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

[Paul Keating]

Phil,

First, regarding costs of arbitration, the salient report was not about the
ICANN arbitration but rather the filing fees and anticipated costs of using
NAF, AAA and JAMS - all of whom have minimum fees plus additional fees based
upon the ³value² of the dispute.  So when speaking about a 3-letter domain
name, the value will be high 5 to mid 6 figures.  A substantial fee.

Second, responding to your comments:

> 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.
> 
PRK:  If the arbitration process requires both parties to agree then it is
an agreement to agree and is not enforceable against anyone.  What benefit
would this be to any party?  What is the benefit of creating such a complex
system?  They can already call each other up and contractually agree to hold
arbitration.

> 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.

PRK:  This ³net benefit² exists ONLY when a respondent is faced with a
Mutual Jurisdiction whose courts do not recognize a cause of action the
Respondent can plead.  As noted, the MJ provision does not foreclose use of
any otherwise appropriate jurisdiction.  For the majority of domains (those
run by Verisign) jurisdiction is per se existing in the US (that is where
the domain registry - and thus the domain for in rem purposes - is located)
and the ACPA grants a specific right of action.  The only additional hurdle
that a respondent would have to satisfy (if the US was not the stated MJ)
would be to obtain a court order enjoining the transfer.  This can be
obtained ex-parte.  And, even if not obtained, most registrant agreements
state that receipt of a complaint will result in a lock on the domain ­
which does not guaranty that the UDRP decision would not be enforced but
adds some weight.  Strong arguments can also be made for an order to reverse
the UDRP decision during the litigation even if the transfer has taken
place.

As a final point, I note that the task of creating the applicable rules for
any proposed arbitration process would be enormous and consume many hundreds
of hours.  I am sorry but I just do not see it.


I fully understand the desire to create a result that the GAC and IGOs will
accept.  I understand that the Board may not accept a recommendation along
the lines of our initial recommendation.  But that is life as they say and I
don¹t believe it is our task to presume a problem exists when neither the
evidence nor applicable law shows that it does.  And, our attempt to
recommend changes to the UDRP based upon that presumed problem, I believe,
goes beyond our mandate.


Paul


On 11/22/17, 6:32 PM, "Gnso-igo-ingo-crp on behalf of Corwin, Philip via
Gnso-igo-ingo-crp" <gnso-igo-ingo-crp-bounces at icann.org on behalf of
gnso-igo-ingo-crp at icann.org> wrote:

> 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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