– Christina D’souza *
“Owing to the upsetting caused by the coronavirus pandemic, the performance of contractual obligations of the parties is affected worldwide. In such a scenario, parties have relied hugely on the doctrine of force majeure and frustration of contract to obtain relief. The early dismissal procedure i.e. Rule 29 under the SIAC Arbitration Rules provides a mechanism for the parties to solve such disputes expeditiously. However, there are some drawbacks of Rule 29 which cannot be overlooked and the need to rectify the same is indispensable. Through this article, an attempt is made to explain to the reader the flaws of Rule 29 and how the same runs contrary to the intention of introducing the rule in the first place. The article further suggests criteria to determine the threshold for manifestness while determining claims suitable for early dismissal under Rule 29.”
Owing to the unforeseen circumstances brought about by the coronavirus pandemic, the performance of the contractual obligations of the parties is affected worldwide. In such a scenario, parties have relied hugely on the doctrine of force majeure and frustration of contract to obtain relief. The early dismissal procedure under the SIAC Arbitration Rules (hereinafter, ‘the Rules’) provides a mechanism for the parties to solve such disputes expeditiously. ‘Early dismissal’ refers to the process of disposing off a claim or a defense at an early stage due to lack of legal merit or the matter being manifestly outside the jurisdiction of an arbitral tribunal. In a claim for early dismissal, an Arbitral Tribunal has the competence-competence to decide whether it has a jurisdiction to determine upon the matter or whether the matter has any legal merit. With the introduction of Rule 29 of the Rules, the Singapore International Arbitration Centre became the first major international arbitration centre to introduce a provision for early dismissal.
Drawback of Rule 29 SIAC Arbitration Rules
As per the Rule 29, an application for early dismissal can be made if a claim or a defense is manifestly without any legal merit or the same is manifestly outside the jurisdiction of the Tribunal. The rule also mentions that an application for early dismissal must state in detail the facts and legal basis on which the application is made. The Tribunal has a responsibility to give a fair opportunity of hearing to both parties and to either accept or reject the application for early dismissal within 60 days of the filing of the application.
The Rules however, fail to elaborate on the term ‘manifest’ and also lack in providing a definite criterion through which a Tribunal can decide the ‘manifestness of claims’. In such a situation, it is left to the Tribunal to decide what claim is manifestly without a legal merit and what claim is manifestly outside its jurisdiction and what is not. In a lack of uniform criteria, a varied set of interpretations of ‘manifest lack of jurisdiction’ are bound to arise. Since the question of jurisdiction arises more often than not in an International Commercial Arbitration, the absence of uniform criteria to determine manifest lack of jurisdiction in early dismissal applications is a grave problem, even graver when the case at hand is of a complex nature.
Moreover, since an international arbitration is final and without any right to appeal, a risk is posed in making early dismissals that cannot be reconsidered when the fuller picture of the facts and law emerges in the full record. This, therefore, requires a stricter analysis by tribunals. The party requesting early dismissal must satisfy a high standard by demonstrating the existence of a claim, which has no legal merit and passes the threshold of “manifestness”. However, there is no such threshold for manifestness in the SIAC Arbitration Rules.
The term “manifestly” generally means something that is “evident”, “clear” or “obvious” to the observer. With hardly any substantive cases where the tribunal interpreted the meaning of manifest under Rule 29, reliance can be placed on the jurisprudence from where Rule 29 was inspired from, i.e. International Centre for Settlement of Investment Disputes (ICSID). The word appears not only in Article 45(6) of ICSID Additional Facility (AF) Rules, but also in Rule 41(5) of the ICSID Arbitration Rules, which has been interpreted by a number of arbitral tribunals. In Trans-Global Petroleum, Inc. v. The Hashemite Kingdom of Jordan, the Tribunal interpreted that manifestness requires the respondent to establish its objection “clearly and obviously, with relative ease and dispatch.” Moreover, the purpose of Rule 41 of ICSID Arbitration Rules, which is similar to Rule 29 of SIAC Rules, is to only dismiss those claims that are so obviously defective from a legal point of view, that they can properly be dismissed outright.
