International arbitration

April 2023  |  ROUNDTABLE | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

April 2023 Issue

International arbitration has been a hotbed of activity in recent years, with innovation and change making the process more efficient, diverse and inclusive. One overarching trend likely to continue is the revision of existing arbitration rules and treaties to align them more closely with modern practice and promote arbitration as a dispute resolution process. Another is the increasing use of technology to resolve disputes. Evolving and adapting to changing circumstances, the arbitration world continues to focus on expediency, transparency and fairness in the arbitration process.

FW: What do you consider to be among the key trends and developments shaping international arbitration over the past 12 to 18 months?

Bamforth: One area which has seen more recent scrutiny is investor-state dispute settlement (ISDS). Criticisms have included that the ISDS mechanisms lead to inconsistencies in decision making, lack of transparency and the potential for investors to bring frivolous claims against states. Thus, many countries are seeking to reform or withdraw from existing investment treaties and the use of ISDS mechanisms, such as intra-European Union (EU) bilateral investment treaties. Another topic is the reform of national arbitration laws. Many countries have recently revamped or are considering revamping their arbitration laws to align them more with modern practice and promote arbitration as a means of dispute resolution. The consultation being carried out by the UK Law Commission over possible reforms to the 1996 Arbitration Act is perhaps the best example of this. Technology also continues to play a significant role in international arbitration. From the use of virtual hearings to the use of artificial intelligence (AI) in document review, technology is changing the way arbitrations are conducted and managed.

Zimmerman: One key trend is the coalescing preference for hybrid virtual and in-person hearings. Although the loosening of coronavirus (COVID-19) pandemic-related travel and gathering restrictions has allowed fully in-person hearings to resume, parties, counsel and arbitrators are showing a strong preference for hybrid hearings. If done well, a hybrid hearing can incorporate the benefits of both approaches, reducing travel burden – particularly for arbitrators and party witnesses – while maintaining an in-person element of hearing advocacy that many find more effective and efficient. A related development we are seeing is an increased push for earlier hearings. Parties often see a truncated procedural schedule as a way to control costs. Hybrid hearings can facilitate earlier hearings in situations where a witness can be available remotely for the few hours needed to give testimony but might otherwise be unavailable to travel on the dates when the arbitrators are available to hear them.

Rhie: Historically, lawyers in Hong Kong and Singapore have been barred from entering into contingency fee arrangements with their clients. But, as of 2022, that is no longer the case. In both jurisdictions, it has become lawful to enter into certain types of ‘no-win, no fee’ or ‘no-win, low fee’ arrangements for arbitrations. In Hong Kong, the latest legal reforms also mean that parties can agree to use conditional fee arrangements throughout the entire life of an arbitration – this exceptionally means even for setting aside or enforcing an arbitral award in domestic courts. While it is still premature to determine what impact these new reforms will have, many are confident that they will contribute to cementing Hong Kong and Singapore as dominant arbitral hubs internationally.

Rana: Cases in international arbitration across the five main centres of choice continue to rise. Those centres – London, Singapore, Hong Kong, Paris and Geneva – have all experienced an increase in caseload. It is likely that we will continue to see a rise in cases as a number of economic factors kick in – supply chain issues, losses from the pandemic still working their way through the system as well as issues resulting from the energy crisis. Broader issues impacting the world view are also beginning to creep into the international arbitration world, such as environmental, social and governance (ESG)-related disputes and disputes in the tech sector. Intellectual property (IP) cases continue to increase and we expect to see more corporate law cases coming into play too.

Andersen: The reestablishment of international arbitration practice post-pandemic, and provisions incorporated into the rules amendments by arbitral institutions are two key areas. The international dispute resolution community quickly adapted professionally to a virtual world for arbitration preliminary hearings, hearings, mediation conferences and educational events. The real question is whether advocates, parties and arbitrators continue to maximise the use of virtual proceedings for efficiency and economy. The ICDR’s extensive rules revision process from November 2019 until March 2021 highlights recent trends, adding a concurrent mediation process during the arbitration proceeding and arbitration rules for tribunal secretaries, third-party funding and early disposition. Other important additions were solidifying the jurisdiction of the tribunal to rule on its own jurisdiction and adding the word ‘arbitrability’ to expand the scope of what an arbitrator can decide. The last phrase of the section confirms expressly that jurisdiction can be determined “without any need to refer such matters first to a court”.

