Arbitral Institutions Respond to Parties’ Needs
Global law firm White & Case LLP has published new research which reveals that arbitral institutions, in an effort to be responsive to the stated needs of companies using international arbitration to solve cross-border disputes, are accommodating an increased wish by parties for expedited proceedings and sole member tribunals, and with greater frequency than before are appointing women arbitrators.
The firm's analysis demonstrates a flexibility on the part of arbitral institutions and in the arbitral process, a characteristic which our 2015 survey with Queen Mary University of London (QMUL) established as being one of the most valuable ones in arbitration.
Accommodating parties' choice of expedited proceedings
The research reveals a steady increase in the desire by parties to use expedited proceedings. For example, from the introduction of expedited proceedings by the Singapore International Arbitration Centre (SIAC) in 2010 to the end of 2015, SIAC received 231 and accepted 140 applications for expedited proceedings. In 2015 alone, SIAC received 69 requests for expedited proceedings, of which 27 were accepted. And in 2014, SIAC received 44 requests of which 23 were accepted.
At the London Court of International Arbitration (LCIA), there were 30 such applications, and 12 were granted. This is up from 2014, when there were 10 applications, three of which were granted.
At the Stockholm Chamber of Commerce (SCC), in 2015 50 cases were administered under the SCC Rules for Expedited Arbitrations, consistent with 49 the year before.
The Swiss Chambers' Arbitration Institution (Swiss Chambers' Institution) referred in its own report to "the increasing number of expedited procedures" and has introduced an initiative allowing parties to agree in advance on 'super-expedited' proceedings.
The International Chamber of Commerce's (ICC) recent move to amend its arbitration rules to incorporate a set of new expedited procedure rules for smaller claims, with effect from 1 March 2017, is in line with this trend.
Preference for/increase in sole member tribunals
Our research shows that there has been an increase in the use of, and in some cases a preference for, sole member tribunals. We find this reflects parties' wish to keep the proceedings as simple and cost-efficient as possible, a desire reflected in our 2015 survey with QMUL. This is the same motivation that has led to the increase in use of expedited proceedings.
At the LCIA, the appointments made in 2015 reflect a preference for sole arbitrators (52%) over three-member tribunals (48%). This is in contrast with 2014 when the split was sole member (28%) versus three-member tribunals (62%).
At the Swiss Chambers' Institution, almost two thirds of new cases submitted in 2015 were referred to a sole arbitrator. This compared to 56% in the period between 2004 and 2015. The Swiss Chambers' Institution's 2015 Annual Report notes that the increase in the use of sole arbitrators reflects an increasing number of expedited procedures.
Of the 1313 appointments and confirmations made by the ICC in 2015, 19% involved sole arbitrators, up from 17% in 2014.
At the SIAC, 68% of cases in 2015 were before sole member tribunals, which mirrors the high figure in 2014 when 73% of the cases involved sole member tribunals.
Paul Friedland, global head of International Arbitration Practice at White & Case, comments:
"Arbitral institutions are adapting to what parties want. The demand for expedition and efficiency does not change the fact that parties are continuing to embrace international arbitration to resolve large, complex, cross-border disputes. The changes introduced by arbitral institutions show responsiveness to users' expectations that arbitration should be efficient and cost-effective."
A call for diversity1
The research also shows that arbitral institutions are making considerable efforts to appoint more female arbitrators. For example, female arbitrators appointed by the SIAC in 2015 constituted nearly a quarter of all appointments. At the World Bank's International Centre for Settlement of Investment Disputes (ICSID), 16% of appointees were women in 2015, which is almost a 50% increase over 2014. At the American Arbitration Association/International Centre for Dispute Resolution (AAA/ICDR), for 2015 16% of arbitral appointments were female as well.
The move toward institutional appointments of female arbitrators is especially noteworthy because party appointments of women continue to lag far behind. For instance, at the SCC, 39 of the 101 arbitrator appointments made by the SCC in 2015 were female (nearly 27%). By contrast, where the parties appointed arbitrators, 6.5% were female, and where appointments were made by co-arbitrators, 10% were women.
At the LCIA, of the 449 individual appointments in 2015, 71 or nearly 16% were female arbitrators, up from just under 12% for 2014. Of those 71 female arbitrators, 55 (77.5%) were selected by the LCIA Court, 14 (nearly 20%) were selected by the parties and two (nearly 3%) were selected by the parties' nominees.
