The “2015 International Arbitration Survey: Improvements and Innovations in International Arbitration”, by White&Case and the University of Queen Mary provides feedback on the latest innovations of international arbitration stakeholders, reviews their perceived effectiveness and tests the viability of selected future developments, on the basis of 763 questionnaire responses and 105 interviews conducted.
The main drawback to international arbitration according to the 2015 international arbitration survey is seen as its cost, which networks such as the International Arbitration Attorney Network have addressed, but there are also some other interesting conclusions that have been drawn.
International Arbitration Survey 2015: the State of Play
90% of respondents indicate that international arbitration is their preferred dispute resolution mechanism and the most valuable characteristics of international arbitration are the enforceability of awards, the possibility to avoid specific legal systems and national courts, the flexibility and the option to select arbitrators. Interestingly, the in-house counsel subgroup favors particularly confidentiality and privacy.
The worst characteristics of international arbitration are its cost, the lack of effective sanctions during the arbitral process, the lack of insight into the arbitrators’ efficiency and the lack of speed. The common denominator of these characteristics is that they relate to the internal workings of the arbitral process which can be influenced by its stakeholders.
A significant majority of respondents stated that there should not be an appeal mechanism on the merits for arbitral awards in international commercial arbitration (77%) and a smaller majority (61%) disfavored the inclusion of such mechanism in investment treaty arbitration.
Should an appeal mechanism be structured in international commercial arbitration, 52% of respondents agreed that it should be implemented within the system of international arbitration rather than via an external forum, 26% would designate another arbitral tribunal as the appellate body and another 26% favour appeals being handled by the relevant arbitral institution. Should an appeal mechanism be structured in investment treaty arbitration, 51% of respondents would prefer an external appellate supervision by an international court.
Overall, respondents appeared to find that the benefits of international arbitration outweigh its flaws but users would have certain improvements made to it, in particular in relation to the cost and the speed of arbitrating. Other notable suggestions included amending the New York Convention to narrow the grounds for non-enforcement of arbitral awards, broadening the pool of arbitrators in number as well as in ethnic and gender diversity, and feedback mechanisms on arbitrators. Respondents have also shared concerns regarding the tribunals’ reluctance to act decisively in certain situations for fear of the arbitral award being challenged on the basis of a party not having had the chance to present its case fully. This “due process paranoia” often leads to deadlines being repeatedly extended and fresh evidence being admitted late in the process which in turn causes lack of speed and an increase of the costs.
International Arbitration Survey 2015: The Evolution of Seats and Institutions
- Choice of Seat
The choice of the seat of arbitration impacts arbitration proceedings in various ways such as the level and nature of the supervisory jurisdiction of the domestic courts of the seat. Respondents stated that their most preferred and widely used seats are London, Paris, Hong Kong, Singapore and Geneva. Their preferences are driven by the reputation and recognition of the seat but also the neutrality and impartiality of a legal system, the national arbitration law and the track record for enforcing agreements to arbitrate and arbitral awards.
Preference for certain seats is often based on intrinsic legal features while factors of personal convenience such as cultural familiarity or location of the arbitral institution ranked considerably lower. Factors of convenience however seem to become more important to stakeholders after a seat’s formal legal infrastructure reaches a certain threshold of quality.
Interestingly, Respondents view that the most improved arbitral seats and the most improved arbitral institutions over the past 5 years are Singapore and Honk Kong, and the HKIAC and the SIAC. Elements leading respondents to state that a particular seat has improved include better hearing facilities, availability of quality arbitrators who are familiar with the seat, better local arbitral institutions and improvements to the national arbitration law.
- Choice of Institution
The choice of arbitral institution can have a significant impact on the structure of the arbitration proceedings and is often relevant for decisive issues such as the appointment of, and challenges to, arbitrators. 79% of respondents’ arbitrations over the past 5 years were administered by institutions.
The most arbitral institutions are the ICC (68%), LCIA (37%), HKIAC (28%), SIAC (21%) and the SCC (13%), and respondents’ preferences are based on an assessment of the quality of their administration (including proactiveness, facilities, quality of staff), their level of “internationalism” and global presence and ability to administrate arbitrations worldwide. The top two considerations increasing the likelihood of a suggested institution being agreeable to both parties when negotiating the arbitration clause are the reputation and recognition of the institution (62%), the previous experience of the institution (52%) and the seat chosen for the arbitration (36%). This last finding suggests that some institutions may benefit from their perceived connection to a given seat and that the quality of a seat may have a strong effect on the popularity of a locally based institution. The in-house counsel subgroup favours particularly the expertise of the institution in certain types of cases while the arbitrators mention the scrutiny of the awards and the private practitioners the overall cost of service as reasons why they prefer an institution over another.
