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Commercial Arbitration

Introduction

Nigel Rawding QC and Elizabeth Snodgrass

Freshfields Bruckhaus Deringer

03 August 2016

As was observed in the introduction to the previous edition of GAR Know-how, it is traditional to begin any commentary on international arbitration with reflections on growth in the “market”, the setting-up of new arbitration institutions and important technical advances, whether in the shape of new rules or key rulings. Seen from this perspective, commercial arbitration continues, by any measure, to be a “success story”.

Quantitatively, the caseload of leading arbitral institutions continues to grow year on year; regional arbitration institutions continue to emerge; an increasing number of longer-established regional institutions, such as the Hong Kong International Arbitration Centre and the Singapore International Arbitration Centre (SIAC), are emerging as truly international players; and the caseload of such institutions continues to diversify.

Qualitatively, legislative reform and pro-arbitration judicial decisions in jurisdictions ranging from Brazil to Russia to Bahrain to India continue to level the playing field for arbitration as regards litigation and to reduce (if not yet completely eliminate) the potential for judicial interference with the arbitral process. And leading arbitration institutions from SIAC to the International Centre for Dispute Resolution at the AAA have, over the past several years, reviewed and modernised their arbitration rules.

The expansion and move towards true globalisation of international arbitration brings welcome diversification among users, counsel and arbitrators (although more remains to be done in this respect, especially in terms of tribunals more closely resembling users and counsel). As a consequence, the practice of arbitration is subject to influence from an ever broader range of cultural, legal and procedural frameworks, which in turn has generated a dialogue on standardising global norms of counsel conduct. In this connection we would mention the 2013 IBA Guidelines on Party Representation in International Arbitration and the General Guidelines for the Parties’ Legal Representatives annexed to the 2014 LCIA Arbitration Rules as two instruments that illustrate – not without controversy – the adaptability and responsiveness of the international arbitration system to new challenges.

Without taking anything away from the accomplishments described above, we also highlight in this brief introduction two other sets of challenges currently being faced by the system of international arbitration: one from within the system and the other from outside.

The principal challenge from within the system is a persistent (if not increasing) dissatisfaction from arbitration users about the ever increasing time and cost of arbitral proceedings. International commercial arbitrations are getting more complex; well-known arbitrators are getting busier; and, as a result, a system that once was advertised as offering a means of speedy, low-cost dispute resolution all too often results in lengthy and expensive proceedings.

Arbitration institutions have moved to address this challenge by including in the latest editions of their arbitration rules a greater emphasis on case management and tribunal efficiency. For example, the 2012 ICC Arbitration Rules (article 24(1)) require and the 2014 LCIA Arbitration Rules (article 14.1) encourage the tribunal to convene a procedural meeting or case management conference at an early stage in any arbitration. In November 2015, for the first time, the London Court of International Arbitration (LCIA) published comparative statistics on the cost and duration of arbitration proceedings. And in January 2016 the ICC announced that, for newly registered arbitrations, arbitrators will be expected to submit awards to the ICC Court for scrutiny within three months of the final substantive submission, on pain of financial penalty. Parties and counsel too must play their part in addressing this challenge by resisting the urge to adopt one-size-fits-all procedures for every dispute and by taking full advantage of the inherent procedural flexibility within the arbitral process to tailor the arbitral process to a given dispute.

Among the challenges to international arbitration from outside the system, we would draw attention to the following.

First, arbitration has come under some renewed criticism as a “back-room” process that adjudicates important public interests in a secret process that lacks legitimacy. This criticism comes primarily from the realm of investment treaty arbitration. But, given the increasing scope for submission to arbitration of public law disputes (such as those relating to securities fraud, corruption, competition law and the like), the pressure for greater transparency and publicity of arbitration proceedings is likely to affect the system as a whole.

Arbitration institutions have responded to this criticism by increasingly publishing redacted versions of arbitral awards in commercial cases; in investment treaty cases, awards and other significant documents are now more commonly published than not. Also in the investment treaty realm, in 2014 UNCITRAL published Rules on Transparency in Treaty-based Investor-State Arbitration and a draft Convention on Transparency in Treaty-based Investor-State Arbitration designed to overlay broad transparency norms on treaty arbitration proceedings. To date the impact of these instruments remains limited (given that, without contracting states opting in, they do not apply to arbitration pursuant to pre-existing treaties), but they appear to signal a clear trend towards greater openness and public scrutiny of international arbitration.

Second, the system of international arbitration faces competition from enhanced frameworks for the resolution of international commercial disputes in national courts. These mechanisms range from the Hague Convention on Choice of Court Agreements (which following the EU’s accession will enter into force – albeit only for 29 contracting states – on 1 October 2015) through to the promotion of state courts for the resolution of international commercial disputes (a particular focus of the New York City Bar Association in recent years) and the creation of parallel court systems for international commercial disputes (as in the courts established in the Dubai International Financial Centre, the Abu Dhabi Global Market, which opened for business in October 2015, and the Singapore International Commercial Court, which opened in January 2015).

For the last several decades, arbitration has enjoyed an advantage as a “least-worst” option for the resolution of international commercial disputes. To our eyes, the advantages of the arbitral process still remain compelling – certainly (outside the European Union) there is no parallel to the mechanism for the recognition and enforcement of arbitral awards under the New York Convention, and parties value highly the opportunity to choose arbitrators and to keep their disputes confidential. But arbitration practitioners and proponents must embrace the challenge of increasing competition from national judicial frameworks as stimulus to improve the ability of commercial arbitration to meet the needs and expectations of its increasingly diverse users. Given the inherent flexibility of the system, and the talents and energy of its many practitioners and users, we are confident that arbitration will remain the preferred method for the resolution of international commercial disputes.

Introduction by Contributing Editors Nigel Rawding QC and Elizabeth Snodgrass, Freshfields Bruckhaus Deringer LLP

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