In addition, at the Swiss Chambers' Institution, 47% of the arbitrators appointed by the institution in 2015 were women. Where parties or co-arbitrators appointed women, however, only 5% were female for that year.
At the ICC, an increase in the number of women arbitrators could also be seen between 2014 and 2015 (10.4% of all appointments and confirmations for the first time in 2015, compared with 9.7% in 2014). In a similar vein to the above, the ICC appointed more women than the parties and the co-arbitrators named collectively.
Anne Véronique Schläpfer, partner at White & Case, comments:
Arbitral institutions are recognising the increased importance of responding to the broader sea change of gender equality. Certainly, encouraging all players to consider offering equal opportunities for like qualifications will increase the chances of seeing more women appointed as arbitrator in the future. Gender equality is not a purpose or end in itself, but a necessary means to ensure that the pool of arbitrators offers the skills which the users expect. The future of arbitration also depends on the ability of the players to attract and select competent arbitrators and this implies enlarging the circle of potential arbitrators.
Improvements still needed on time and cost
Despite all the work that arbitral institutions are doing with regard to expedited procedures, sole member tribunals, and ensuring women are better represented on arbitral tribunals, more remains to be done to reduce timeframes for rendering arbitral awards and associated costs.
With respect to timeframe, ICSID reported that it takes (no year specified) generally 3-4 years for an award to be issued in an ICSID arbitration. The ICC (for 2015) reported an average of 25 months; the HKIAC reported a mean duration of 12.3 months (from early 2014 to December 2015); the SCC (for 2015) indicated that in the majority of cases an award is rendered in 6-12 months, and the LCIA (January 2013-June 2015) reported a mean duration of 20 months. The SIAC (April 2013-July 2016) indicated a mean duration of 13.8 months, while the Swiss Chambers' Institution (for 2014 and 2015) reported a period of 11 months. As for the AAA/ICDR, the average time for rendering an award in 2015 was 14.9 months.
Cost also remains an issue. The LCIA revealed in its own analysis that the HKIAC appears to be cheaper overall when compared to the ICC, SIAC and LCIA. When comparing its costs against those of the ICC, SIAC and HKIAC, the LCIA concluded that, for cases with a claim amount less than US$1m, LCIA costs are comparable with the ICC and SIAC, but higher than the HKIAC (i.e. HKIAC is the cheapest of the four). And for cases with a claim amount above US$1m, LCIA costs are comparable with the HKIAC, but lower than the ICC and SIAC (i.e. the LCIA and HKIAC are the most cost effective of the four). Based on the LCIA's analysis, it can be concluded that HKIAC is, overall, cheaper than ICC, LCIA and SIAC. HKIAC's recently released statistics confirm this, with mean total costs of an arbitration being US$65,721 (for cases under its 2013 rules, as of December 2016) as compared to LCIA (US$ 192,000) and SIAC (US$ 80,337).
Andrew McDougall, partner at White & Case concludes:
In keeping with this trend of responding to users' expectations, the ICC issued a guidance note in 2016 to arbitral tribunals and parties on the conduct of ICC arbitrations, stating that the arbitration process would become more transparent while abiding by parties' confidentiality expectations. Improving transparency, increasing the use of expedited proceedings, making efficient use of sole arbitrators, and achieving more gender balance are all examples of changes made by arbitral institutions to provide greater confidence in the arbitral process and ensure that international arbitration remains the preferred form of dispute resolution for significant cross-border disputes.
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Arbitral Institutions Respond to Parties’ Needs
About the research
Data collected and analysed from recent figures provided by 10 arbitration centres around the world: Dubai International Arbitration Centre (DIAC), Hong Kong International Arbitration Centre (HKIAC), American Arbitration Association (AAA)International Centre for Dispute Resolution (ICDR), International Centre for Settlement of Investment Disputes (ICSID), International Chamber of Commerce (ICC), the London Court of Arbitration (LCIA), Permanent Court of Arbitration (PCA), Singapore International Arbitration Centre (SIAC), Stockholm Chamber of Commerce (SCC), Swiss Chambers' Arbitration Institution (SCAI). The data from the different institutions differs somewhat in terms of format, detail and period covered. While this should be borne in mind when looking at the results, it should not prevent one from drawing conclusions from the information. The 2016 statistics for some of these institutions have recently been released. It will be interesting to further study the above issues when all 2016 statistics are available.
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1 Most statistics regarding female arbitral appointments were only available as from 2015 making it difficult to establish any increase from 2014. It will be interesting to further analyse this issue once all the 2016 statistics are available.