Ripley-Evans: Over the last 12 to 18 months, we have seen positive trends and developments driving innovation and change in international arbitration and making the process more efficient, diverse and inclusive. As one would expect, the pandemic has had a lasting impact and we continue to see the growth of remote hearings. Many arbitration institutions and tribunals have adapted to this change by introducing specific guidelines and protocols for virtual hearings, indicating that remote hearings may soon become the default position for international arbitration. Notably, there has been an increase in demand for expedited proceedings to resolve disputes quickly and cost effectively. Several institutions have introduced new rules to accommodate these types of proceedings, such as the International Chamber of Commerce’s (ICC’s) Expedited Procedure Rules and the recently revised the Arbitration Foundation of South Africa’s (AFSA’s) International Arbitration Rules.

FW: Has there been a rise in international arbitration cases in certain sectors? What are some of the notable underlying themes leading to commercial conflict?

Zimmerman: Post-M&A disputes have seen a notable increase. Due to the economy bouncing back from the initial pandemic shock, as well as low interest rates, M&A activity in 2021 rose above pre-pandemic levels and approached peaks seen in 2007 and 2015. M&A activity slowed significantly in the second half of 2022 as concerns about inflation and a potential recession began to take hold. During this time, many buyers began to look at underperforming acquisitions and the disclosures, representations and warranties made by the sellers in those deals. As a result, we are seeing an uptick in disputes over purchase price adjustments, as well as cases of alleged misrepresentations and fraud. In terms of industry sectors, the life sciences industry has continued to see growth. Long-term trends in favour of international in- and out-licensing have made international arbitration a more appropriate forum for dispute resolution for many life sciences companies.

Rhie: The advent of the ‘crypto winter’ has meant a surge of crypto-related arbitrations being filed all over the world – this includes Hong Kong. This is mostly because many of the early crypto-agreements, with the top exchanges, contained built-in arbitration agreements that wrote in Hong Kong as the seat. Hong Kong, as a go-to choice for arbitral seat, is not surprising. For one, the city is, and has long been, a top financial centre. Second, Hong Kong is uniquely placed. The cryptocurrency ban in mainland China does not extend to Hong Kong. In recent months, the Hong Kong government has signalled intentions to further relax trading regulations in a move to establish the city as a crypto-friendly jurisdiction. The promotion of Hong Kong as a crypto-hub will naturally mean more arbitrations being filed in this sector, especially if there are Chinese investors or parties involved.

Rana: Predominantly, the rise in international arbitration has occurred in the technology, energy and financial sectors. The triumvirate of a global economic recession, inflationary pressures and rising interest rates is putting pressure on businesses and existing transactions. Pressures on business usually have a direct causal link to an increase in disputes. One exception was the global financial crisis which saw a dip in disputes largely because at that time businesses had determined not to fight cases because of the costs of doing so. However, today, commercial transactions contain either multi-tiered dispute resolution clauses culminating in arbitration or vanilla arbitration clauses. Multi-tiered dispute resolution clauses allow the disputants to settle at various stages of the dispute using different forms of dispute resolution. These stages can go from the cheapest and most informal – senior executive negotiations – to the very formal and most costly – arbitration. In addition, the sectors that now welcome arbitration have grown, such that the arbitral panel’s powers are – by agreement and interpretation of those powers by courts – broader than they once were: M&A disputes, bribery and corruption, IT generally, space law, all matters capable of being resolved by arbitration. The list is getting longer.

Andersen: Technology disputes have risen substantially over the past 20 years. The technology industry has embraced the use of arbitration for certain types of disputes, including international – a dramatic change from corporate counsel between the years 1990 to 2010. We now see technology disputes in many other industries, including aerospace, aviation, construction, energy, life sciences and pharmaceuticals. Conflicts arise where ambiguity and uncertainty allow differences between commercial parties and unforeseen events or circumstances create a new paradigm, differences that might not exist in the beginning of a collaborative partnership or agreement. A few examples are liability, ownership and licensing. This often happens when business professionals stop working with business professionals; they stop participating in the rising conflict too early, and lawyers arrive too late to better support the business solution and goals of the organisation.

