Suppose you went to arbitration and the opponent did not come?
In arbitration, you have to prove your case even if the opponent does not show up. The no-show creates some pitfalls to avoid.
A respondent who does not participate will not prevent an arbitration from proceeding. However, unlike the ordinary courts in many (or even most) countries, arbitral tribunals generally cannot render default decisions. The claimant will still have to submit evidence and present legal grounds supporting its claims. Tactically, refusing to participate allows the respondent to raise jurisdictional objections in set-aside or enforcement proceedings. If the non-participation is not handled properly, further grounds for challenge of the award may appear.
No-show is not a showstopper
First and foremost, the non-participation of a party does not prevent an arbitration from proceeding or a tribunal from rendering an enforceable award. This principle may be spelt out explicitly in arbitration laws and institutional rules, and may also be reflected in provisions dealing with the practical hurdles of non-participation. For example, the competent court or arbitral institution will generally always be empowered to appoint an arbitrator on behalf of the non-participant.
However, the tribunal will generally never be entitled to render a default award, i.e. to grant the relief requested just because the respondent did not show up. Again, this principle may be explicitly spelt out, and may also be reflected in requirements for the tribunal to apply the law and to consider the evidence before it.
Furthermore, tribunals are always required to safeguard both parties’ rights to fair proceedings. This means that the claimant will still have to present legal grounds and submit evidence supporting its claim. Moreover, the non-participating party shall generally be given a reasonable opportunity to join the arbitration at all stages of the proceedings. Therefore, the non-participant should be included in all correspondence with the tribunal and any arbitral institution, and be given the opportunity and also be encouraged to comment at all procedural and substantive milestones.
Advancing without resistance(?)
Presenting your case without an opponent to dispute your legal reasoning and question your evidence may sound like a dream come true. However, this situation also has its downsides. (As the saying goes, if you advance without resistance, you are walking into an ambush.)
First, the resistance from an opponent may also assist you in presenting your case better, by pointing out weaknesses in your reasoning and evidence thereby allowing you to remedy them. Secondly, as the tribunal’s obligation to safeguard the interests of the non-participating party will not necessarily be fulfilled if the tribunal simply accepts everything presented to it, you still have to convince the tribunal.
In our experience, tribunals and participants deal with the above challenges by adapting the procedure. For example, the procedural timetable may have two tracks, one for where the respondent joins the proceedings at a given milestone, such as the due date for the respondent’s first submission on the merits, and another for where the respondent does not. In the latter case, the tribunal will partly step into the shoes of the respondent, and submit questions to the claimant, aiming to clarify the claimant’s position.
In such cases, the practical evidentiary burden on the claimant may even be effectively somewhat higher. In practice, there may be only one main pleading on the merits in the proceedings, and all relevant arguments and evidence should be submitted with it.
Finally, the non-participant would normally be precluded from raising jurisdictional objections in set-aside proceedings only if it actually appeared in the arbitration at least once without raising such objections. As such, the non-participant is often not precluded from disputing the tribunal’s jurisdiction before the state courts. Not knowing the respondent’s jurisdictional objections, the claimant cannot rebut them in the arbitration, and the tribunal is not necessarily able to pre-empt them and properly discharge of them in an award. This may make the award more vulnerable to subsequent challenge.
Avoiding the pitfalls
Non-participation may be part of a delaying strategy, where the non-participant plans to disrupt the proceedings by joining late with extensive submissions, attempting to postpone hearings and/or the award. This risk is particularly high if the proceedings are divided into separate phases, for example dealing with jurisdiction before the merits. An unfavourable award on jurisdiction may often prompt the respondent to change strategy and enter the arbitration in the second stage of the proceedings, and then also attempt to relitigate already decided matters of jurisdiction. In order to pre-empt and mitigate such tactics, the claimant may want to ask the tribunal to establish a clear procedural timetable and a strict cut-off date.
In our experience, the timetable should first safeguard the non-participant’s reasonable possibility to join the arbitration with a generous time limit for responding to the claimant’s first main pleading. Thereafter, the timetable and the supplemental procedural rules should regulate in full the possibility to submit pleadings and evidence in case of a late entry. Depending on when the non-participant enters the proceedings, it may have a more limited opportunity to present its case. However, this should not be a breach of due process if the non-participant has had earlier opportunities to enter the proceedings but has chosen not to do so.
Non-participation may also require adaptions of the supplemental procedural rules, in particular those dealing with evidence. For example, common provisions saying that documents shall be deemed to be authentic unless disputed by a party, do not work when one party does not participate. Theoretically, the non-participant may allege that any reliance by the tribunal on the non-participant’s failure to dispute the authenticity of the documents is a procedural error which affected the outcome and try to set aside the award and/or resist enforcement on that basis. The logic is that because the non-participant was not there, it could not dispute anything, and therefore the tribunal could not deem or assume anything. In our experience, this potential threat against the integrity and enforceability of the award is dealt with by amending these evidentiary provisions and replacing references to agreement or failure to dispute by the parties with references to the tribunal’s discretion. Obviously, the tribunal retains its discretion to assess the evidence even if a party does not participate.