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

[Corwin, Philip]

Personal comments:

I do not believe that the costs of an IRP seeking to overturn an ICANN Board
action, or an arbitration process concerning the complexities of an
employment discrimination case, are directly comparable to the narrower
issues at play in a post-UDRP appeal.

As for consumer group critiques of arbitration clauses, they have been
subject to criticism on the basis of those entities receiving substantial
funding from the trial bar seeking to expand the ability to bring class
action litigation (I take no position on the merits of their conclusions, and am equally
skeptical of industry studies claiming great benefits from compulsory
arbitration).

But the most salient point is that Option 3 does not compel the parties to utilize arbitration as an alternative to judicial review; doing so requires mutual consent. If either party feels that this route is more expensive than judicial process or has other disadvantages it can withhold that consent.

As for the availability of arbitration in the rare circumstance of an IGO succeeding in its claim of immunity from judicial process, that provides a net benefit to domain registrants compared to current policy by providing an opportunity to get a determination on the merits under applicable national law, an opportunity that is not available today in the same scenario.

-----Original Message-----
From: Gnso-igo-ingo-crp [mailto:gnso-igo-ingo-crp-bounces at icann.org] On
Behalf Of George Kirikos
Sent: Wednesday, November 22, 2017 8:41 AM
To: gnso-igo-ingo-crp at icann.org
Subject: [EXTERNAL] [Gnso-igo-ingo-crp] Arbitration costs would be HIGHER
than court costs

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-reope
ns-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/Pre
sentation/NewsAttachment/7e531e5e-4040-4251-b1a8-1d4b6168c99b/Practice%20Not
e_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.ph
p

"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.pd
f

"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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