Ripley-Evans: There certainly has been a rise in international arbitration cases in specific sectors over the past 18 months, namely, in energy, infrastructure and construction, finance and investment, technology and IP, as well as in the ESG space. Disputes related to energy, including oil and gas, continue to be a significant contributor to matters referred to international arbitration. This includes disputes related to production-sharing. The infrastructure and construction sector, in the post-pandemic world, has given rise to disputes regarding delays, cost overruns and defects. These disputes often involve complex contracts and technical issues where time is a significant factor in the successful resolution of the dispute. For this reason, these disputes remain well placed in international arbitration. International arbitration is increasingly being used to resolve disputes related to finance and investment, including disputes between investors and states, as well as disputes between financial institutions. The future of investment dispute resolution is currently being debated in an effort to restore trust in the system which appears to have weakened over recent years. With the rise of technology and digital innovation, there has been an uptick in disputes related to IP, technology licensing and cyber security. These disputes often involve complex technical and legal issues which make them well suited for international arbitration.

Bamforth: Major disruptions usually take several years to culminate in disputes. Pandemic disturbances, geopolitical tensions, energy transition and financial distress will all likely lead to international disputes. The life sciences and healthcare, IP and energy sectors all seem particularly susceptible to increases in disputes. The life sciences and IP sectors are closely connected, often involving disputes regarding patents, trademarks, copyrights and licensing agreements. Looking ahead, the Unified Patent Court (UPC) will become operational in 2023, significantly impacting the resolution of patent disputes in Europe. As part of its introduction, the UPC has established a Patent Mediation and Arbitration Centre and it remains to be seen whether this will increase patent arbitrations. The energy sector will also likely remain one of the primary sources of international arbitration involving issues related to the production, transportation and distribution of energy resources and regulatory compliance. The upcoming modernisation of the Energy Charter Treaty may also pave the way for future energy disputes. Many underlying themes leading to commercial conflict can be attributed to the transactions’ complexity and the parties’ diversity. Fraud, corruption, unfair competition and overly broad arbitration agreements can also lead to commercial conflicts.

FW: In terms of dispute management, how are parties approaching aspects such as case assessment, settlement evaluation and evidence preservation in the current environment?

Rhie: There are many alternative dispute resolution methods that are available to those that do not want to commit to the entire lifecycle of an arbitration. Mediation often goes hand in hand with arbitration. For example, the Hong Kong International Arbitration Centre (HKIAC) has developed its own standardised mediation rules that complement its arbitration rules. Parties that are serious about settlement can also request a ‘preliminary assessment’ from a tribunal. This would entail the parties putting forward their respective legal case to a tribunal that will then share its non-binding preliminary views. What this does is give parties a base to discuss settlement without having to accumulate legal costs associated with disclosure and testimonial evidence, and committing to final hearings.

Rana: Businesses are generally very good at settling disputes at senior executive level. It is a very important make or break step in any dispute. Once the dispute becomes entrenched, however, the will to negotiate it to settlement becomes even less evident. In cases where there is third-party funding, case assessment is very important because before any funding can be agreed there has to be an assessment of the likelihood of success versus the costs of running the case. Such assessments can also be useful in building a negotiation plan to settle the matter. Preservation of evidence has also changed dramatically in the last decade or so since much of the evidence now is likely to be in digital form. This brings its own separate challenges, such as with confidentiality, legal privilege and recovering from systems all relevant evidence.

Andersen: There seems to be a big difference between proactive and responsive advocacy in international arbitration. New counsel, often representing respondents only after a claim is made against them, request extensions. We also see an increase in how much and how often counsel from opposing parties already have worked together on the current dispute. This early collaboration seems to promote more agreement on many aspects of the case, impacting significantly how the case starts and how efficiently it is handled. Prior to the appointment of the arbitration tribunal, it is important to review a variety of important components of the case and arbitration clause, including utilising mediation early in the case. Attorneys often note the need to discuss this with their clients. This indicates that the use of mediation is not being fully explored in the early stages of the dispute.

