The International Arbitration guide provides expert legal commentary on the key issues for businesses involved in arbitration. The guide covers the important developments in the most significant jurisdictions.
Last Updated July 10, 2018
International arbitration is widely, and rightly, regarded as the preferred mode of resolving international disputes between individuals, businesses and States. The use of international commercial and investment arbitration has increased dramatically over the last few decades, concurrently with the widespread and rapid global expansion in international commerce, foreign investment and cross-border trade. The enduring and increasing popularity of international arbitration is in large part due to its advantages over traditional court litigation as an efficient, flexible process of adjudication that results in a final, binding and enforceable award under the New York Convention in nearly 160 states around the world. The success of international arbitration, and particularly international commercial arbitration, is also due to the support of national legislatures and courts, and to the ability of the arbitral process to evolve and improve in response to the needs of its users.
Legislative and Judicial Support
Historically, many national courts took a generally unsupportive approach to the arbitral process, refusing to enforce either arbitration agreements or arbitral awards, and sometimes interfering in the arbitral proceedings. These approaches were based in part on concerns that arbitration provided a second-class form of rough justice, which improperly ousted the jurisdiction of courts. In the past 40 years or so, however, there has been a marked change in such attitudes in at least two ways.
First, many States have updated or revised their arbitration statutes and adopted legislative frameworks that reflect a commitment to the international arbitral process. These include statutory provisions that require recognition and enforcement of international arbitration agreements, that restrict the grounds for challenging arbitral awards and that require the recognition and enforcement, of arbitral awards, subject only to limited exceptions; at the same time, national arbitration legislation also increasingly affirmed the power of arbitral tribunals to issue interim measures, to determine their own jurisdiction and to tailor arbitral procedures to the circumstances of individual disputes. This trend has been influenced in particular by the United Nations Commission on International Trade Law (UNCITRAL) Model Law, which was first promulgated in 1985 for the purpose of assisting States in reforming and modernising their international arbitration legislation. Since it was first transmitted by the United Nations General Assembly at its 112th plenary meeting on 11 December 1985, the UNCITRAL Model Law has now been adopted in 75 States.
Second, national courts have also become increasingly supportive of international arbitration, lending further legitimacy and certainty to the arbitral process. Many jurisdictions such as England, France, Switzerland, Hong Kong and Singapore have earned reputations for pro-arbitration jurisprudence. In these “arbitration-friendly” jurisdictions, judicial decisions consistently uphold the validity of international arbitration agreements, the parties’ procedural autonomy and the arbitral tribunal’s procedural discretion and the finality of the arbitral process, while simultaneously providing fast and effective ancillary relief when required.
There have also been a number of positive developments in jurisdictions that have traditionally been regarded as less supportive of arbitration. For example, there has been an increasing trend towards pro-arbitration decisions in China, including a 2013 decision by the Supreme People’s Court which, despite the scepticism over foreign arbitral institutions in China, upheld the validity of an arbitration agreement providing for ICC arbitration in Shanghai. Courts in certain Middle-Eastern jurisdictions that have historically been hostile to arbitration, including Qatar, Saudi Arabia, and the United Arab Emirates, have also rendered arbitration-friendly judgments in recent years.
Recent Developments and Innovations
The arbitration community has continued a tradition of innovation to improve the arbitral process; in recent years, practitioners, arbitrators, institutions and even States have introduced a number of new initiatives. Although there have been many such initiatives, they may be broadly grouped into three categories: (1) efficiency; (2) expedited procedures; and (3) ethics.
First, arbitral institutions have introduced a number of devices and tools in the last few years to address the issue of increasing time and costs in international arbitration. These include emergency arbitrator provisions, which allow parties to obtain interim relief even before the constitution of the tribunal, as well as provisions that provide for fast-track or expedited arbitration, where the arbitrator may be empowered to decide a case on the basis of documents only, or where fixed timelines may be imposed on the arbitrator to render its award (eg six months from constitution).
The SIAC Rules were revised in August 2016, and the new Rules include a number of refinements to improve emergency arbitrator and expedited arbitration procedures, as well as a new provision for the early dismissal of claims and defences on the basis that they are manifestly lacking in merit or jurisdiction. The SCC also revised its Rules in January 2017 and introduced a new summary procedure that allows the tribunal to decide issues of fact or law without necessarily undertaking every procedural step that might otherwise be adopted for the arbitration. Also in 2017, the ICC introduced expedited procedures that apply on an opt-out basis for cases where the amount in dispute does not exceed USD2 million. Beyond these formal rule revisions, there are now also a number of publications designed to give parties, counsel and arbitrators more specific guidance on how to make to the arbitral process more efficient, such as the ICC’s Report on Techniques for Controlling Time and Costs in Arbitration.
Second, a number of recent initiatives have been introduced to clarify the ethical or professional conduct rules that apply to party representatives in international arbitrations. The International Bar Association (“the IBA”) published Guidelines on Party Representation in International Arbitration in 2013, which dealt with ethical issues ranging from witness preparation to document production and preservation. The LCIA’s 2014 Rules also included for the first time provisions that allow a tribunal to sanction parties for breaches of ethical rules by party representatives, as well as an Annex that sets out standards of professional conduct. In 2015, the Swiss Arbitration Association (“ASA”) proposed the creation of a Global Arbitration Ethics Council to which matters regarding alleged breaches of ethical or professional conduct rules would be referred, and formed a working group to study this possibility. However, the ASA working group concluded in June 2016 that arbitral institutions should consider whether to adopt internal disciplinary procedures.
Third, a number of jurisdictions that previously prohibited third-party funding have recently been introduced amending legislation expressly to permit such funding in arbitration or arbitration-related court proceedings. Singapore introduced amendments to the Civil Law Act in January 2017 that abolish the common law torts of champerty and maintenance (which prohibited third-party funding), and provided that third-party funding is not contrary to public policy when provided by qualifying funders in international arbitrations or associated court proceedings. Singapore also introduced a legal framework for licensing and regulating the conduct of qualifying funders. Hong Kong introduced similar amendments in June 2017. In line with these developments, the Paris Bar Council also recently passed a resolution in May 2017 confirming that third-party funding does not breach French law.
These developments are encouraging, and bode well for the continuing success of the international arbitration process. Indeed, the resilience and continuing success of international arbitration depends, and has always depended, on the ability and versatility of those involved in the process – institutions, counsel, arbitrators, and even courts – to be responsive to the needs of end-users and generate innovative, contextual and flexible solutions to improve the process.