The envisaged 2022 NAI Arbitration Rules
9 November 2021
The Netherlands Arbitration Institute ("NAI") is currently undertaking a major overhaul of its rules of 2015 in response to the increased sophistication of users of international arbitration and growing competition in the market. The new rules are to be introduced in 2022.
The current 2015 NAI Arbitration Rules were introduced together with the New Dutch Arbitration Act that entered into force simultaneously on 1 January 2015. The New Dutch Arbitration Act remains to be a modern statute with a strong pro-arbitration structure. At the same time, the arbitration practice is fast evolving, which requires several issues to be addressed by the institutional framework for the conduct of arbitral proceedings.On 15 September 2021, the NAI presented ten key features of the upcoming 2022 NAI Arbitration Rules during a webinar organised by the NAI and Young NAI and hosted by Allen & Overy. This blog entry analyses certain proposed changes to be implemented in the new version of the NAI Arbitration Rules (the "2022 NAI Arbitration Rules"). Please note that the changes are still subject to discussion. We will update you as soon as possible when the new NAI Arbitration Rules are released.
ENHANCED ADMINISTRATOR ROLE IN THE APPOINTMENT PROCESS OF ARBITRATORS
Under the 2022 NAI Arbitration Rules, several important adjustments are made in the appointment process of arbitrators (Article 13), in particular, (i) the shift away from the list procedure as a fallback option and (ii) the enhanced role of the administrator (as defined in the NAI Arbitration Rules) in the appointment process of arbitrators.The first concrete changes to these provisions include the shift away from the list procedure as a fallback if parties do not/cannot appoint the arbitrator(s). The list procedure has been one of the unique features of NAI arbitration. The proposed change favours direct appointment by the administrator instead.
The new draft Article 13 includes a 14 day term (starting on the day the respondent receives the request for arbitration) in which the parties can jointly appoint a sole arbitrator. If no arbitrator is appointed within this period, an arbitrator may be appointed by the administrator. Parties remain entitled to request an extension of this term under Article 4 of the 2015 NAI Arbitration Rules to foster party autonomy. This amendment will also apply when appointing a chair of the arbitral tribunal by the other arbitrators in cases where the panel consists of three arbitrators.
If an arbitral tribunal consisting of three arbitrators must be appointed, the claimant and the respondent must each appoint an arbitrator in the request for arbitration and the 'short answer', respectively. The 'short answer' (short-written answer) is on procedural matters such as communications and the appointment of arbitrators and is written by the respondent. If no notice of such an appointment is included in the request for arbitration and 'short answer', the arbitrator(s) may be appointed by the administrator.
The shift towards the administrator appointing arbitrators is intended to improve efficiency in selecting them. The list procedure will continue to be an opt-in mechanism, in cases where parties wish to make use of it.
DEVELOPMENT OF THE CHALLENGE MECHANISM
The 2022 NAI Arbitration Rules aim to further develop the challenge mechanism currently provided in Article 19 of the 2015 NAI Arbitration Rules. Article 19 allows parties to challenge an arbitrator if a party has justifiable doubts about an arbitrator's impartiality or independence. These challenges are reviewed by a challenges committee installed at the NAI (the "Committee", as defined in the 2015 NAI Arbitration Rules). The NAI is considering three major changes to the current challenge mechanism.Firstly, the NAI is considering to include a provision that limits the possibility to challenge arbitrators in cases of abuse of rights by the challenging party (in line with Article 39 (4) of the Dutch Code of Civil Procedure). The provision will allow the Committee to reject a challenge if the Committee deems the challenging party to be abusing its right to challenge an arbitrator. The Committee's envisaged new function is proposed to prevent the unnecessary extra costs and time associated with the frivolous challenge of an arbitrator.
Secondly, the NAI is exploring the possibility to include a provision that provides for the challenge of the Committee (or Committee member) deciding on the original challenge by a different chamber than the Committee.
Lastly, the NAI is considering including a registry fee for the challenging party and a provision that addresses the settlement of fees and disbursements of the challenged arbitrator that resigned due to the challenge.
THE EXPEDITED RULES: A SIMPLIFIED PROCEDURAL FRAMEWORK
In our last blog entry, we discussed the UNCITRAL expedited rules that took effect on 19 September 2021. This shows a current trend in the international arbitration market, where there is an increased demand for a streamlined dispute resolution mechanism tailored to resolve simple or low value disputes.The new 2022 NAI Arbitration Rules regime envisages an expedited set of rules as well. The current draft rules consider the characteristics of the expedited proceedings below:
- The expedited procedure will be the default. Parties can opt out unless they have agreed otherwise up front.
- In principle, the expedited rules will only apply if the amount in dispute does not exceed EUR 2 million. However, the parties are also given the opportunity to share their observations on applying the expedited rules for disputes that exceed EUR 2 million.
- The administrator will decide on the prima facie applicability of the expedited rules within 48 hours of receiving the 'short answer'.
- The arbitral tribunal will determine the date and form of the case management conference within 48 hours of their appointment and the case management conference will take place within 10 days after the appointment of the arbitral tribunal.
- The procedure will only have one round of written submissions and one hearing on the merits, with proportional taking of evidence. These hearings will be virtual.
- The expedited set of rules will contain a 'best efforts' undertaking for the arbitral tribunal to render an award within five months after the case management conference. The award will be rendered within six months after the case management conference.
The expedited rules proposed by the NAI provide for a simplified framework for arbitral proceedings, emphasising short timeframes for the parties and arbitral tribunals. The focus on short timeframes and limited occasions for taking statements by the parties are tailored to the trends in the global arbitration practice, as these can also be recognised in the recently updated UNCITRAL Expedited Arbitration Rules.
CODIFYING THE SCRUTINY OF AWARDS
Administrators examine the draft of awards to ensure that the awards meet certain fundamental requirements laid down in the Dutch Arbitration Act and NAI Rules. The NAI already provides a "light" scrutiny service for arbitrators in cases administered under the NAI Arbitration Rules, but such scrutiny was never enshrined in the 2015 NAI Arbitration Rules. The 2022 NAI Arbitration Rules guarantees that this form of light scrutiny is now an integral part of rendering an award, but also limits such scrutiny to the essential form requirements of the Dutch Arbitration Act and NAI Rules, areas in which the NAI can be of added value when required.Accordingly, the NAI is looking to add a new provision in Article 5(5) of the 2022 NAI Arbitration Rules. This new provision states that "the tribunal shall forward a draft of the award to the administrator. The administrator may make recommendations concerning the form of the award, without prejudice to the arbitral tribunal’s discretion to decide otherwise."
COOPERATION WITH THE NETHERLANDS COMMERCIAL COURT
Since 1 January 2019, it is possible to litigate in English before the Netherlands Commercial Court (NCC District Court and NCC Court of Appeal). For more information, please see our News Update on the NCC.The NAI, in cooperation with the Netherlands Commercial Court, created a model clause that may be used to designate the NCC as the chamber for post-award (and sometimes even pre-award) court litigation. Parties can incorporate this clause in their contracts to ensure that when court litigation is necessary, it can proceed in English instead of Dutch, saving parties time and costs.
To allow parties to fully agree to NCC litigation – even after the arbitral award is rendered – the NAI is looking to include in its 2022 NAI Arbitration Rules a provision that makes Amsterdam the standard place of arbitrations conducted in English if the parties have not agreed otherwise.
The cooperation between the NCC and the NAI enables parties to resolve the whole dispute, including pre-award and post-award litigation, in English in one jurisdiction. This cooperation thereby significantly improves the possibilities for international disputes to be resolved in the Netherlands, reducing language barriers.
