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One year ago, in May 2021, the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) extended its portfolio of dispute resolution services with the SCC Express Dispute Assessment (“SCC Express”). The SCC Express constitutes a new, hybrid form of dispute resolution between arbitration and mediation. Depending on what the Parties want, the SCC Express offers them a binding or non-binding legal assessment of their dispute(s) by a neutral professional. The SCC’s biggest marketing points are that the Neutral issues its findings within just three weeks after the dispute is submitted to the Neutral, and that the fees are fixed at 29,000.00 €.

Depending on the parties’ agreement, the Neutral will render a non-binding legal evaluation of the dispute, a contractually binding decision, or an enforceable arbitral award (for the latter the Neutral also has to agree).

In the following, the authors will examine whether the advantages of the SCC Express outweigh its limitations for each type of decision.

Non-binding decision

The first form of the SCC Express proceedings can be summarized as follows: Parties to a dispute pay 29,000.00 € for a legal, but non-binding, evaluation of their dispute within three weeks by a neutral third party, which they generally cannot use in subsequent proceedings. What sounds unappealing at first sight, might turn out to be a valuable addition to the existing means of dispute resolution.

If the Neutral’s findings facilitate the resolution of the dispute, the parties have done so within a very short time and with relatively low costs. In the authors’ experience, there are many cases in which this form of dispute resolution can be beneficial, particularly in cases where the parties already know each other very well, want to continue a long-term relationship, and where the dispute is not too disruptive. It often helps the parties to a dispute to gain some perspective by hearing from a neutral third person before initiating more expensive full-fledged arbitration. Exactly this can be achieved by such non-binding assessment. One typical scenario where a non-binding assessment could help are disputes between shareholders or joint venture partners.

If the Neutral’s findings are, however, dismissed by the “losing” party, the effort is wasted. The parties could not even use the findings as persuasive authority due to the broad confidentiality clause[1] included in the SCC Express Rules, unless they agreed on a waiver.[2]

The maximum time limit for a decision by the Neutral is three weeks. Although this might seem very short considering that the Neutral has to conduct what is essentially a “mini arbitration”, the SCC Express rules provide the Neutral with great discretion over the case and procedural management.[3] To ensure a smooth but fast procedure, the SCC will only select individuals with great case management experience.

Some practitioners might consider three weeks not enough time to examine complex legal or factual issues. The SCC itself states that the SCC Express Service is intended “primarily for less complex disputes, or disputes that hinge on a few legal or limited factual issues.” In such cases, there is no reason to expect that the Neutral cannot come to thoroughly prepared, developed and reasoned findings.

Binding, but unenforceable decision

If the parties want, they can agree[4] that the decision of the Neutral is contractually binding – but unenforceable – between them.

If the losing party refuses to comply with the decision, the same considerations apply as for the first form of the SCC Express: the effort and costs are wasted.

However, how likely is it that the losing party will refuse to comply? It will depend on whether the losing party considers non-compliance no realistic option, i.e. it will depend on whether subsequent arbitration / court proceedings would generally be nothing more than a mere formality on the basis of the Neutral’s decision. It is not entirely clear whether non-compliance is hopeless.

Firstly, it is not clear if a tribunal or court could “set aside” the binding decision. Potentially and depending on the applicable law, a tribunal or court could overrule the binding decision if the decision is unreasonable.

Secondly, it is not clear if the (binding) decision of the Neutral can be disclosed to an arbitrator / court. In this regard, however, the confidentiality clause in the SCC Express Rules may pose a potentially major issue. According to that clause, “the parties […] shall not disclose the existence of the Assessment or the findings, or use any information learned in the context of the Assessment, whether in a subsequent arbitration or otherwise.”

The language of the SCC Express Rules suggests that this clause applies equally for non-binding findings and a binding decision. Article 2(3) of the SCC Express Rules simply states that the findings can be binding upon agreement by the parties. It does not state that these “binding findings” constitute a different type of decision that would be treated differently under the rest of the Rules. As a consequence, without a confidentiality waiver, this might be a great obstacle to subsequent enforcement proceedings. Parties are therefore well-advised to include the confidentiality waiver provided by the SCC.

In practice, parties will only resort to this type of decision if they expect the losing party to comply with the decision.

Binding and enforceable award

If the Neutral agrees, the parties can appoint the Neutral as an arbitrator to confirm its findings in an arbitral award.[5]

A few questions remain open regarding the transition into the arbitration proceedings:

Firstly, the language of the Rules is not entirely clear concerning the point in time at which the parties can agree that the findings shall be confirmed in an arbitral award. In practice, this would most likely be before the start of the SCC Express proceedings. The wording “Subject to the consent of the Neutral[6] indicates, however, that the consent is only given after the selection of the Neutral.

Secondly, it is unclear if the confirmation in an award creates additional costs.

Thirdly, how do the costs of SCC Express compare to SCC Expedited Proceedings? The SCC Express Service costs 29,000.00 € (4,000.00 € administrative fees plus 25,000.00 € Neutral’s fees). This amount is only adjusted in exceptional cases.[7] Each party thus has to pay 14,500.00 € plus its own legal fees. In SCC Expedited Proceedings, the total of administrative fees and median arbitrator’s fess for one arbitrator is often lower than 29,000.00 €! This is the case if the amount in dispute is below 500,000.00 Euros.[8] For comparison: if the amount in dispute is 250,000.00 Euros, the total cost of SCC Expedited Proceedings (without legal fees) amounts to just 9,200.00 €.

This being said, SCC Express offers parties by far the fastest ways to an enforceable decision. Where time is key, SCC Express introduces the ideal solution at a reasonable price with a high degree of cost certainty.

Conclusion

With SCC Express, the SCC has filled a gap in the world of ADR. In the authors’ view, the SCC Express can be very valuable in many disputes and can avoid both lengthy arbitrations and – perhaps even more important – that disputes are not solved at all because the parties shy away from an expensive and full-fledged arbitration.

However, the parties need some courage and trust in each other to opt for the (non-binding) SCC Express. Let’s see how many parties are courageous.

[1] Article 3 SCC Express Rules.

[2] The waiver clause provided by the SCC reads: “The parties may use the findings of the Neutral and the information learned in the context of the Assessment in a subsequent arbitration or court proceeding.”

[3] The Neutral can inter alia expressly direct the parties to the – in its view – relevant points (especially by giving preliminary oral assessments of the issues), limit the scope of the written submissions and dispense with an oral hearing, Article 7(5) SCC Express Rules.

[4] The clause reads: “The findings of the Neutral shall be contractually binding upon the parties.

[5] Article 2(4) SCC Express Rules.

[6] Article 2(4) SCC Express Rules.

[7] Article 11(3) SCC Express Rules.

[8] 523,500.00 €.

Author

Dr. Markus Altenkirch LL.M. is a member of the Dispute Resolution team in the Frankfurt office of Baker McKenzie where he focuses on international arbitration. He currently represents clients in ICC, DIS, and CIETAC arbitrations. Markus primarily advises on Post-M&A as well as construction disputes. Markus teaches at the University of Mainz and regularly publishes in the field of international arbitration. He is a contributor and editor for Global Arbitration News. Markus Altenkirch can be reached at [email protected] and +49 69 2 99 08 232.

Author

Elias Klodt is currently a member of the Dispute Resolution team at Baker & McKenzie in Frankfurt. He participated in the Willem C. Vis Moot and is specialized on international arbitration. Elias Klodt can be reached at [email protected] and +49 69 299080.