The Current and Future State of Arbitral Institutions: From Competition to Cooperation?

On 19-23 May 2019, at the Saint-Petersburg International Legal Forum, a multinational panel of experts from various arbitral institutions and state courts presented their views on future developments in arbitration proceedings.

Representatives of distinguished arbitral institutions advocated for the type of cooperation that facilitates creating unified standards for arbitration proceedings, making a strong pool of prospective arbitrators, establishing transparent arbitration rules and procedure, and bolstering enforcement mechanisms for the arbitral awards.

Encouraging a positive environment for commercial arbitration: judges’ view

Natalia Pavlova (Judge, Supreme Court of the Russian Federation) emphasized the need for a common legal culture to enhance success in the field of arbitration. Efficient legislation, procedural norms and judicial practice remain essential for fostering and encouraging a positive environment for commercial arbitration development.

The Supreme Court of the Russian Federation has recently conducted a case law analysis on arbitration issues. Such analysis resulted in certain findings involving steps that should be taken if a party invokes a lack of funds to finance arbitration; what occurs when the abuse of arbitration takes place; and when issues related to bankruptcy proceedings arise. Judge Pavlova highlighted that the business community needs assurances that reasonable expectations of the parties would be met regarding arbitration models accepted throughout the world.

View from Western Europe

Victor von Essen (Deputy Secretary-General and Head of Case Management, German Arbitral institution (DIS)) mentioned that flexibility between arbitration and mediation/adjudication is a development that has been reflected in the new 2018 DIS Rules. The DIS rules provide for parties with a new tool for early dispute settlement that fosters both arbitration and mediation. DIS offers a set of measures to increase efficiency in arbitration proceedings. Article 27 of the DIS Rules and annex 3 to the Rules enshrine certain measures to increase efficiency in arbitration proceedings to encourage the parties to discuss these measures in case management conferences. Mr. von Essen stressed that arbitral institutions must cooperate to establish global standards in the arbitration field.

Philippe Baertsch (Member, Swiss Chambers’ Arbitral institution) said that expedited procedures that require arbitrators to render an award within 6 months have been recently introduced to the institution’s rules. Expedited proceedings provide advantages such as the absence of any formalism or scrutiny of awards, which ultimately make arbitration more cost and time effective.

Alice Fremuth-Wolf (Secretary-General, Vienna International Arbitral Centre) mentioned that parties still consider it as effective and standard for proceedings to last for around a year. However, new 2018 Rules provide an incentive for arbitrators that promote expeditious resolution through the provision of a reward from parties and the institution if they render an award quickly. Such a reward could amount to up to 40% of their fees. In cases of inefficiency, the arbitrators’ fees might be lowered as well. Additionally, another tool that could be utilized to speed up arbitral proceedings consists of a self-binding provision, which arbitrators would use to announce the time of releasing the award. Apart from that, institutions can offer a variety of solutions that work towards efficiency including wire clouds and electronic services.

Annette Magnusson (Secretary General, Arbitration Institute of the Stockholm Chamber of Commerce) explained how complexity in underlying transactions leads to long and complicated disputes. In an effort to ameliorate such issues, the Stockholm Chamber of Commerce offers various tools that help meet the parties’ expectations in terms of efficiency. These tools include multiparty disputes, joinder, expedited rules, cost allocation provisions as well as new digital services.

Jacomijn van Haersolte van Hof (Director General, London Court of International Arbitration (LCIA)) elaborated on the increasingly challenging environment and pluriform market where users demand cost and time efficiency. People sometimes have a different perspective as to what they expect in terms of efficiency in abstract and when the case has arisen. She added that if there is a case in which the livelihood of the company depends, the party will pay fees even when based on an hourly rate. She focused on a dilemma that arises in arbitration relating to payment issues.

Notably, the arbitral institution has to remind parties that the system benefits from an appropriate remuneration system that strikes the right balance between demands on macro and micro level. This task proves to be difficult as users have different interests varying according to regions. So, the institution needs to bring these interests together and to assume responsibility for driving change. In particular, LCIA nominates 45% of female arbitrators and tends to nominate more sole arbitrators and chairpersons. Recently LCIA has been working on revising rules regarding techniques of expedited proceedings. However, in Jacomijn van Haersolte van Hof’s opinion, introducing too many specific rules to the LCIA proceedings might make the process even more complicated.

View from Russia

Alexey Kostin (President, International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation) mentioned the affordability of arbitration proceedings as the main quality feature of arbitration. The ICAC Rules have been recently amended after the completion of the arbitration legislative reform in Russia. Professor Kostin contemplated on the appointment of arbitrators at the ICAC and how ICAC appoints the presiding arbitrator from a list.

