International Arbitration

Streamlining, While Competition Heats Up

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Matthew Secomb, Christophe von Krause, Patricia Nacimiento, Aloke Ray, Michael Turrini and David Goldberg of White & Case LLP examine developments in international arbitration over the last five years in the key jurisdictions across the globe.

Arbitration has, for some time, been the standard form of dispute resolution for international disputes. The increasing acceptance of arbitration is reflected in a number of traits typical of mature markets; namely, efforts to improve existing products rather than create new ones and a corresponding increase in competition between players in the market.

In an arbitration, the parties, or an institution on their behalf, select an arbitrator or arbitrators to render a binding decision on the parties’ dispute. The process is private and largely confidential. Its key advantages are perceived to be neutrality, flexibility and the enforceability of decisions (arbitral awards) internationally.

Streamlining rather than innovation

The fabric that makes up international arbitration is a series of conventions, national laws and arbitral rules (rules that the parties can agree to adopt to govern their arbitrations). The last five years have seen refinements to this fabric rather than radical changes.

While no new international conventions have been enacted recently, positive trends can be seen in how existing conventions are implemented by national courts. The lynchpin of international arbitration is the New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards, adopted in 1958 (New York Convention). Historically, national courts in some countries have been unsupportive in their interpretation of the New York Convention; however, recent years have seen an increase in decisions that respect its letter and spirit.

Moves have also been made to improve arbitral rules; for example, in 2010, the United Nations Commission on International Trade Law (UNCITRAL) published a revised version of its arbitration rules, originally published in 1976 (UNCITRAL rules). The 1976 UNCITRAL rules had been widely used and broadly accepted, and the 2010 changes focused on modernising and improving them rather than changing their underlying content.

Arbitral institutions have also been making steady efforts to improve the quality of the services they offer. For example, one constant complaint is that international arbitrators take on too much work and therefore delay the arbitral process. In mid-2009, the International Chamber of Commerce (ICC) International Court of Arbitration, arguably the leading international arbitral institution, decided to require arbitrators to disclose to the parties their workload in order to encourage arbitrators to reflect more carefully on their availability before accepting appointments.

Increased competition

One trend over recent years has been increasing competition between countries to attract international arbitrations.

The 2010 International Arbitration Survey: Choices in International Arbitration (2010 survey) revealed that parties’ choice of the seat or legal place of the arbitration is mostly influenced by a country’s formal legal infrastructure. Many countries have been attempting to improve their legal framework to encourage parties to choose their country for arbitrations; for example, in 2008, Mauritius enacted a new arbitration act with a view to becoming a regional arbitration centre for African disputes. Even established arbitral jurisdictions have made efforts to improve. France, historically one of the most pro-arbitration jurisdictions, has recently implemented reforms to its arbitration legislation to maintain its position.

Such competition has also had a marketing angle. Singapore has marketed itself aggressively as a regional hub for international arbitration, focusing on its perceived neutrality, business friendliness and practical infrastructure, such as the availability of hearing rooms. Even popular places for arbitration such as London and Paris have increased their efforts in recent years to promote their use for international arbitrations.

This competition can only improve international arbitration. It creates more, and better, choices for parties that decide to use arbitration to resolve their disputes.

ENGLAND AND WALES

English law, as the governing substantive law of arbitration, and London, as the seat of arbitration, have enjoyed growing popularity in the last five years.

In the 2010 survey, 40% of respondents said that they use English law most frequently as the substantive governing law of their arbitrations, singling out the perceived neutrality and impartiality of the legal system as the driving force behind this choice. Similar reasons in respect of the formal legal infrastructure (the Arbitration Act 1996 and the track record in enforcing arbitration agreements and awards) were given by 30% of respondents choosing England as the preferred seat of arbitration.

This positive trend for arbitration in England is due largely to the pro-arbitration attitude of the English courts in upholding arbitration agreements, supporting party autonomy, and resisting interference in the various stages of the arbitral process.

Arbitration agreements

English courts have applied an expansive approach to the construction of arbitration clauses on the basis that, in the absence of clear wording to the contrary, parties who have included an arbitration clause in their contract have intended to submit all disputes arising out of their relationship to arbitration by the same tribunal (Fiona Trust v Yuri Privalov [2007] UKHL 40; see News brief “International arbitration: full steam ahead”). Clear words will be required to demonstrate that the parties intended to exclude certain disputes from their agreement to arbitrate.

This liberal approach extends to situations in which the arbitration agreement between the parties is contained in a second, related agreement. Where this second agreement arises directly out of the relationship between the parties governed by the first agreement, an arbitration clause contained in the first agreement may apply and the tribunal may therefore have jurisdiction over a claim arising under the second agreement (Emmott v Michael Wilson [2009] EWHC 1 (Comm)). Parties should therefore be aware of the need to ensure that those disputes which are not to be arbitrated are clearly identified and carved out of the arbitration clause.