By Marily Paralika and Maxime Berlingin
WITH the rise of specialist and regional courts offering to resolve international commercial disputes, there is pressure on the traditional bastions of international arbitration to reinforce their significance in the global justice system.
The role of arbitral institutions in the ever-changing arbitration landscape has come under increasing scrutiny in the past decade.
International arbitration is facing competition from alternative forms of dispute resolution, which offer various perceived benefits compared to more traditional arbitration models, while arbitral institutions themselves have faced criticisms around cost and efficiency.
One particular bone of contention is the function of international arbitral institutions as commercially interested organisations in the general administration of justice.
In an arbitral “market” that becomes more crowded and competitive every year, arbitral institutions are obliged to continually assess and refine their approach to remain at the forefront of international dispute resolution, which may ultimately involve cooperating with some of the newer arrivals on the arbitration scene.
The growth of regional arbitration centres
The past decade has seen the establishment of a number of regional arbitration centres across the world.
This is partly because arbitration has become a lot more popular as a way of resolving disputes, thanks to greater awareness of, and familiarity with, the arbitration process among the international business community.
This has created a market for arbitration and provided a financial incentive for local arbitral institutions to offer services and manage disputes locally, rather than sending the cases, and the associated revenue, abroad to centres like Paris or London.
There is also a misperception that if an arbitration clause within a contract states that disputes must be heard by an international arbitral institution like the ICC or the LCIA, it is necessary to hold the hearing in the cities where these institutions are headquartered.
Nevertheless, regional arbitration centres have been able to leverage cultural credentials to draw in local disputes.
International arbitral institutions including the ICC have responded by expanding their physical presence in different parts of the world, notably Asia and the Middle East, to capture some of this demand for local presence and services.
However, the fact remains that the arbitration market is now far more geographically fragmented than it was 10 years ago.
Specialist arbitration centres
Not every “specialist” arbitration centre focuses on a particular region. Some specialise in a sector or type of work, such as sport, art, IP, shipping or investment.
This adds another level that traditional arbitral institutions have to compete on.
While international arbitral institutions pride themselves on their ability to supply sector experts with the relevant experience to preside over highly technical cases, specialist providers can potentially offer a more efficient service, with the added benefit of greater legitimacy and likelihood of adoption by the sectors they serve.
When the stakes are high, as they so often are in international arbitration, members of a particular community may be more willing to entrust their fate to practitioners and forums they feel they can trust to understand the issues.
Emergence of national commercial courts
Newly established national commercial courts across Europe, such as the International Chamber of the Paris Court of Appeal, which as of March 2018 has allowed pleadings in English, aim to strengthen the appeal of European jurisdictions as litigation centres post-Brexit.
As well as France, similar initiatives have been announced in the Netherlands, Belgium and Germany.
While these are primarily alternatives to the London commercial courts, they will also compete with international arbitral institutions.
National commercial courts may prove appealing to some parties, as they are typically cheaper and offer certain flexibility and dedicated commercial expertise, and may issue decisions more quickly.
Such options are likely to be attractive to parties involved in smaller cases, where full-blown arbitration proceedings are not necessary and where there are no confidentiality concerns.
Making the case for international arbitration
In the face of competition from regional and commercial alternatives, the pressure is on international arbitral institutions to prove they remain competitive and relevant to all types of client, but also to guarantee and sustain a healthy and efficient environment for dispute resolution.
Arbitration has historically been attractive because it offers, among other advantages, confidentiality, a luxury not afforded by commercial courts, along with procedural flexibility.
It also gives parties the opportunity for cases to be heard by arbitrators with expertise in the particular sector, typically within an institution that has a long reputation for handling disputes efficiently.
The finality of an arbitral award has also conventionally been a strong enticement for disputants who want to avoid the possibility of a potentially messy, drawn-out appeals process.
This is complemented by the fact that the award can be enforced in any of the 163 signatory countries to the New York Convention.
The last three months have illustrated that the flexibility inherent in international arbitration allowed it to overcome hurdles imposed by the Covid-19 lockdown, with the assistance of technology. It has also been an opportunity for arbitral institutions to play an important role in guiding and assisting parties and tribunals in dealing with the impact of the pandemic in their proceedings.
It may be too early to assess what the impact of the pandemic on dispute resolution will be and whether it will affect the volume of cases in the coming months, but there are certainly sectors, like the construction industry, that are expected to witness a rise in disputes going forward.