Bamforth: Technology is increasingly important in all parts of the dispute management process seeking to allow parties to be more time and cost efficient. The broad definition of ‘document’ under the disclosure pilot scheme now adopted in the English High Court and in use in commercial cases illustrates the need for technology adoption in order to manage the volumes of material that are potentially covered. Such a broad definition creates challenges for parties regarding the extent of documents that may need to be reviewed and produced and the need to manage and protect sensitive information adequately. Thus, parties are using AI-powered search techniques to identify the critical documents in the dispute and various electronic document management systems to ensure that evidence is stored and protected in a way that can stand up to scrutiny in the dispute. AI and technology have an increasing role in the efficient administration of disputes, including potentially carrying out legal analysis and drafting of documents.

Ripley-Evans: In the current environment, parties are increasingly adopting a proactive and strategic approach to dispute management, with a focus on achieving efficient and cost-effective outcomes that are aligned with their commercial objectives. Parties are carefully assessing cases at an early stage to determine the likelihood of success in arbitration and to identify the most efficient and cost-effective approach to resolving the dispute. This includes considering the availability of evidence, the strength of legal arguments, and the potential costs and risks of pursuing the dispute. We are also noticing parties placing a greater emphasis on settlement evaluation, with the aim of resolving disputes outside of arbitration where possible. This may involve engaging in informal settlements, negotiations or using formal mediation or conciliation procedures. Settlement evaluation may also involve considering the impact of the dispute on ongoing business relationships and reputational issues.

Zimmerman: Parties are utilising early case assessment and settlement evaluation more than ever. In light of the current concerns regarding a potential recession, parties are sensitive to the substantial legal fees that come with any dispute and are also looking to hedge the inherent risk of dispute resolution. We have seen an increase in all forms of alternative dispute resolution short of arbitration, particularly mediation and direct party to party negotiations. In terms of evidence preservation, we are seeing parties taking on more of a direct role in this process. This goes beyond merely issuing preservation holds, but also directly managing the collection and storage of documents and associated vendors. Thus far, this is mostly happening at large companies with sophisticated in-house litigation expertise, but we should expect more companies to do so in an attempt to control costs.

FW: To what extent have the perceived benefits of arbitration changed – for better or worse – in recent years? Could the processes and protocols involved be streamlined to further assist understanding and efficiency for the parties involved?

Ripley-Evans: The perceived benefits of arbitration have evolved, with some changes being viewed as positive, while others have been more controversial. On the positive side, arbitration continues to provide a flexible, efficient and confidential means of resolving disputes. Parties can choose their arbitrators and tailor the process to their specific needs, which can help to streamline proceedings and save time and money. Additionally, arbitration awards are generally final and enforceable, which can provide certainty and finality to the dispute resolution process. However, some criticisms of arbitration have emerged. These include concerns about the cost and complexity of the process, the lack of diversity and transparency in arbitrator appointments, and the potential for awards to be inconsistent or biased. These have all presented a challenge to the legitimacy of the process, particularly in developing regions.

Zimmerman: The biggest changes relate to perceptions around the related issues of time and cost. International arbitration has often been touted, rightly or wrongly, as being a quicker and more cost effective means of dispute resolution – at least when compared to US court litigation. But, more parties and counsel are questioning this belief. Arbitration processes and protocols should continuously be reconsidered and streamlined to improve efficiency. Although arbitral disclosure will almost always be more limited than US discovery, parties and arbitrators must be careful to schedule disclosure at a point in the case when the arbitrators can make meaningful assessments on relevance and materiality. Parties can consider using expedited arbitration procedures at higher thresholds than provided under the applicable rules of arbitration. Even simple mechanisms like page limits for briefs can have a substantial impact on costs.

Bamforth: The perceived benefits of arbitration have undoubtedly changed in recent years. The idea of arbitration proceedings being quicker and more cost effective than court litigation is no longer a given. The complexity and, particularly, the cross-border nature of the types of disputes referred to arbitration has necessarily led to an increase in the average duration and cost of proceedings. Confidentiality of arbitration proceedings was also often held up as an advantage of arbitration, but that is not always the case and is perhaps now also something of a double-edged sword. While on the one hand, commercial parties will be keen to keep their dispute confidential, on the other hand, transparency is a political necessity in disputes arising under contracts with states, and claims against states via ISDS. That said, arbitration’s neutrality advantage over national courts remains a positive, as does the ease of enforcement of awards via the New York Convention. The independence and impartiality of arbitrators must, however, remain a focus for the arbitration community. Another concern is the problem with enforcing awards in underdeveloped or politically unstable countries, where creditors often face difficulties recognising and enforcing foreign arbitral awards. To address these concerns and streamline the arbitration process, some experts have proposed reforms such as standardised arbitration agreements, more rigorous arbitrator vetting and greater arbitration process transparency. There have also been calls for greater regulation of the arbitration industry to ensure that parties are protected and that the process is fair and efficient.