Respondents feel that arbitral institutions would contribute to the improvement of international arbitration by publishing data relating to the average length of their cases and the time taken by individual arbitrators to issue awards, and increasing transparency in the institutional decision-making on the appointment of, and challenges to, arbitrators. The suggestion that institutions should publish awards in a redacted form was favoured for both its academic value and usefulness when arguing a case but also as a method to gain insight into arbitrator performance and encourage arbitrators to write high quality awards. It was also stated that published reasoned disqualification decisions would give parties due process comfort because they would know that their application was properly considered and would also benefit the arbitral community as a whole because it would provide insight into the circumstances on which meritorious challenges might be founded.
International Arbitration Survey 2015: Reducing Time and Cost
Cost and lack of speed were both ranked by Respondents as amongst the worst characteristics of international arbitration and several factors can help address these issues.
Innovations to control time and cost include, for example, the requirement that tribunals commit to and notify parties of a schedule for deliberations and delivery of a final award, which is expected to incentivize arbitrators to render awards in a timely fashion and alleviate some of the clients’ frustrations with the length and uncertainty of the award process.
92% of respondents would like simplified procedures to be included in institutional rules for smaller claims and 94% believe that disputes exceeding USD 1 million should fall outside of this provision.
Almost half of respondents (46%) preferred recourse to relevant domestic courts if in need of urgent relief before the constitution of the tribunal and 29% preferred emergency arbitrators. The most stated concern (79%) relates to the enforceability of the decision rendered. The overwhelming majority of respondents (93%) nonetheless favour the inclusion of provisions on emergency arbitrator in institutional rules.
Arbitration counsels can contribute to improving international arbitration in several ways, in particular by working with opposing counsel to narrow the issues and limit document production, encouraging settlement, including the use of mediation during an arbitration and by not overlawyering (e.g. not include disproportionate use of resources in the conduct of matters). Counsels could also make better use of technology to save time and cost and 44% think that counsels should encourage a shift to electronic paper filings.
When arbitration and mediation are used in conjunction, a minimal overlap between the process is preferred and 78% preferred the idea of staying an arbitration so that mediation could be attempted, without prejudice to the arbitral proceedings. Interestingly, only 45% of respondents believed that a convention to enforce agreements to mediate would encourage them to mediate more often and 54% stated that a convention on the enforcement of settlement agreements resulting from a mediation would encourage them to use mediation more often; some interviewees explained that the proposed convention would be “solutions looking for a problem”.
You may find a number of techniques to reduce the time and cost of international arbitration here.
International Arbitration Survey 2015: Soft Law and Guidelines
The use and effectiveness of soft law and guidelines has been a controversial topic within the arbitral community. Various organisations have developed instruments addressing “best practices” with respect to the arbitral process or the behaviour of specific actors and some stakeholders have criticized these instruments as self-promoting or inhibiting independent thinking, and international arbitration has also been accused of being “overregulated”.
Overall, according to the International Arbitration Survey 2015, respondents had a positive perception of guidelines and soft law instruments. 50% of respondents believed that they provide guidance where none or not much exists and 48% believed that they supplement existing rules and laws.
A clear majority (70%) expressed the view that international arbitration currently enjoys an adequate amount of regulation and 17% of respondents consider that there is too much regulation in arbitration; some felt that regulation restricts the flexibility of the arbitral process and that guidelines stifle independent thought by stakeholders, and others were concerned that they would lead tribunals to apply guidelines and soft laws rigidly as “hard” regulations. Given the clear majority in favor of the status quo, it seems likely that the existing level of regulation will diminish.
The IBA Rules on the Taking of Evidence in International Arbitration 2010 (77%) and the IBA Guidelines on Conflicts of Interest 2004 and 2014 (71%) were by far the most widely known and the most frequently used instruments by respondents, and were awarded the highest effectiveness ratings, 69% and 60% respectively. The other instruments presented to respondents (IBA Guidelines on Party Representation in International Arbitration (2013), UNCITRAL Notes on Organizing Arbitral Proceedings (1996)and the ICC In-House Guide to Effective Management of Arbitration (2014) were most often considered neutral or not effective and respondents stated being less familiar with their use in practice.
International Arbitration Survey 2015: Role and Regulation of Specific Actors
- Regulating the Conduct of Arbitrators
A small majority (55%) of respondents believed that the conduct of arbitrators should be regulated more (33% of arbitrators and 62% of private practitioners agreed) but no single option was favoured by a clear majority (22% showed a slight preference for instruments issued by arbitral institutions, 23% through a code of conduct by a professional institution or body for arbitrators such as the Chartered Institution of Arbitrators and 21% through databases that provide parties with information about an arbitrator’s performance in past cases).
