[Gnso-igo-ingo-crp] Arbitration costs would be HIGHER than court costs

[Paul Keating]

Thank you George.  These are very sobering facts that would seem to show that arbitration would work a substantial hardship on plaintiffs (UDRP respondents). 

This makes the contrast even more severe when one considers the total lack of evidence supporting such a post UDRP arbitration process. 

Sincerely,
Paul Keating, Esq.

> On Nov 22, 2017, at 2:40 PM, George Kirikos <icann at leap.com> wrote:
> 
> Hi folks,
> 
> I believe that the backers of Option #3 are incorrect to claim that
> arbitration would be less expensive than the courts.
> 
> I provided some preliminary discussion of this imporant point at the
> end of a prior email at:
> 
> http://mm.icann.org/pipermail/gnso-igo-ingo-crp/2017-October/000884.html
> 
> "Costs -- it's naive to believe that costs would be lower in
> arbitration than in a judicial case, while trying to emulate the due
> process protections of a court. One need only look at a recent IRP
> that ICANN lost:
> 
> http://domainincite.com/21481-icann-loses-another-irp-sport-gtld-fight-reopens-as-panel-finds-apparent-bias
> 
> where the costs of the IRP itself (*not* counting lawyers fees of each
> party) amounted to $152,673. In real courts, the actual disbursement
> costs and filing fees are relatively low (hundreds of dollars, maybe
> thousands in a complex case), because the most substantial cost,
> namely the labour cost for the judge (their salary) is paid for by
> TAXPAYERS! Not so in an arbitration, where the parties themselves have
> to pay for the costs of the panelists (3 panelists, multiplied by
> hundreds of dollars per hour, multiplied by many hours adds up
> quickly)."
> 
> but wanted to have a focused discussion just on this point.
> 
> Here are some additional references to consider (I saved the best for
> last, since like the above it directly involved ICANN, so jump to the
> bottom if you'd like):
> 
> (1) http://www.lawmemo.com/arb/res/cost.htm
> 
> "Here, Public Citizen presents the first comprehensive collection of
> information on arbitration costs. We find:
> 
> The cost to a plaintiff of initiating an arbitration is almost always
> higher than the cost of instituting a lawsuit. Our comparison of court
> fees to the fees charged by the three primary arbitration provider
> organizations demonstrates that forum costs- the costs charged by the
> tribunal that will decide the dispute- can be up to five thousand
> percent higher in arbitration than in court litigation. These costs
> have a deterrent effect, often preventing a claimant from even filing
> a case.
> 
> Public Citizen's survey of costs finds that, for example, the forum
> fee for a $60,000 employment discrimination claim in the Circuit Court
> of Cook County, Illinois is $221. The forum fees for the same claim
> before the National Arbitration Forum (NAF) would be $10,925, 4,943%
> higher. An $80,000 consumer claim brought in Cook County would cost
> $221, versus $11,625 at NAF, a 5,260% difference. These high costs are
> not restricted to NAF; for the same $80,000 claim, the American
> Arbitration Association (AAA) would charge the plaintiff up to $6,650,
> and Judicial Arbitration and Mediation Services (JAMS) would charge up
> to $7,950, amounting to a 3,009% and 3,597% difference in cost,
> respectively."
> 
> (2) https://m.mayerbrown.com/Files/News/04165fd5-5165-41ea-bb6f-19d9235c171d/Presentation/NewsAttachment/7e531e5e-4040-4251-b1a8-1d4b6168c99b/Practice%20Note_Duncan_Pros-Cons-Arbitration_oct12.pdf
> 
> "It is often said that arbitration is quicker and cheaper than
> litigation. However, arbitrations may in certain cases actually be
> more protracted and more expensive than litigation. There are numerous
> reasons for this, including: - the additional costs payable in
> arbitration which are not applicable in court proceedings. For
> example, the requirement to pay the arbitrators’ fees, any
> institutional administrative fees and to pay to hire the hearing venue
> - poorly drafted contracts with arbitration agreements which fail to
> provide an adequate and practical framework for the conduct of the
> arbitration proceedings - tribunals being unwilling to control the
> timetable and the parties’ conduct for fear of challenges to the
> subsequent award on the grounds of unfairness Disputed enforcement
> proceedings (although this is an area which various arbitral
> institutions are working hard to address, for example with the new ICC
> Rules)"
> 
> (3) https://www.attorneygeneral.jus.gov.on.ca/english/family/arbitration/cost.php
> 
> "It is often thought that arbitrations are cheaper than court-based
> litigation, because people may agree on a streamlined procedure and
> avoid delays that may occur in the formal court process.
> 
> However, an arbitration that is contested may turn out to be longer
> and more expensive than going directly to court. The parties may end
> up in court fighting about the arbitration as well as their original
> dispute."
> 
> [George's note: Note, it's clear that for the case of an IGO dispute involving a
> domain name owner, where it already went to UDRP, already fought a
> battle re: "immunity", that it is a heavily contested case, so would
