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2018 Queen Mary International Arbitration Survey: nihil novi sub sole?

Last month, the Queen Mary University of London issued its eighth empirical survey on international arbitration. This detailed report, made in partnership with White & Case LLP for the fourth time, focuses on the evolution of international arbitration.

As the 1958 New York Convention will soon celebrate its 60th birthday, the 2018 survey seeks to “identify key areas of development through the lens of a wide and diverse pool of stakeholders.” The survey is based on 922 questionnaire responses and 142 in-person or telephone interviews (the highest number to date). According to the survey, 97% of respondents stated that international arbitration was their preferred mode of dispute resolution, with 90% of them declaring that they would recommend international arbitration to resolve cross-border disputes in the future.

Though impressive, these findings are consistent with those of the 2015 survey, which found that approximately 90% of respondents preferred international arbitration. Interestingly, the 2018 survey shows that in-house counsel have a marked preference (60%) for international arbitration combined with other forms of alternative dispute resolution (ADR), whilst only 32% would use arbitration as a standalone dispute resolution method.

Furthermore, the findings  in the survey set out in greater detail the points below.

Respondents favoured the enforceability of arbitral awards, which is stated to be arbitration’s “most valuable characteristic” by 64% of them. They also value other features, such as “avoiding specific legal systems/national courts” (60%), “flexibility” (40%) and the “ability of parties to select arbitrators” (39%). As the survey points out:

“… [t]his reinforces the continued success of the New York Convention and the benefit to parties of eluding the potential biases and specificities of domestic courts.”

As that was to be anticipated, the costs of international arbitration remain its worst feature, followed by “lack of effective sanctions during the arbitral process”, “lack of power in relation to third parties” and “lack of speed.” The users’ concerns for costs explain why in-house counsel tend to opt for arbitration in conjunction with ADR. As the survey states:

“… even though arbitration continues to be the go-to dispute resolution mechanism, parties are increasingly resorting to various forms of ADR in the hope that a swifter and more cost-efficient resolution can be found.”

The five arbitral institutions preferred by respondents remain the International Chamber of Commerce (ICC) (nominated by 77% of them), followed by the London Court of International Arbitration (LCIA) (51%), the Singapore International Arbitration (SIAC) (36%), the Hong Kong International Arbitration Centre (HKIAC) (27%), and the Stockholm Chamber of Commerce (SCC) (16%). It is worth pointing out that most of these institutions have recently adopted new arbitration rules in order to address some of the specific concerns expressed by their users. Also, the survey shows that, when choosing a specific arbitral institution, users take a macro perspective rather than looking at specific aspects of the institution’s administration of cases. As such, the respondents’ main criteria are the “general reputation and recognition” of the institution, as well as its internationalism (and global presence).

As predicted in the 2015 survey, the same jurisdictions stand out: London is still the preferred seat (64%), followed by Paris (53%), Singapore (39%), Hong Kong (28%) and Geneva (26%). Singapore surged ahead of Hong Kong, gaining 10% more votes and thus swapping places. London and Paris have managed to consolidate their dominance on the market, with London surging even further ahead. The survey also notes that:

Switzerland also stands out once again as a particularly popular jurisdiction given that 38% of respondents included at least one Swiss city or Switzerland itself in their answers.”

Given London’s popularity as a seat (it is the preferred seat in all regions of the world), the respondents were specifically asked whether Brexit would influence the use of London as a seat. Interestingly, a small majority of respondents (55%) took the view that Brexit was unlikely to bring any change in this regard. However, for 37% of respondents, London would risk suffering from Brexit (to a higher or lesser degree). Finally, only 9% of respondents considered that London will see positive changes as a seat following the UK’s withdrawal from the EU.

For a rather high number of respondents (40%), the continued “neutrality” and “impartiality” of the English legal system should prevent Brexit from negatively affecting London’s position as the world’s most favoured seat. Others (40%) consider that the arbitration-friendly legislation and court practice should also help London to remain at the top of the list. Among those thinking that London will suffer as a result of Brexit, 70% take the view that Paris will most likely benefit. Geneva and Singapore (22%) come second, followed by Hong Kong (15%), Stockholm (13%), New York (12%) and Zurich (6%).

The survey also examines whether arbitration has evolved in a more diverse practice. Overall, respondents indicated that they were unsure about the potential causal link between diversity across a panel and the quality of the decision-making process (or even whether this was a relevant enquiry to make). 60% of respondents stated that progress had been made in terms of gender diversity, whilst a minority considered that progress had been made in terms of geographic (34%), age (35%), cultural (31%) and ethnic (24%) diversity. 45% of respondents considered that arbitral institutions were best placed to ensure greater diversity across tribunals, followed by parties (27%) and their external counsel (23%).

From a more procedural standpoint, an overwhelming majority of respondents (97%) are aware of third party funding in international arbitration, although most of them have reported not seeing it used in practice (56%). Overall, respondents have a positive perception of third party funding (51%).

Respondents also consider that “due process paranoia” is the main hurdle to more efficient arbitral proceedings. In many users’ view:

“… arbitrators need to adopt a bolder approach to conducing proceedings and, if need be, apply monetary sanctions for dilatory tactics.”

87% of respondents indicated that confidentiality is of importance. Interestingly, 74% of them considered that confidentiality should be an opt-out feature. In particular, this was the opinion expressed by 69% of in-house counsel.

Finally, respondents are rather confident that the use of international arbitration will increase in relation to investor-state disputes.

These findings appear to suggest that the various members of the arbitral community have been able to address and handle, to the users’ satisfaction, some of the issues raised in recent years. These efforts, in particular those of arbitral institutions, have obviously helped preserve arbitration’s status as the preferred form of global dispute resolution for cross-border commercial disputes. Having said that, there is still room for improvement on diversity, efficiency of the proceedings, and, most importantly, costs.

Schellenberg Wittmer Sebastiano Nessi Simon Demaurex

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