Issue conflicts are not seen as requiring specific regulation in commercial arbitration by 63% of respondents and in investment treaty arbitration by 51% of respondents. Repeat appointments are considered more problematic by decisive majorities in the context of both investment treaty and commercial arbitration but respondents generally feel that current instruments (e.g. the IBA Guidelines on Conflicts of Interest) offer sufficient guidance to deal with the issue. Interestingly, respondents seem to attach greater weight to potential conflicts in investment treaty arbitration than in commercial arbitration, perhaps because of the public interest factor in relation to investment treaty arbitration.
- Regulating Party Representatives
Just under half of respondents (46%) feel that the conduct of party representatives should be regulated more and respondents most often expressed that the best way to address the issue was through tribunals’ effective use of sanctions.
If more regulation was to be put in place, the most popular options are through institutional rules, such as the annex to the 2014 LCIA Rules (35%) and through guidelines, such as the IBA Guidelines on Party representation in International Arbitration (27%).
- Regulating of Tribunal Secretaries
The use of tribunal secretaries is common in international arbitration; an overwhelming majority (97%) of respondents are aware of the function and 82% have directly been involved in cases involving a tribunal secretary. Overall, respondents had a positive perception of tribunal secretaries and believed that their use enhances the efficiency of arbitral proceedings and presents a unique opportunity to train the next generation of potential arbitrators. Only 9% believed they were not useful.
Three particular tasks were highlighted by a notable majority as appropriate for tribunal secretaries to undertake: organisational work (93%), communicating with the parties (81%) and preparing drafts of procedural orders and non substantive parts of awards (75%). Interestingly, only 55% of respondents believed that tribunal secretaries should perform legal research and 13% believed that they should prepare drafts of substantive parts of awards. Interviewees often saw it as improper to delegate such tasks.
A clear majority of respondents expressed the view in the survey that the use and function of tribunal secretaries should be regulated (68%) and most of them (70%) believed the most effective way was to regulate through arbitral institutions. A significant majority (72%) think that arbitral institutions should offer the services of tribunal secretaries and often stated that the secretary’s connection to the institution would ensure that arbitrators would be less likely to delegate merits-related tasks. Also, some arbitrators, when sitting as co-arbitrators, complained that they were not always aware of what responsibilities were delegated to the tribunal secretary by the presiding arbitrator. Respondents adopting the opposite view believed that offering such services through arbitral institutions would undermine the effectiveness of the tribunal secretary because the secretary must be a person whom the arbitrator likes to work with and trusts, and this could only be guaranteed if the arbitrator choses the secretary.
- Regulation of Third Party Funding according to the International Arbitration Survey 2015
39% of respondents have encountered third party funding in practice, 12% have used it and 27% have seen it used, while 15% have encountered insurance products, 3% have used it and 12% have seen it used. A bit less than half (46%) of respondents have a neutral perception of third party funders whilst 28% have a positive perception of them, and a small majority of respondents who have used third party funders in practice have expressed a positive view. Indeed, positive perception was influenced by a greater degree of familiarity.
Most respondents (71%) indicated a desire to regulate the area, regardless of whether they had a positive, negative or neutral perception of third party funding, and barely half (49%) of respondents which have experienced it believe that it needs regulation. 58% of respondents were of the opinion that the best way to regulate it was through guidelines such as the IBA guidelines and 29% indicated a preference for collective self-regulation through a code of conduct by an independent body.
An interesting point made was that regulation should mainly focus on disclosure rather than on the creation of a prescriptive, substantive regime as it would enable tribunals to handle potential issues on a more nuanced, case by case basis. Should it be mandatory to disclose some aspects of third party funding, 76% of respondents supported disclosure of its use and 63% the identity of the funder. The resulting transparency would be expected to help check for conflicts of interest and provide the tribunal with context as to the financial position of the parties. Interestingly, 29% asserted that the full terms of the third party funding arrangements should be disclosed in order to reveal the extent of the influence funders may have as a result of the terms of their arrangement with a party.
- Conclusion on Regulations
Although 70% of respondents expressed the view that there is currently an adequate amount or regulation in international arbitration, some areas such as tribunal secretaries, third party funding and the conduct of arbitrators were identified as requiring regulation, and only the conduct of party representatives was not seen as needing additional regulation in international arbitration.
- Olivier Marquais, Aceris
Visit Queen Mary University of London (author of the survey with White & Case): https://arbitration.qmul.ac.uk/research/2015/