. In addition, fast-track arbitration procedures preserve the key benefits of arbitration generally, including ease of enforceability, confidentiality, and the ability to choose arbitrators with in-depth knowledge of the sector. 

While the LCIA and the ICC are yet to adopt specific fast-track rules, the rules of both institutions can be readily adapted to accommodate an expedited procedure in certain cases. Parties are of course also free to agree between themselves an expedited process or shorter timescales, and to include such provisions in their arbitration agreement. As to the specific institutional fast track processes mentioned above, there are various differences in the application of these. For instance:

  1. The SCC Rules for Expedited Arbitrations (2010) are applicable by agreement of the parties regardless of the claim value (though they are said to be suitable "for disputes of a simpler nature").  
  2. In contrast, even where the parties have not agreed on expedited arbitration, Rule 5 of the SIAC Rules (2013) provides the possibility to apply for expedited proceedings where the amount in dispute does not exceed S$5,000,000 or in cases of exceptional urgency. The decision as to whether the procedure is adopted is made by the President of the Court of Arbitration of SIAC after considering the views of the parties. (Indeed, even where the parties agree on the use of the expedited procedure, this is subject to the decision of the President.) Article 41.2 of the HKIAC Administered Arbitration Rules (2013) is in similar terms and applies where the amount in dispute does not exceed HKD 25,000,000.

The popularity of these new processes for the resolution of energy disputes remains to be seen and in fact, the take-up of the STS has been surprisingly slow in comparison to other new court-led initiatives, such as The Financial List. It may be the reason for this is that parties are wary of relinquishing options that are available to them within the broader litigation process. Moreover, once a dispute has arisen, it is often in at least one party's interest to delay proceedings, which means the adoption of expedited court and arbitration processes at that stage is likely to be more difficult.

Yet, both the STS and fast-track arbitrations have significant speed advantages over conventional litigation and arbitration, whilst retaining the respective advantages of more established processes. This must be attractive to parties as it should also significantly reduce the costs incurred.

When negotiating a contract or faced with a dispute in the energy industry, it is important to consider the most appropriate mechanism to resolve specific issues. For matters where time is of the essence and a binding decision is required, the STS or fast-track arbitration may be worthwhile practical options. The shorter timeframes and ability to control the issues and costs mean that commercial relationships are more likely to be preserved, which is a key consideration within long-term contracts and projects. It may also be the case that expedited processes can be used to reduce the prospect of disruption in the long-term by a recalcitrant counterparty. Where possible, the need for speed should be considered at the time of negotiating the contract rather than later, because of the tendency mentioned above for at least one party to wish to delay matters once the parties are at loggerheads. Arbitration clauses in particular lend themselves to the adoption of streamlined processes at this stage.

Disputes arising in the energy sector are varied and for some an expedited but binding process will be entirely appropriate. The dispute resolution mechanisms on offer mean that there is a range of options to match the range of disputes; the challenge is choosing the right option in each case.

  1. Family Mosaic Home Ownership Ltd v Peer Real Estate Ltd [2016] EWHC 257 (Ch).
  2. Blair J in a keynote speech to the CLAN 2016 annual conference.