International arbitration dominates global dispute resolution

International arbitration, once a second choice to litigation for private dispute resolution, is now conclusively the most preferred form of dispute resolution for cross-border disputes, according to a new study.

Queen Mary University of London (QMUL), in partnership with global law firm White & Case, found that 90 per cent of 763 respondents surveyed prefer international arbitration to resolve cross-border disputes.

The latest finding is a significant increase from the university's first international arbitration survey in 2006, where the figure was 73 per cent.

The survey found that parties are now embracing international arbitration thanks to the greater enforceability of arbitral awards, the ability to avoid specific legal systems yet choose arbitrators, and the inherent flexibility of the process.

Preferred institutions

Respondents to the survey ranked London and Paris as the most preferred and used venues for international arbitration over the past five years.

However, Hong Kong and Singapore are gaining momentum, ranked in third and fourth places respectively. The latter is perceived to be the most improved seat for arbitration over the past five years, with Hong Kong following close behind.

Paul Friedland, a partner at White & Case, said: 'London and Paris remain the most popular seats because of their enduring reputation as arbitration-friendly jurisdictions with high quality legal infrastructure.

'However, as this year's study shows, Singapore and Hong Kong are closing the gap. Both seats have made significant investments in support of international arbitration in recent years, which have made them increasingly attractive locations for users.'

Just over two-thirds of respondents chose the International Chamber of Commerce (ICC) as one of their three preferred institutions.

Some 37 per cent included the London Court of International Arbitration (LCIA), mirroring the results from the 2010 survey.

The Hong Kong International Arbitration Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC) came in third and fourth, with 28 per cent and 21 per cent respectively.

The survey revealed that institutions are primarily chosen due to their high level of administration, neutrality, internationalism, and ability to administer arbitrations worldwide.

More regulation

A hot topic among arbitration users is the extent to which it requires greater regulation. While 70 per cent of respondents felt there is an adequate level of regulation, a clear majority believed that more 'micro-regulation' is needed when it comes to third-party funding (71 per cent), tribunal secretaries (68 per cent), and the conduct of arbitrators (55 per cent).

Respondents believed the most effective way to regulate third-party funding is through guidelines, such as those issued by the International Bar Association (IBA). Some 76 per cent of respondents said claimants should be made to disclose the use and identity of third-party funding. Only 27 per cent, however, thought the full terms of the third-party funding arrangement should be disclosed.

The scope of the role of tribunal secretaries was an issue respondents expressed concern over, with an overwhelming majority preferring tribunal secretaries to only undertake tasks which are neither substantive nor related to the merits of the dispute. Some 70 per cent thought the most effective way to regulate tribunal secretaries would be through arbitral institutions.

Commenting on the findings, Professor Loukas Mistelis, the director of QMUL's School of International Arbitration, said: 'While arbitration is the most preferred method of dispute resolution, this year's research shows that the global arbitration community increasingly supports greater micro-regulation for many of the specific parties involved.

'At the same time the survey shows that respondents appreciate the arbitration laws and rules adopted over the last years hence considering further macro-regulation unnecessary.'

Time and cost?

To reduce the time and cost associated with arbitration, nine out of ten respondents favoured inclusion of simplified procedures in institutional rules for claims under a certain value. A requirement that 'tribunals commit to and notify parties of a schedule for deliberations and delivery of final award' was particularly welcomed.

The phenomenon of 'due process paranoia' was also raised as one likely cause of increased cost and delay. Many felt the risk of a successful challenge to an arbitral award was insufficient to justify arbitrators' overly cautious behaviour. As such, it was felt that arbitrators should be more willing to manage proceedings decisively.

Some 93 per cent of respondents favoured the inclusion of emergency arbitrator provisions in institutional rules. This is despite nearly half saying they would elect to have recourse to domestic courts if in need of urgent relief before the constitution of the tribunal, whereas only 29 per cent would opt for an emergency arbitrator. Users thus prefer to have a wide range of options available to them, regardless of how often they may elect to use them.

John van der Luit-Drummond is deputy editor for Solicitors Journal
john.vanderluit@solicitorsjournal.co.uk | @JvdLD