Andersen: One of the main benefits to arbitration and mediation has always been party control. That flexibility allows parties to maximise other benefits of arbitration and mediation – efficiency, economy and finality. International arbitration rules have evolved to create more transparency and opportunities for the economy. There is a growing gap between what the current ICDR rules offer compared to what parties can do in an ad hoc case under UNCITRAL or other similar procedures. The rules innovations over the past decade have provided international standards on processes and protocols for international arbitration users, incorporating important guides to support an efficient and fair process, including ‘Code of Ethics for Arbitrators in Commercial Disputes’, ‘ICDR Tribunal Secretary Guidelines’ and ‘AAA-ICDR Best Practice Guide for Maintaining Cybersecurity and Privacy’, to name just a few. Additionally, the rules themselves have advanced to provide international standards on document exchange, enhanced jurisdiction for the tribunal, emergency interim relief, consolidation and many others.

Rana: The popularity of arbitration as a means of dispute resolution has grown exponentially in the past 25 years. World economic growth and technological advances have made that both necessary and possible. Its initial attraction was the efficiencies brought about by low cost and speed. Those factors have become problematic over time. Cases now can take years at great expense. But its growth has also led to initiatives to rein in cost and keep tribunals to tight timetables. The jurisprudence has also grown around the use of international commercial arbitration with players showing a better understanding of the processes involved in arbitration. Legal systems across the world now, largely, treat arbitration as a favourable means of dispute resolution and holding the parties to their bargain.

Rhie: As arbitral disputes become increasingly global and complex, it can risk costing parties more than court litigation. That is obviously undesirable. Clients and their arbitration counsel need to communicate about the needs of the case, and the commercial needs of the client, from the very beginning. They need to be on the same page about what to prioritise. For example, does the client need to extract a favourable settlement early on? Does the client need a fast result more than setting out all of its claims as fully as possible? Strong and open communication is the cornerstone to ensure the arbitral process remains focused so that the benefits of arbitration are preserved.

FW: In your experience, what can parties do to manage the costs associated with arbitration while maximising the quality of the process?

Zimmerman: Parties should consider proportionality when making strategic decisions in the case. Each additional witness, expert or document request will add cost to the arbitration. A ‘bet the company’ case might warrant a maximalist approach to the presentation of evidence, but many disputes do not. These strategic decisions about presentation of evidence also dictate the time needed to make submissions, which is a substantial driver of costs. Outside counsel can advise as to the costs and benefits of different approaches, but ultimately parties need to decide on the investment to be made in any given case. Parties should also make use of emerging technologies to enhance efficiency. Although we are a long way away from having AI arbitrators deciding cases, there are numerous AI and machine learning (ML) technologies that parties and their counsel can utilise, particularly in connection with document collection and review.

Bamforth: Arbitration can be a cost-effective alternative to traditional litigation. But it is vital to carefully manage the costs associated with the process. One approach is to choose an arbitrator or arbitration panel with experience and expertise in the dispute’s subject matter and a good reputation. Another approach parties may consider is limiting the scope of the arbitration and avoiding overly broad arbitration agreements. In addition, parties should work with the tribunal to schedule hearings and deadlines in a way that is efficient and minimises unnecessary delays. Parties can also agree to limit the scope of discovery and avoid filing unnecessary applications, reducing the time and expense of gathering, reviewing and drafting documents. Finally, parties can use technology for evidence preservation, handling unstructured data and streamlining the review and production of documents.

Andersen: It is a fallacy that there is a direct correlation between the cost and quality of an international arbitration process. Maximising the process is more about creating the best decision-making scenario for the particulars of an individual case. There are far too many scenarios where people are ‘cutting and pasting’ from case to case, instead of being strategically deliberate on each case. Parties, counsel and the arbitral tribunal can help manage costs substantially in arbitration by defining goals and strategy case by case. There is a huge disparity and range of what counsel can and cannot do in a case that may improve the case experience or make it more contentious, drastically increasing costs. By contrast, we have seen multimillion-dollar disputes with multiple claims handled in short timeframes with limited hearing time focused on key witness testimony. This eliminated redundancy and non-relevant or extraneous evidence.

