Avoiding the dreaded ships passing in the night: A focus on the issues to be decided

That phrase – ships that pass in the night – was written in 1863 by American poet, Henry Wadsworth Longfellow, in his poem, Tales of a Wayside Inn:

Ships that pass in the night, and speak each other in passing,

Only a signal shown and a distant voice in the darkness;

So on the ocean of life, we pass and speak one another,

Only a look and a voice, then darkness again and a silence.

Introduction – Ships, rivers and clients

In arbitration, we expect parties to speak to each other – to engage in fruitful discussion and to try to find common ground and when they can’t agree – they are expected to try to find common ground on the issues upon which they disagree – what we call “the issues in dispute” or “the issues to be decided.”

When the parties can agree – upon which they disagree, they can focus their attention on those key issues and make the arbitral process more effective, more efficient and more in line with their shared expectations.

But sometimes, parties do not speak to one another – or address what the other is addressing. They will only address issues from their point of view and hardly respond to what the other party has to say. When that happens, parties are indeed like “ships that pass in the night.”  This is the dreaded situation that plenty of us recognise – and we want to avoid.

At the ICC Court, during the scrutiny process, we see those ships passing in the night in draft awards, when tribunals try to tackle issues which haven’t been addressed by one or both of the parties – inevitably leading to delay, either in the deliberations, or because the tribunal must get additional submissions from the parties – or the draft award is not approved by the Court.

So, the question we must ask ourselves is: How to avoid the dreaded ships passing in the night? Let me answer that question from two starting angles –

First, from the Hudson River in New York – it gives us a guidepost for international arbitration.  At its mouth, the Hudson kisses the bustling skyline of Manhattan.  At its source, it finds itself way up in the peaceful wilderness of the Adirondack Mountains.  And if we were to set sail on the Hudson, and follow its ever-flowing twists and turns, we would come across seven iconic lighthouses, which had guided the ships on its water, warning them of the hazards and channels and enabling the Hudson to serve in an earlier era as an essential corridor of commercial activity. From the beautiful Athens Lighthouse to the one of Stony Point. And from the Little Red Lighthouse into the safe arms of Lady Liberty.

And second – from my focus as President of the ICC Court, which drives everything we do, international arbitration must operate with a client mindset.[1] Of course, outside counsel representing a party in an arbitration have a client. But arbitrators and arbitral institutions must think of the parties as their clients too, for purposes of this mindset.

We must give centre stage to the parties’ needs and expectations and enable the parties’ engagement in the arbitration process, reflecting the changing role of general counsel, now operating as strategic advisors to the C-Suite and working hand in glove with the business teams to assess risk.

If we want to avoid parties passing like ships in the night, we must stop hoping for parties to actively engage with the issues themselves. And we must start looking at what parties want and need in international arbitration and provide them with this focus.

The what – Overview

It is tempting to think in terms of the most common critiques of the arbitral process. Namely, that parties want things faster and that they want things cheaper – with time and cost as the usual suspects in any discussion on efficiency.

But we know that talking only about fast and cheap can be too simplistic.  We know that parties don’t want to be in an arbitration or litigation; they want a resolution of their dispute. And resolving disputes efficiently is not merely a matter of doing things fast and doing things cheap. Instead, as Jennifer Kirby –  former Deputy Secretary-General at the ICC Secretariat – correctly pointed out: “when we talk about efficiency in arbitration, we’re actually talking about the relationship between three things: time, cost, and quality.”[2]

To get to an efficient resolution of the parties’ dispute – standing on the three-legged stool of time, cost and quality, we can take what may seem like basic, but potentially impactful, steps to better align the arbitral process with the parties’ needs and expectations. We need to take steps to avoid the dreaded ships passing in the night and focus on the issues in dispute.

ICC Arbitration has always encouraged a focus on the issues to be decided. Under the ICC Arbitration Rules, arbitral tribunals are required – as soon as they receive the file from the Secretariat – to prepare the Terms of Reference.

The purpose of this unique and longstanding feature of ICC Arbitration is simple: it creates a framework for the arbitration and includes detailed information about the parties, place of arbitration and applicable procedural laws, as well as a summary of claims and – as stated in the ICC Rules, unless the tribunal finds it inappropriate – a list of issues to be determined.

This list of issues to be decided forms the crux of the case.  Not only does it assist arbitral tribunals in effectively managing the case as it progresses, but it also serves an important function for the ICC Court when scrutinising draft awards, and for national courts when ruling on issues of enforcement and annulment.

Many appreciate the Terms of Reference for that reason. But some consider it to be outdated. In their opinion, there is no point in preserving the Terms of Reference because the reason for introducing it almost 100 years ago – as a submission of a dispute before the law allowed for agreements to arbitrate for future disputes – no longer exists. To them, the Terms of Reference is a “cumbersome and time-consuming procedural exercise and source of delay with no meaningful benefit.”[3]

This critique misses the point.  With a client mindset, this list of issues in dispute streamlines the process and gets the parties’ and the tribunal’s attention on what is important – what needs to be decided.