After looking at the existing jurisprudence on early dismissal, it is evident that a request for early dismissal cannot succeed if one, there is a need for a detailed factual analysis or if there are numerous disputed facts or two, where it is clear that the matter is heavily factual and does not establishes the lack of merit clearly or three, where there are plausible arguments on both sides.
Another issue with the procedural requirements laid down by Rule 29 is that Rule 29.2 requires the applicant to state in detail the facts and legal basis for seeking early dismissal. This requirement in itself works at cross-purpose to the intention of introducing the provision of early dismissal. The aim of early dismissal is to dismiss those claims which are without any merit or are outside the tribunal’s jurisdiction at an early stage so as to save cost and time of both the parties as well as of the tribunal. Early dismissal is granted to those applications where there is a clear lack of merit, however, requiring the applicant to establish in detail the facts and legal basis before the tribunal fails to achieve the purpose of saving cost and time of both the parties and the tribunal. Carefully analysing the facts and legal basis of seeking early dismissal and then hearing the other side defeats the purpose and unnecessarily drags unmeritorious claims or those claims which are clearly outside a tribunal’s jurisdiction simply because the Rule requires a need for a detailed analysis.
Suggestive procedure for determining the threshold for manifestness
To ascertain whether a claim is manifestly without any legal merit or outside the Tribunal’s jurisdiction, a four-step procedure should be followed by the Tribunal.
- In the first step, the applicant who raises a request for early dismissal should be directed to submit an application stating briefly the facts and legal basis supporting that the claim is without any legal merit/outside the Tribunal’s jurisdiction.
- In the second step, the tribunal should go through the application and shall have the discretion to either accept it or reject it. If the tribunal chooses to accept the application, an opportunity of hearing must be given to the opposite party. The opposing party may choose to either rebut the application filed or present before the tribunal briefly facts and legal basis as to why the claim has legal merit and the application should be rejected.
- In the third step, the tribunal should give an opportunity to the applicant to defend and respond to the opposing party’s claim. The applicant must only respond to what the opposing party has presented before the tribunal.
- In the last step, After the tribunal has attended to both the parties, the tribunal must check if
- There is a need to go into a detailed analysis of any fact or legal basis presented by the opposing party. For example, if the opposing party pleads involvement of corruption in the case, in such a situation, it is a duty of the Tribunal to go into a detailed analysis of the case and ascertain the presence of corruption.
- If the Tribunal believes that both the applicant and the opposing party have presented disputed facts over which there is no common agreement between the two. In such a case, it is the duty of the Tribunal to delve into a detailed analysis of the facts of the case and put an end to the dispute between both the parties.
- If the opposing party is able to convince the Tribunal that dismissing the case at an early stage will be detrimental to it and cause substantial loss to it.
If any of the three conditions are not met then it can safely be concluded that the threshold for manifestness is reached and the case is without any legal merit and outside the Tribunal’s jurisdiction. If the Tribunal finds any of the above three conditions to be fulfilled then it must reject the application for early dismissal for not reaching the threshold of manifestness.
The disruptions caused by COVID-19 have affected the performance of contractual obligations worldwide, to avoid such obligations, there is an increased reliance on the doctrine of force majeure to provide relief. The objective of the early dismissal process is to dismiss those claims where the case can be established with relative ease. For example, if the contract between the parties provides for a “pandemic” as a force majeure event then in the early dismissal proceedings, the Tribunal will dismiss the claim(s) at an early stage and find that the parties are exempted from liability. In this manner, the parties will find a quick way out through arbitration proceedings.
It is high time that Singapore International Arbitration Centre must consider amending the Rule 29 of SIAC Arbitration Rules and introduce uniform criteria to help the Tribunal assess claims for being manifestly without any legal merit and manifestly being outside their jurisdiction. Without any definite criteria to determine the manifestness of claims, it rests upon the tribunal’s discretion to decide whatsoever way it wants to construe whether the threshold for manifestness is reached or not. This not only opens a possibility of error in interpreting the provision but also paves way for lack of uniformity. It therefore becomes indispensable to amend Rule 29 and introduce criteria for determining the threshold of manifestness.
 Nicolás Costábile, ‘Early Dismissal of Unmeritorious Claims and Defences in International Arbitration’, in Carlos González-Bueno (ed), 40 under 40 International Arbitration, page 256 (2018).