Particularly, any arbitrator (except for the presiding arbitrator) might be chosen to sit on the arbitration panel, which in fact means that any candidate with proper qualifications may be elected as an arbitrator. ICAC now consists of four divisions (for international, domestic, corporate, sports disputes) and has always targeted international arbitration. Alexey Kostin emphasized that now ICAC is actively involved in setting up its branches in other regions, which extends to 15 branches throughout Russia. Also, a branch of the Maritime Arbitration Commission has recently started to function in Saint-Petersburg.

View from Asia

Kevin Nash (Deputy Registrar – Centre Director, Singapore International Arbitration Centre) noted that arbitration agreements might have “waterfall” provisions requiring parties to engage in a sequential combination of mediation, arbitration and other kinds of dispute resolution. Remarkably, Singapore has a lot of options in terms of arbitral institutions, including WIPO, ICC, PCA as well as the Singapore International Mediation Centre. Besides, Singapore will become the venue for signing the Singapore Mediation Convention in August 2019. According to Mr. Nash, case management enables parties to wield new tools such as consolidation and joinder, which raises certain practical confidentiality issues.

Sarah Grimmer (Secretary-General, Hong Kong International Arbitration Centre) said that it requires an immense amount of intellectual effort and capital in order to make proceedings cost-effective. This involves interaction with legislators and courts as well as continuous consulting and advising. HKIAC offers 7 mechanisms of efficiency:

• Parties have an option to pay: by hourly rate or by the amount in dispute.
• HKIAC has a tribunal secretary service from within permanent legal stuff. Besides, a lawyer can be appointed to the tribunal to take on administrative work off the tribunal at a cheaper rate. As far as case management relationship is governed by guidelines, parties know what the tribunal is dealing with. For instance, parties receive timesheets to track down this work and process.
• There are stringent time limits for rendering awards under the self-binding provision, which comes down to 3 months.
• Expedited proceedings should be wrapped up within 6 months if the case goes to the sole arbitrator.
• A party can request an early determination procedure that might be fact or law determination. The party can ask for early on and discreet procedure filing an application to the tribunal for fact or law evaluating, which has to be conducted within 2 months.
• HKIAC keeps a repository system when parties and institutions upload and store documents electronically in a cloud system.
• HKIAC offers hearing facilities free of charge for developing states as parties if they are on the OECD assisting list.

Sarah Grimmer added that while mechanisms may be laid out in the rules there is also a lot of internal work and dealing with candidates as well as making fees go down to ensure a smooth running of the case.

Brad Wang (Managing Counsel, China International Economic and Trade Arbitration Commission) focused on a hard deadline that CIETAC imposes on parties and arbitrators. The arbitrator has to render an award within 6 months starting from the day of formation of the tribunal. CIETAC employs a strict system of accountability which includes having case managers for each case and tough internal management to ensure that cases go smoothly.

The caseload in the light of sanctions

Representatives of the arbitration centres commented on the caseload involving Russian nationals in light of the sanctions introduced by the US and the EU countries against Russia.

Annette Magnusson from the Stockholm Chamber of Commerce confirmed that there has been no decline of such cases since 2014 and Russian parties remain one of the most frequent nationalities in disputes. Maintaining an open dialogue with regulatory bodies and an analysis of the ownership structure remain key elements to run the case where sanctions might be an issue.

Jacomijn van Haersolte van Hof from the LCIA stated that the number of cases involving Russian parties has not dropped. Statistically, 30% of 300 annual cases at the LCIA deal with Russia or Russian parties and encompass financial instruments governed by English law. Although sanctions itself do not hinder arbitral proceedings, cases that include sanctions issues require disclosures about shareholders, which results in making certain administrative steps regarding the case.

Alice Fremuth-Wolf from Vienna International Arbitral Centre said that Austria has been having a steady caseload with Russian and CIS parties. She suggested that it is a quality of arbitration that should be raised but not a race between the parties.

Sarah Grimmer from HKIAC announced that on April 25, 2019, the arbitration centre obtained a status of the permanent arbitral institution in Russia, which means that from now on HKIAC may administer arbitrations seated in Russia including those corporate disputes that do not require special corporate rules. HKIAC Rules enshrine mechanisms for cases with multiple parties and multiple contracts when outcomes of an ongoing arbitration have an impact on another, such as consolidation and concurrent proceedings.

Arbitration centres worldwide work out efficient mechanisms that foster arbitral proceedings making them more attractive, highly qualified, and digitally accessible for the parties. Various provisions aimed at cost, time, and speed efficiency have been encompassed in the arbitration rules in order to meet the parties’ expectations. Interestingly, arbitration centres confirm their readiness to adopt global arbitration standards, to cooperate, and to exchange experience while preserving their own “personality” and individual approach to administering cases. Though arbitration remains a premier method for international commercial disputes, the parties now also have the opportunity to combine different methods of dispute resolution, such as mediation, conciliation, adjudication and other.