The why – Lists of issues

Why focus on the issues in dispute?

For parties, a well-drafted list of issues in dispute helps them engage more deeply with the arbitral process and to focus their discussion on what’s important.

For arbitrators, a well-drafted list of issues in dispute helps them render awards which address all key issues and go directly to the point. A possible challenge on the ground that the arbitrators dealt with issues beyond what needed to be decided or on the ground that they failed to rule on certain issues is, therefore, less likely.

On the flip side, a poorly drafted list can have negative consequences. When parties don’t receive any guidance from the arbitral tribunal on what’s important, they are likely to try to leave every stone unturned, which can result in substantial time and costs on documents, experts or arguments that turn out to be irrelevant for the resolution of their dispute. This approach inevitably means the proceedings will cost more and take more time – unnecessarily.[4]

And when it comes time for enforcement, poorly drafted lists of issues in dispute leads to poorly drafted awards – to awards that do not adequately address the issues in dispute or to awards that address too much. Decisions from Canada, New Zealand, Singapore, France and Australia all point out that awards are most often annulled because of “a mismatch in expectations as to what issues, arguments or reasoning are properly within the purview of the tribunal.”[5]  Arbitrators have an obligation to address all issues that fall within the scope of their jurisdiction for determination, but also to not do more than that.

The who – Reluctance among arbitrators

If this is so obvious – if preparing a list of issues in dispute is so beneficial, why do we still need to talk about it?  Why isn’t the list of issues in dispute like brushing our teeth – beneficial and part of daily life?  Why is it more like flossing – something you know is good for you, but the dentist still needs to encourage you to do?

In practice, drafting the list of issues in dispute can be challenging – and thus frequently avoided. The problem is that “the parties’ initial submissions frequently contain too general and succinct a description of their positions to enable tribunals to draw up a comprehensive and meaningful list of disputed issues.”

And the real issues may only become fully apparent as the proceedings unfold. This makes drafting a list of issues at the very beginning of a case a tricky and time-consuming process.

That is why most lists – if there is one at all – are too general.  Or arbitrators will simply insert the so-called Goldman formula into the Terms of Reference, stating that they will “decide all issues that arise from the parties’ case as it is expressed in their submissions.”

This general statement gives the green light to the arbitrators and the parties to get through the requirements of the Terms of Reference at that very early stage.  The reluctance to take the time and effort required to draft a list of issues based on what is submitted may stem from a desire not to spend too much time on a case in its early stages when it may settle or otherwise may evolve.

But at what cost?  This approach puts the utility of the arbitral process in jeopardy if the parties and arbitrators never agree on the list of issues to be decided as their guidepost.

Kenneth Carlston touched upon this problem over half a century ago when he said: “Procedure…should always be adapted to facilitate the course of the particular arbitration.”[6]

The same remains true today. In a brilliant address earlier this year, Yves Derains argued that we need a tailor-made proceeding for each case.[7]

This is what I envision for the future of arbitration.  We need a renewed sense of flexibility. We need adaptable arbitrators who proactively approach their case management powers and carefully adapt the proceedings to the needs of each case. With this approach, the list of issues to be decided can evolve just as much as the issues can.

Arbitrators should guide parties in resolving their dispute and shine their light on the issues to be determined. Parties do not necessarily have the will or ability to do this alone – but arbitrators do.

And if we want to avoid the dreaded ships passing in the night, keeping parties apprised of – and then focused on – the issues in dispute is essential.  Parties can then focus their resources on the points that matter and render the arbitral process more efficient – balancing time, cost and quality.

The how – Suggestions

That leaves us with the final question: How to do this?

Arbitrators – and the parties – must focus on the issues in dispute not just at the beginning of a case, but at various points in the proceeding. And with many suggestions readily available, we do not have to reinvent the wheel. Instead, I will focus on some of the suggestions related to three different stages: the very start of the arbitral process, right before the hearing, and during the hearing itself.

First, during the early stages of the proceeding, it is essential that the tribunal understands the issues from the perspective of both parties, not just from one of them.

Appendix IV of the ICC Rules[8] includes the suggestion from the 2019 Report on Construction Industry Arbitrations – that the arbitral tribunal invite the parties to submit a provisional list of issues to be further discussed at the case management conference.[9]  Parties are encouraged to identify issues that can either be resolved by agreement between the parties or be decided solely based on documents, as opposed to issues that require a hearing. The tribunal can then request that the parties focus their submissions and arguments within that framework.

After issuing the first procedural order, arbitrators should discuss any evolution of the issues in dispute with the parties. For example, the tribunal may hold a case management conference after the first rounds of submissions but before the parties begin exchanging document requests – which ensures that there is clarity regarding the issues in dispute at that stage – before the tribunal has to make decisions whether to order a party to produce documents over that party’s objection.

