Stockholm syndromes

 MARKET VIEW – ARBITRATION 

James Hope of Vinge talks to Annette Magnusson, secretary general at the Arbitration Institute of the Stockholm Chamber of Commerce, about arbitrator diversity, emergency relief and sharing best institutional practices

That Sweden boasts both one of the earliest modern arbitration statutes – predating by two years the English Act of 1889 – and an enviable reputation for resolving East-West disputes as a legacy of its being the venue of choice for Cold War-era parties counts for little in the hyper-competitive world of international arbitration. Indeed, a few essentially superficial differences aside, Annette Magnusson admits that the alphabet soup of institutional rules can be largely indistinguishable. For parties, the question is always a simple one: what do I get in practice? The difference is not what an institution offers, but the way it puts its rules into practice. It is, says Magnusson, who joined the Stockholm Chamber of Commerce (SCC) in April 2010 from Swedish disputes firm Mannheimer Swartling, the ‘how’ that matters.

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James Hope, Vinge: Why should a party use the Arbitration Institute at the SCC?

Annette Magnusson, SCC: A party’s choice of institution is defined by a number of factors. The first is your familiarity with the institution, particularly in the context of the type of dispute in question. For example, it is well known that the SCC has strong and historic experience in resolving East-West disputes, cases related to the energy field and, in more recent years, treaty arbitrations. Our counsel are very well versed in each of those fields. More importantly, they are close to the cases and know the arbitrators and the process, in the sense that they’re close to the proceedings. Parties who choose the SCC know they have access to the counsel working on their files; they can be safe in the knowledge that our counsel know, and care about, their files. I think that’s a good thing.

James Hope: How long on average does it take from the registration of the claim to the production of an award?

‘We look to have at least one woman on each list.’ Annette Magnusson, SCC

Annette Magnusson: For an international case, it takes about a year to render an award. The investor-state cases, given their complexity, take two years on average. In my time as secretary-general numbers have stayed relatively stable. The smallest treaty case we are currently administering is worth €16,000; the biggest is around €13bn. The spread of our commercial matters is similar – some are valued at several billion euros – so it’s a very diverse caseload.

James Hope: There are always cases which fall outside the ordinary when one is having these discussions, but I know of some SCC cases that have taken very much longer than two years.

Annette Magnusson: You will always have the outliers, both in the commercial and treaty context. Those are the cases you notice, the ones that get talked and written about a great deal. The average cases, in which nothing dramatic happens and the parties receive an award in 11 months, are rarely discussed. That goes for the entire field.

James Hope: What makes some cases take so much longer – is it the parties, the arbitrators or the courts?

Annette Magnusson: It could be for any number of reasons. For example, you might see cases where one party isn’t particularly interested in the dispute being decided; we’ve all experienced that type of case. Alternatively, the members of the tribunal may be proving slower than expected in conducting the case, and possibly shouldn’t have accepted their appointments in the first place. You might also be surprised at the number of times high-value disputes are conducted without the involvement of outside counsel. In those cases, a company director or commercial manager will be representing the business, which can understandably contribute to the case not being decided as efficiently as if outside counsel had been involved.

Pick an appointment

Unlike the International Chamber of Commerce (ICC) and Singapore International Arbitration Centre, the SCC does not formally scrutinise awards rendered by its tribunals. How then is performance measured, other than by way of anecdotal evidence or the successful challenge of awards? Magnusson says the SCC reviews arbitrators’ general performance and their end product, albeit the institution doesn’t blacklist panellists as such. ‘We do assess performance and, yes, it does matter when it comes to new appointments,’ she says.

One possible solution would see the SCC, rather than the arbitrators, send out the award, thus enabling the secretariat to catch errors which may lead to a successful challenge while avoiding the extra time and cost entailed by a full scrutiny process. Such an idea has been discussed internally ‘from time to time’, says Magnusson. Not every panellist replacement can be attributed to poor performance, however. More prosaically, most arbitrators – eventually – retire, meaning there is an ongoing need to identify and recruit up-and-coming talent.

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James Hope: What factors does the SCC take into account when appointing arbitrators?

Annette Magnusson: It’s a fairly long list, but one that can vary from case to case. As with most institutions we usually appoint the chairperson, which often entails a different skillset from a party appointment. We require added experience generally, but experience of chairing arbitral tribunals in particular. Then we look at the co-arbitrators on the case and how the chairperson can be used to complement or, if needs be, manage their colleagues. They must also be neutral in relation to the parties; language could be an issue in this regard, as could their legal background. It goes without saying that each of the arbitrators needs to understand the legal issues underpinning the case. That might mean having experience of the region at the heart of the dispute, or the context in which the contested contract was struck. Lastly, we look at their time commitments: has this person already taken on a lot of cases? We ask arbitrators to confirm in writing that they have time to take on any additional matters.

