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The virtual reality as international arbitration adapts to a changing world

  • London shares its No.1 position with Singapore as the most popular seat for international arbitration for the first time 
  • 61% of respondents agreed that some progress has been made in relation to gender diversity on arbitral tribunals, compared to just 31% in relation to ethnic diversity 
  • Adapting in response to COVID-19, 72% of arbitration users have now used virtual hearing rooms and only 16% would postpone a hearing to hold it in person
     

Arbitration was adapting to a changing world before the pandemic hit, but COVID-19 has been a catalyst for accelerating many of these changes. This is according to a study garnering the views of more than 1,200 users of arbitration published today by global law firm White & Case in partnership with the School of International Arbitration of Queen Mary University of London.

Abby Cohen Smutny, partner and Global Head of the International Arbitration Practice Group at White & Case, said: "The field of international arbitration is dynamic by nature. Its hallmarks of flexibility and party autonomy allow it to develop and adapt in response to the needs of its users. Recent times have seen an increased focus on drivers of change such as diversity, technology, environmental considerations and information security. The COVID-19 pandemic has also presented challenges to the way in which the international arbitration community interacts, with virtual hearings, conferences and meetings with counsel, clients and teams becoming the norm almost overnight."

Norah Gallagher, Deputy Director at the School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London, said: "We are delighted to present the findings of the 2021 International Arbitration Survey on 'Adapting arbitration to a changing world'. It was not easy to conduct a survey during a global pandemic. The results are an interesting snapshot of some rapid changes implemented in challenging times. It was a pleasure to work so closely with Dr Maria Fanou, White & Case Post-Doctoral Research Fellow, and the White & Case team to draft this survey to best reflect the data collected. We hope it will be useful to the arbitration community when considering potential changes to arbitral practice." 

Current choices and future adaptations 

Asked to select their preferred seats, London and Singapore were chosen by 54% of respondents – the latter making the top spot for the first time. The survey found rising popularity across the key Asian arbitral hubs, with significant percentage gains made by Singapore (54%) and Hong Kong (50%), as compared to previous surveys. Singapore was the third most frequently chosen seat in the 2018 study (39%) and came fourth in 2015 (19%). Hong Kong took fourth place in 2018 (28%) and was third in 2015 (22%). 

The survey found a significant preference for international arbitration in conjunction with ADR (59%) as opposed to on a stand-alone basis (31%). This follows a trend over recent years of increasing overall popularity of arbitration used alongside ADR, with just under half preferring to use the two together in 2018 (49%) and only 34% in 2015.

Results showed that in certain types of disputes there are established practices of recourse to other means of dispute resolution; for instance, respondents with experience of disputes in the construction industry reported positively on the common use of dispute adjudication and dispute review boards in that sector. 

The adaptation of arbitral practice during the COVID-19 pandemic was highlighted by respondents’ desire for ‘administrative/logistical support for virtual hearings’ to be provided by arbitral institutions. 

Diversity

While the majority of respondents (61%) agreed that some progress has been made in relation to gender diversity, this contrasted sharply with other areas of diversity. In relation to geographic, age, cultural and ethnic diversity, less than a third of respondents positively agreed in each case that progress has been made in recent years.

Ethnic diversity continued to be an area where respondents felt a need for improvement. As in our 2018 survey, ethnic diversity lagged behind the other four listed aspects of diversity; only 31% of respondents thought progress had been made.

Respondents emphasised the role to be played both by appointing authorities and institutions (59%), and by counsel and parties (46%), in encouraging greater diversity on arbitral tribunals.

Clare Connellan, White & Case partner, said: "The general consensus is that the COVID-19 pandemic has been a mixed bag for the promotion of diversity. The shift to on-line conferences and hearings may create new opportunities to increase the visibility of practitioners from groups that are underrepresented, or who are based in jurisdictions less known for international arbitration. However, some interviewees speculated that the lack of in-person meetings between members of a tribunal may push those selecting arbitrators to prefer more well-known candidates with established reputations and existing relationships with other tribunal members."

Use of technology

The COVID-19 pandemic has presented many challenges for the international arbitration community, but information technology tools have bridged the gap and allowed practices to be adapted to new circumstances. 

There has been an explosion in the use of virtual hearing rooms: 72% of respondents reported using virtual hearing rooms at least 'sometimes', if not 'frequently' or 'always'. This is in stark contrast to our 2018 survey, when 64% of respondents said that they had 'never' utilised virtual hearing rooms and a further 14% said they had used them 'rarely'. If a hearing could no longer be held in person, 79% of respondents would choose to ‘proceed at the scheduled time as a virtual hearing’. Only 16% would ‘postpone the hearing until it could be held in person’. 

Respondents are also willing to continue to interact using virtual settings in the future, although only 8% would prefer to hold substantive hearings remotely rather than in-person (45%) or using a mix of in-person and virtual formats (48%).

Although there has been a noticeable increase in the use of artificial intelligence (AI) since 2018, its adoption continues to lag behind other forms of technology. 35% of the respondent group stated that they have ‘never’ used AI, while 24% stated that they have used AI rarely.  Only 15% said they used AI ‘frequently’ or ‘always’.

Sustainability and information security

Results indicated that respondents understood the environmental benefits of opting for virtual rather than in-person interaction, with 'procedural conferences held via telephone conference, video-conference or virtual hearing rooms' one of the most commonly experienced measures identified by respondents (53%) to reduce the environmental impact of international arbitration.

There appears to be increasing awareness of the need to embrace greener practices. However, the overall message from respondents was that the reduction of environmental impact is a welcome side-effect of their choices throughout the arbitral process, rather than a priority in and of itself. 

When it comes to information security, even though users generally acknowledged that data protection issues and regulations may have an impact on the conduct of arbitrations, the extent and full implications of that impact are not understood by all. 34% of respondents predicted that data protection issues and regulations have ‘limited impact at present but [this is] likely to increase’. There is also scope for more engagement with cybersecurity issues. Only 27% of respondents have seen cybersecurity measures used in more than half of their cases over the past three years.

About the Survey  

The research for this study was conducted from October 2020 to March 2021 by Dr Maria Fanou, White & Case Postdoctoral Research Fellow in International Arbitration, School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London, together with Ms Norah Gallagher, Deputy Director, School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London.

The research was conducted in two phases: the first quantitative and the second qualitative. Phase one involved an online questionnaire of 31 questions which was completed by 1,218 respondents between 8 October 2020 and 21 December 2020. The respondent group consisted of counsel (private practitioners) (43%), full-time arbitrators (15%), in-house counsel (private sector) (7%), in-house counsel (government or state entity) (2%), 'arbitrator and counsel in approximately equal proportion' (11%), arbitral institution staff (5%), and others (17%). 

Phase two involved 198 video or telephone interviews, ranging from ten to 110 minutes long, which were conducted between early November 2020 and early March 2021. Interviewees were based in 39 countries and 53 cities across all continents (except Antarctica). The pool of interviewees reflected all categories across the diverse respondent group. 

For the purposes of this survey, ADR includes, for example, adjudication, dispute boards, expert determination, mediation, negotiation, but not litigation or arbitration.

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