It is inconceivable that a tribunal can decide properly whether a document is relevant for the outcome of the case without clarity of the issues in dispute.

If agreed between the parties, the tribunal may also issue preliminary opinions to show the tribunal’s thoughts on certain issues, without prejudging the dispute. This approach ensures that the Terms of Reference are a starting point, not the destination.

Second, before the hearing, tribunals could go on what Lucy Reed has named the “Reed Retreat.”[10] During this retreat, tribunals would gather to discuss the submissions of the parties and consolidate the key issues. And after those deliberations, the tribunal would set aside a day to discuss their findings with the parties and inform the parties of the issues that it views as important and which the parties should address during the hearing. This list of issues can, of course, be adjusted according to the parties’ comments.

But even if the tribunal does not go through the formalities of a Reed retreat – it is incumbent on the chair of the tribunal to ensure that the tribunal has considered and identified the key issues in dispute – inform the parties and get their views – so everyone is heading into the hearing on the same page – focused on the essential matters.

Gary Born has raised a similar point in relation to the UNCITRAL Notes Organizing Arbitral Proceedings, in which he has suggested that identifying the issues in dispute might help to concentrate on the essential matters, to reduce the number of points in dispute and to select the best and most economical process for resolving the dispute.[11]

In more complex cases, where parties cannot agree on a list of issues, tribunals may even decide to adopt an “issues schedule.”[12] In this schedule, a first column would list the issues proposed by each party; a second would indicate whether parties agree on the issue, or not; and a third would mention the reason for any disagreement between the parties. A possible fourth column would contain evidence related to each issue. This would allow the tribunal to have a better understanding of the issues in dispute when parties do not reach any agreement.

Finally, during the hearing itself, tribunals may guide the parties in their discussion of the key issues by raising specific questions or by intervening when the discussion goes beyond the issues that need to be determined.

And at the end of the hearing, the tribunal should work with the parties to prepare a final list of issues in dispute, and those issues – or some of them could be addressed narrowly in post-hearing briefs.

And then, with a well-drafted list of issues at their disposal, it will be much easier for arbitrators to draft an award that adequately addresses those issues – not more – and not less.

Conclusion

Focusing on the issues in dispute can be a tedious game of connect-the-dots. But if we want to avoid parties from passing like ships in the night, it is a game we must continue to play. Arbitral tribunals must take a proactive and adaptable approach.  Rather than a static list of issues or no list at all, they need to adopt an approach that allows for the list of issues to be prepared or revised throughout the proceedings.

Because the issues in dispute can evolve, too. And arbitral tribunals should be there to guide the parties along the way. They should be like the lighthouses of the Hudson River – guiding the parties through the waters of their dispute and shining light on the issues to be decided at various points.

Such a beacon is a great way to engage parties more deeply in the arbitral process and to ensure that every international arbitration has a client mindset. To avoid the dreaded ships passing in the night, I can imagine no better solution.

With thanks to Yiqing Yin and Mees Brenninkmeijer, ICC Dispute Resolution Services interns.

[1] Claudia T. Salomon, ‘International Arbitration with a Client Mindset’ (2021) 2 ICC Dispute Resolution Bulletin 47.

[2] Jennifer Kirby, ‘Efficiency in International Arbitration: Whose Duty Is It?’ (2015) 32(6) JOIA 689, 689.

[3] Andrea Carlevaris, ‘Who (Still) Needs Terms of Reference?’ (2019) 3 Les Cahiers de l’Arbitrage 369, 370.

[4] See ICC Commission Report on Controlling Time and Costs in Arbitration (2018); Christopher Newmark, ‘Controlling Time and Costs in Arbitration’, in Lawrence W. Newman and Richard D. Hill (eds), Leading Arbitrators’ Guide to International Arbitration (3rd edn, 2014).

[5] Simon Foote and James Herbert, ‘Obligation of Arbitrators to Address All Issues That Fall for Determination, But No More’ (2014) 10 Asian Int’l Arb J 47, 54.

[6] Kenneth S. Carlston, ‘Procedural Problems in International Arbitration’ (1945) 39(3) AJIL 426, 448.

[7] Yves Derains, ICC Institute Master Lecture: ‘New Ideas for Arbitral Proceedings’ (15 March 2021).

[8] 2021 ICC Arbitration Rules, Appendix IV paras (b)-(c).

[9] ICC Commission Report, Construction Industry Arbitrations: Recommended Tools and Techniques for Effective Management (2019).

[10] Lucy Reed, Kaplan Lecture: ‘Arbitral Decision-making: Art, Science, or Sport’ (2012), 10-11.

[11] Gary Born, International Arbitration: Documentary Supplement (2015) 310.

[12] Foote and Herbert (n 5), 59.