‘My impression, and I say this as counsel, is that the fees charged by the SCC are reasonable.’
James Hope, Vinge

James Hope: I must say that the SCC does a great job in promoting young arbitrators, and especially women, which I’ve seen done successfully on many occasions. Was that a conscious decision?

Annette Magnusson: Absolutely. It is our responsibility to increase diversity, which includes gender, geography and age. You need to tick all of the other boxes, of course, but there are plenty of people that fulfil those requirements and contribute to diversity. The last time we looked at the numbers of female appointments it was about one in four. When we present possible appointees to the board we have three names for each appointment, which helps to increase both diversity and efficiency. It means that if the first person on the list isn’t able to accept the appointment, we are able to move to the second name without having to start the process all over again. We look to have at least one woman on each list.

James Hope: Do you think the SCC’s emergency arbitrator provisions have proven to be successful?

Annette Magnusson: They have been very successful since their introduction, in January 2010, and have been used ever since that date. We have seen that the procedure works well. The 24-hour time limit to appoint an emergency arbitrator has proven to be doable, as has the five-day limit to issue a decision on interim measures. Pleasingly, parties are loyal to the procedure.

James Hope: When comparing it with other institutions, it is an amazingly quick process. How does it work in practice?

Annette Magnusson: Counsel will usually call in advance to let us know that they are going to imminently file an emergency arbitration request. It will usually arrive on Friday night, or the day before Christmas, but we’ll do whatever is required to make it happen. The number of requests has been stable to date – between two and four per year. That’s what we expected.

Counting the cost

The SCC’s 16-member board, led by Magnusson’s predecessor as secretary general, Ulf Franke, houses five women: Stockholm University academic Patricia Shaughnessy; King & Spalding treaty arbitration specialist Margrete Stevens; Schellenberg Wittmer partner Nathalie Voser; and two prominent Swedish general counsel, Nina Macpherson of Ericsson and Pfizer’s Inger Brattne. Its secretariat is staffed almost entirely by women. Of the ten-strong team, Magnusson included, only one – Johan Lundstedt, a legal counsel – is male. Among the board’s male contingent are British barrister Toby Landau QC, lauded for his role in two of the most influential arbitration cases in recent memory, Dallah v Pakistan and Jivraj v Hashwani, Debevoise & Plimpton dispute resolution partner David Rivkin and Chinese disputes specialist Michael Moser, the first non-PRC national appointed to a tribunal in the jurisdiction. Members serve three-year terms, which can be renewed once. While board meetings are held once a month, issues are also tackled as and when they arise – a particularly thorny challenge, for example.

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Annette Magnusson: The combined experience of the board and its role in our organisation is critical. Its diversity of nationalities and expertise feeds into every decision the board makes – whether that relates to the appointment of, and challenges against, arbitrators, complicated jurisdictional questions, and so on. Being able to tap into that experience ensures that our decision-making is increasingly strong, which is in fact a feature of the SCC as a whole.

James Hope: I can certainly attest to that. I was amazed when I first saw how the board meetings worked. People ring in from across the world and participate fully, which you might not necessarily expect from a group of incredibly busy lawyers. Interestingly, having sat on the board for a little over a year, I don’t remember a situation where we thought the costs of arbitrating at the SCC were too high. I do remember, however, several discussions where we thought the arbitrators weren’t receiving adequate compensation. We weren’t trying to ensure that people were making lots of money, but simply looking at the practicalities of how cases were going to work, especially in the investor-state context.

Annette Magnusson: The most common question we receive, both from in-house and outside counsel, is: how much is this going to cost? Because predictability is worth a great deal, our fee structure is based as a starting point on the amount in dispute, meaning that it’s possible to calculate the tribunal’s costs before the arbitral process begins. Time and added-value are completely different principles. Parties want to have reasonable and predictable ways of deciding costs in relation to the value of the claim they are contesting.

James Hope: I agree. In contrast to the ICC, which doesn’t have a limit on the tribunal’s fees, the SCC has an upper limit of €100m in claim value, after which fees are discretionary. In a normal case, an arbitrator might receive €50,000 to €100,000, but not much more than that. My impression, and I say this as counsel, is that the fees charged by the SCC are reasonable. The fact that they are calculated by the value of the claim, rather than on an hourly rate, doesn’t lend itself to excessive tribunal costs.

Annette Magnusson: It is of course important to benchmark ourselves against other arbitral institutions. That said, we are very open to working together. We receive a large number of delegations at the SCC every year, including from developing countries, and we are always open to sharing, and exporting, best practices. The SCC also has a key role in supporting initiatives for legislation relating to international arbitration. We have a common objective for providing a solution for businesses to resolve their disputes; in that sense we have a joint mission with other institutions, and we try to live up to that.