What happens when a party fails to appear in an international arbitration?

In many U.S. proceedings, a plaintiff can seek a default judgment against a properly served defendant who fails to participate.  Although default judgments determine liability on the merits, a plaintiff can usually obtain one without actually presenting evidence to support its claims. 

Generally speaking, international arbitrations take a different approach.  For enforcement reasons, it is important that proceedings where only one side participates be perceived as fair.  Such arbitrations often include safeguards uncommon to U.S. litigation.

Arbitration laws and institutional arbitration rules

Most arbitration laws and institutional arbitration rules address a party’s “default” only in a narrow way.  They address whether a respondent’s non-participation should terminate proceedings.  Usually, applicable laws and rules state that it should not. 

For example, English arbitration law allows arbitral proceedings to continue notwithstanding a party’s failure to participate.  To the same effect are the International Centre for Dispute Resolution rules, the London Court of International Arbitration rules, the International Court of Arbitration rules, and the Singapore International Arbitration Centre rules.  

Arbitrator best practices

When only one party participates in an arbitration, the absent party might not voluntarily honor an award rendered against it.  Enforceability of any such award assumes heightened significance. 

To maximize chances of enforcement, arbitrators often make a conscious effort to demonstrate the inherent fairness of the proceedings.  That includes fairness in the process leading up to the award and fairness in the award itself.

On the process side, an arbitrator should ensure that the non-appearing party receives notice of the proceedings and the procedural timetable.  Particular emphasis should be placed on providing further notice ahead of deadlines for written submissions and hearings. 

Arbitrators also make a point of ensuring any written submissions and evidence are sent to the absent respondent, often both by email and hard copy.  Arbitrators also should inform the absent party of the substance of phone calls, conferences, or hearings.  The preferred practice is to send a transcript. 

Communications from arbitrators to non-participating respondents usually contain warnings of the potential consequences of continued non-participation.  Arbitrators often emphasize that the party’s absence will not prevent the tribunal from proceeding with the arbitration and issuing an award.

In essence, an arbitrator following best practices takes all reasonable measures – and perhaps some extraordinary ones – to give a respondent ample opportunity to participate in the proceedings.  Those measures are likely documented and detailed in any award that follows.

Arbitrators are not likely to issue an award based solely on a party’s failure to participate.  Rather, they normally require a claimant to satisfy its burden of proof with competent evidence for each of its claims.

An arbitrator is unlikely to receive a claimant’s arguments and evidence passively.  Arbitrators often  vigorously test the veracity of a claimant’s position.              

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Default judgments, as understood by U.S. practitioners, are rare in international arbitration.  Occasionally, that fact is explicitly mandated by law or rule, but it is most often a function of well-settled best practices. 

Those arbitrating against a non-appearing respondent should expect that party will be given a reasonable opportunity to participate.  They should also be prepared – just as if their opponent had participated – to prove their claims with persuasive and sufficient evidence.   

These arbitral best practices might be an inconvenience to claimants in the short term.  But in the long run, they could help the claimant achieve the desired outcome of an enforceable arbitral award.

To learn more about international arbitration, follow us on LinkedIn.  “Brilliant lawyers with courtroom savvy” – Benchmark Litigation.  Copyright MoloLamken LLP 2021. 

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