REUTERS | Denis Balibouse

‘You asked, we answered’: arbitral institutions are attuned to parties’ needs, shows White & Case research

The 2015 Queen Mary University of London (QMUL)-White & Case survey identified the flexibility inherent in the arbitral process as one of its most valuable characteristics. New research by White & Case demonstrates that apart from other stakeholders, arbitral institutions are definitely among the ones listening. The research found that institutions are responding to an increased demand from parties for expedited proceedings and sole member tribunals and are attempting to address diversity concerns by appointing more female arbitrators.

The research analysed data from ten arbitration centres around the world. It also bears mentioning that the research benefited from the larger move towards transparency in international arbitration, with institutions becoming more forthcoming in providing data and statistics that would otherwise have remained unpublished.

On the fast track

The research showed a steady increase in the number of expedited proceeding applications received and approved by arbitral institutions across the board. This is in line with the parties’ oft-expressed desire to take advantage of the expeditious nature of arbitral proceedings.

This trend was discernible at the Singapore International Arbitration Centre (SIAC), which received 69 requests for expedited proceedings in 2015 (up from 44 requests in 2014) and the London Court of International Arbitration (LCIA), where 30 applications were received in 2015 (up three-fold from the ten requests in 2014). The number of expedited proceedings administered by the Stockholm Chamber of Commerce (SCC) remained steady at 50 such cases in 2015 (49 cases in 2014).

The International Chamber of Commerce (ICC) has also joined the bandwagon through the introduction of its new expedited procedure rules for smaller claims (with effect from 1 March 2017). The innovations in this regard continue, with the Swiss Chambers’ Arbitration Institution (SCAI) pioneering a customisable arbitration clause, through which parties can agree upon ‘super expedited proceedings’.

Going solo

While procedural timelines should be drawn up at the very outset of arbitral proceedings, the process is often made tedious given the heavy workload of counsel and arbitrators. This problem is compounded where tribunals are constituted of three members. Using a sole member tribunal adds to the advantages of speed and cost, feeding yet again into the demands for efficiency and cost-effectiveness.

The appointments and confirmations made by the ICC recorded an increase in the percentage involving sole member tribunals in 2015 (19%, up from 17% in 2014). The percentage of sole member tribunals remained steadily high at the SIAC at 68% in 2015 (comparable to 73% in 2014). At the SCAI, almost two thirds of new cases submitted in 2015 were referred to a sole arbitrator. The SCAI’s 2015 commented statistics note that the increase in the use of sole arbitrators reflects an “increasing number of expedited procedures”.

The LCIA made for a curious study, by contrast. LCIA 2015 data reflects a preference for sole arbitrators (52%) over three member tribunals (48%). However, data from 2014 and subsequently released data from 2016, reveals a preference for three member tribunals over sole arbitrators. It would be interesting to monitor this trend in the future.

 Increasing diversity

In response to a question on “Who are the arbitrators?”, a panel discussion at the 2014 ICCA Miami Conference had found that arbitrators were overwhelmingly “male, pale, and stale”. Ensuing discussions since have focused on how the constitution of the international arbitration community reflects on its claims for legitimacy and efforts are being made to address the issue of diversity.

White & Case’s research shows that arbitral institutions are trying to do their bit in adhering to the Equal Representation in Arbitration Pledge. Female arbitrators appointed by SIAC in 2015 constituted nearly a quarter of all appointments. At the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) and the American Arbitration Association/International Centre for Dispute Resolution (AAA/ICDR), 16% of appointees were women in 2015. At the SCAI, 47% of the arbitrators appointed by the institution in 2015 were women. The trend of increasing female arbitrator appointments was also reflected at the LCIA (16%), ICC (10.4%) and SCC (27%).

While there have been demands for diversity from all quarters in discussions around how to improve international arbitration, parties and co-arbitrators have themselves shied away from making diverse appointments. The strides and the initiatives demonstrated by arbitral institutions therefore merit even more recognition.  At the SCC, where the parties appointed arbitrators, a dismal 6.5% were female, and where appointments were made by co-arbitrators, 10% were women. Similarly at the SCAI, in 2015, where parties or co-arbitrators appointed women, only 5% were female arbitrators. The appointments of female arbitrators had a similar fate at the ICC in 2015, with the ICC appointing more women than the parties and the co-arbitrators named collectively.

The research involved in making arbitral appointments no doubt makes counsel often take comfort in the known, rather than vouching for or delving into uncharted territory by opting for an unknown face. It may help to encourage female counsel to take the lead and encourage fellow colleague appointments to arbitral tribunals.

Optimism tinged with caution

The 2015 survey had found cost and speed of arbitral proceedings as the biggest concerns for parties. The innovation on the part of institutions in offering expedited proceedings and an increased preference for sole member tribunals appears to have been developed in response to such concerns.

While the developments and responsiveness of the institutions need to be lauded, a note of caution is also necessary. We must not lose sight of the fact that not all disputes are suitable for expedited proceedings and to be decided by sole member tribunals.  The application of the expedited procedures to complex disputes may lead to a situation where the parties find themselves in a bind, unable to meet the tight time-frames that they themselves imposed. It may also provide an avenue for recalcitrant parties to challenge the rendered award on due process grounds.

Similarly, sole member tribunals come with the potential risk of errors, there is an argument that one person is more likely to get it wrong than a party of three. An argument may also be made that three-member tribunals are more accommodating of party preferences, since parties appoint one arbitrator each. Three-member tribunals are also, ostensibly, less prone to being improperly influenced. Moreover, a complex dispute involving substantial documentary evidence may take longer to be decided by a sole member tribunal, since there are no other members to ‘share the load’. However, these risks do not need to be overstated and can be alleviated by institutional mechanisms such as the ICC award scrutiny process.

The research also shows that further steps may still need to be taken towards greater efficiency in arbitral proceedings. While investment disputes at ICSID generally take three to four years for an award to be rendered, the time-frames across other institutions varied in 2015 from a mean duration of 11 months (SCAI) to 25 months (ICC). As for costs, the Hong Kong International Arbitration Center (HKIAC) appears to be the most cost-efficient, in comparison to the ICC, LCIA and SIAC.

While the 2015 survey was indicative of the predominance of international arbitration as the preferred dispute resolution mechanism, these innovations only bolster conviction in the process and are likely to ensure that arbitration remains the go-to method for parties seeking to resolve international disputes.

White & Case Andrew McDougall Poorvi Satija

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