REUTERS | Darrin Zammit

Expect the unexpected: what lies ahead in the arbitration world?

“Expect the best, plan for the worst, and prepare to be surprised” (Denis Waitley)

At the start of 2017, we predicted a lively time in the arbitration arena, and the first six months have certainly not disappointed. At the half-way mark, we find ourselves in a similar position, for example, with the continued uncertainty surrounding the effects of Brexit on arbitration in the UK, as well as the future of investor-state dispute settlement (ISDS) and its potential reform. Add to the mix the relatively untested waters around the effect of emergency arbitrator provisions in many institutional rules, and it’s effectively all as clear as mud. Luckily the arbitral institutions are on hand to offer some tangible developments through ongoing revisions to rules, while the reform of national arbitral legislation around the world also gives us the conviction to foresee several developments.

Practical Law Arbitration has been looking at What to expect in the second half of 2017 and beyond. So before you pick up this year’s current best seller for your holidays, get a glimpse of what’s to come in our quick read below.

Institutional developments

The institutions got off to a flying start in 2017, with several new rules already in force. The remainder of 2017 and beyond looks likely to progress in a similar manner. Most notably, the International Centre for Settlement of Investment Disputes (ICSID) has commenced the process of revising its rules and regulations and in the first half of 2018 it will publish background papers containing 16 areas of reform. The German Institution of Arbitration (DIS) and the Dubai International Arbitration Centre (DIAC) are also working on revising their arbitration rules. The expansion of institutional operations and offices also continues, with the International Chamber of Commerce (ICC) planning case management offices in Brazil and Singapore, while Maxwell Chambers in Singapore is planning to triple its size by 2019.

Amendments to arbitration legislation

Revisions to arbitration legislation are underway in numerous jurisdictions, including Australia, Estonia, New Zealand, the Russian Federation, South Africa, Sweden and Switzerland. Meanwhile, Ontario became the first state to implement Canada’s revised Uniform International Commercial Arbitration Act. Amendments to the Hong Kong Arbitration Ordinance are also due on 1 January 2018, clarifying the arbitrability of intellectual property disputes. Last but not least, arbitration practitioners in England and Wales have been eagerly awaiting the Law Commission’s decision on whether to include the Arbitration Act 1996 in its forthcoming programme of reform. However, it now appears a decision is unlikely to be made for some time.

Third party funding

Third-party funding continues to evolve, with new legislation passed in Singapore and, in Hong Kong, a Bill to amend the Arbitration Ordinance will take effect later this year.

We will also continue to watch out for decisions by tribunals and courts on the subject. In the last couple of months, two key decisions have come out:

  • An ICSID tribunal’s order declining an application by Italy for provisional measures, in the form of an order for security for costs or disclosure of funding arrangements.
  • An Irish Supreme Court ruling that commercial funding of litigation is prohibited by law, a decision that has ramifications for parties arbitrating in Ireland.

Of particular interest, however, will be the impending draft report from the International Council for Commercial Arbitration (ICCA) and Queen Mary, University of London, task force on third-party funding in international arbitration. It is anticipated that the draft report will be available for formal public comment in autumn 2017, with a view to presenting the final report at the ICCA Congress in Sydney in April 2018.

Brexit

Much like the referendum itself, arbitration specialists are equally divided on how Brexit will affect arbitration in England and Wales. Some argue that London will remain a key arbitral seat. Others have debated the idea that foreign investors could bring claims against the UK as a result of Brexit. Whatever your views, it’s fair to say that the implications of Brexit remain to be seen.

To keep you up-to-date with all Brexit related developments, see our Brexit landing page and key developments tracker.

Investment treaty arbitration, ISDS and free trade agreements

Slow progress continues on the negotiation of EU free trade agreements containing ISDS provisions with various countries. With both the Canadian (CETA) and Singapore (EUSFTA) free trade agreements being determined as “mixed agreements”, the ISDS provisions will now have to be ratified by all member states. Meanwhile, the future of both Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) remain shrouded in uncertainty. Little has changed since our post in January on reform of ISDS and the establishment of a permanent multilateral investment court. In April 2017, the European Commission published the responses received on its latest public consultation and we will continue to watch out for the next steps.

In the meantime, the Court of Justice of the European Union (ECJ) is to rule on the interplay between intra-EU bilateral investment treaties (BITs) and arbitration, following a reference from the German Federal Court of Justice which is to decide whether to set aside an arbitral award in favour of Dutch company, Achmea, against Slovakia. In addition, a decision is awaited in the Micula brothers’ challenge to the European Commission’s order that Romania recover compensation paid to investors according to an ICSID award.

An entire book could be dedicated to the Yukos saga, in which the appeal by former majority Yukos shareholders against the setting aside of the US $50 billion awards remains pending. While enforcement proceedings continue in various countries, it will be particularly interesting to see if the Paris Court of Appeal refers the question on the interpretation of Article 45 of the Energy Charter Treaty to the ECJ, as indicated in its recent order.

What else is to come? Transparency; diversity; tax and emergency arbitrator provisions

The institutional push towards improved transparency will no doubt advance further. We are likely to see a continued increase in the publication of data on time and costs of proceedings, as well as on arbitrator appointments, particularly gender diversity statistics in light of the Equal Representation in Arbitration Pledge. On that front, Arbitrator Intelligence has entered into a cooperation agreement with the Singapore International Arbitration Centre (SIAC) to promote the use of its recently launched questionnaire. We wait to see if other institutions will follow suit.

Likewise, the enduring tension between confidentiality and transparency doesn’t appear to be abating any time soon. On the investment treaty side, the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration will come into force on 18 October 2017.

While transparency and gender diversity have been hot topics for some time, it will be interesting to see if certain new trends emerge. Will we start to see the arbitration of tax disputes following the newly signed multilateral tax convention containing an optional provision on mandatory binding arbitration? We will also be watching out for national court decisions dealing with emergency arbitrator provisions in the institutional rules. So far, an English court has ruled that the availability of the London Court of International Arbtiration’s (LCIA’s) emergency arbitrator procedure limits the court’s powers to grant freezing injunctions in support of arbitration. It is certainly feasible that national courts will start to hear arguments on due process and enforcement issues.

Practical Law Arbitration Suzie Noble

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