> very likely end up being more costly than court due to the payment of
> the arbitrators' fees (which are going to be triple in total due to
> the 3 person panel).]
> 
> (4) http://thefirmdubai.com/new/publicationdetails/114
> 
> "It is submitted that one of the first things to consider should be the
> value of the contract and, more precisely, the amount that would be
> the subject of a claim if a potential dispute arises. This is
> important because arbitration costs and attorney fees for the same are
> usually much higher than court fees and attorney fees for litigating
> the case. Dubai courts (mainland courts) have a cap on their fees
> equivalent to AED 40,000 regardless of the value of the claim, while
> there is no cap for arbitration cases. By way of example, a claim with
> a value of AED 3 million before Dubai courts (mainland courts) would
> not involve more than AED 40,000 of court fees. However, the
> same-value arbitration would cost AED 130,000 before a single
> arbitrator, and three times this amount (roughly AED 350,000) if the
> contract provided for a three-arbitrator panel. Moreover, if you
> successfully obtained the award, you would have to pay an additional
> AED 40,000 by way of court fees to enforce the award.
> 
> Furthermore, the number of panel arbitrators should be carefully
> considered because the fees of an arbitration panel of three
> arbitrators will be three times that of a sole arbitrator. Recently, a
> client, an international supplier of building materials instructed our
> firm to commence proceedings against a main contractor to claim an
> outstanding balance. Upon review of the supply contract, we discovered
> the presence of a UNCITRAL arbitration clause whereby any dispute was
> to be resolved through a panel of three arbitrators. When informed of
> the estimate of arbitration and attorney fees, the client’s
> representative refused vehemently to proceed down that route for
> economic reasons. In the words of the client’s representative, the
> fees were “exorbitant”. However, luckily, after the client submitted
> to us additional documents, we detected a loophole in the contract,
> which we used to avoid the arbitration agreement. Hence, the decision
> was taken to bring proceedings before the Dubai mainland court."
> 
> [George's note: Of note, UNCITRAL rules have been brought up several
> times in this PDP as potential rules to follow, and the above is a
> clear example of parties to a dispute wanting to avoid their use
> because the costs would be "exorbitant".]
> 
> (5)(a) http://domainincite.com/4580-icann-tries-to-dodge-jobs-legal-fees
> 
> "ICANN is still smarting from the last time it headed to arbitration,
> for its Independent Review Panel over ICM Registry’s .xxx top-level
> domain.
> 
> ICANN lost that case in February 2010, and had to cover the panel’s
> almost $500,000 in costs, as well as its own legal fees. The overall
> price tag is believed to have comfortably made it into seven figures."
> 
> (5)(b) https://www.thedomains.com/2010/02/20/report-finds-against-icann-in-denying-the-xxx-extension-charges-them-the-475k-cost/
> 
> "Yesterday an independent panel, the International Centre For Dispute
> Resolution (pdf) found in a 80 page decision, in favor of the ICM
> Registry against ICANN for its decision to eventually reject the .xxx
> extension and ruled that ICANN had to pick up all the costs of the
> independent panel to the tune of $475K and reimburse ICM the fees it
> paid for the application to the tune of another $241K. (ICM is stuck
> for its own attorney fees)."
> 
> (5)(c) https://www.icann.org/en/system/files/files/-panel-declaration-19feb10-en.pdf
> 
> "Therefore, the administrative fees and expenses of the International
> Centre for Dispute Resolution, totaling
> $4,500.00, shall be borne entirely by ICANN, and the compensation and
> expenses of the Independent Review Panel, totaling $473,744.91, shall be
> borne entirely by ICANN. ICANN shall accordingly reimburse ICM Registry
> with the sum of $241,372.46, representing that portion of said fees and
> expenses in excess of the apportioned costs previously incurred by ICM
> Registry."
> 
> (from the full ICDR decision, costs on page 70)
> 
> [George's note:] ICANN paid nearly $500,000 just to cover the IRP
> panel fees in the .xxx arbitration (not counting its own legal fees)!
> There's no court in the world where the court fees would ever amount
> to such a high level for such a case (because, as I've noted earlier,
> it's the taxpayers who pay the salaries of judges in court, whereas in
> arbitration it's the parties who pay those steep costs).
> 
> Thus, while arbitration is presented as a solution to improve access
> to justice, it'd actually have the exact opposite effect, *increasing*
> the barriers to justice due to the prohibitive costs involved.
> Contested intellectual property disputes are by their very nature
> complex compared to other litigation, and the costs would accordingly
> be high for an arbitration where the parties have to pay the hourly
> fees of panelists.
> 
> Sincerely,
> 
> George Kirikos
> 416-588-0269
> http://www.leap.com/
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