Rana: Parties should use multi-tiered dispute resolution processes and stick to them diligently and not just as window dressing – you will be surprised at how effectively you can deal with the dispute early. Choose your tribunal wisely: do not just go for the most popular names. They are often busy, and their availability will impact both the time and cost it takes to resolve the dispute. Popularity should not be confused with quality. There are plenty of excellent arbitrators out there. Insist on tight timetables for all parties. The right team can prepare a case well in less time than you think. Alternatively, for a claim made by a party, third-party funding can be used to take the disputes ‘off your books’ but still allow the claim to continue.

Rhie: Clients and their arbitration counsel should make good use of arbitral procedures that have been designed specifically to help speed up the arbitral process. For example, most major arbitral institutions such as the ICC, the HKIAC and the Singapore International Arbitration Centre (SIAC) have published fast-track or expedited procedural rules. This may be attractive to smaller companies or those that envision smaller sized disputes. For case management conferences or procedural hearings, clients and lawyers should consider whether in-person hearings can be dispensed with. Virtual or teleconference hearing sessions can, in appropriate circumstances, help ensure that the arbitral process keeps moving without delay or interruption.

Ripley-Evans: Managing the costs associated with arbitration while maximising the quality of the process can be challenging, but there are several steps that parties can take to achieve this goal. First, select the right arbitrators. The choice of arbitrators is critical to the success of the arbitration process. Parties should select arbitrators with relevant expertise and experience in the subject matter of the dispute, and who are known for their impartiality, efficiency and effectiveness in managing the arbitration process. Second, set realistic expectations. Parties should work with their counsel to set realistic expectations for the arbitration process, including the anticipated duration and cost of the proceedings. Third, use efficient procedures. Parties can take advantage of expedited procedures and other cost-saving measures offered by arbitral institutions. Fourth, engage in early case management. Parties should engage in early case management to identify key issues, establish procedural orders and schedules, and streamline the process. This can help to avoid unnecessary delays and ensure that the process stays on track. Finally, collaborate with the other party. Parties can work collaboratively with the other party to identify areas of agreement.

FW: In the current market, what general advice can you offer to companies on preventing or avoiding disputes? Or, if that is not possible, how can they lay the groundwork to resolve disputes efficiently with well-drafted contracts and clear communication with business partners, for example?

Ripley-Evans: Preventing or avoiding disputes altogether may not always be possible, but companies can take steps to minimise the risk of disputes and lay the groundwork for efficient dispute resolution if a dispute does arise. This can ultimately help to preserve business relationships and reduce the costs and disruption associated with disputes. Clear and effective communication with business partners is essential to preventing, or at least minimising, disputes. This includes being transparent about expectations, setting realistic goals and addressing any concerns or issues that arise early on. In addition, well-drafted contracts can help to avoid disputes by clearly defining the terms and conditions of the business relationship, including the scope of work, payment terms and dispute resolution mechanisms. Another way that companies can minimise the risk of disputes is by identifying potential areas of disagreement and developing strategies to manage those risks.

Andersen: Decision makers and leadership in a company must create a culture of resolution to handle both internal and external disputes. This culture then influences the relationships the company has with partners, distributors, vendors and other entities with which it might interact. Preparation is key. International parties must understand the basic process, costs and timing of international arbitration and mediation: UNCITRAL, the New York Convention, governing laws, applicable rules and clause-drafting. The next step is strategic planning on managing potential disputes. The selection of one or two clause options to insert in future agreements and rules that fit your efficiency goals is crucial.

Rana: The starting point is always a clear and well-drafted contract using plain language. After all, the people who administer the contract are lay people and they should be able to understand what is being asked of them. Use the contract, do not just put it in the bottom drawer once it is signed. The contract is like the Highway Code: it is there to direct and guide you through the rules that the parties have agreed will apply to that project, job and relationship. It binds all parties to the transaction and states what they can or cannot do and what the remedies are for failing to do or not to do something. Clarity in the dispute resolution clause is also essential. You do not want to be in the position of arguing over how to resolve the dispute. Next, be open to compromise. No dispute has a crystal-clear answer, and no dispute will have one right answer.

Rhie: Dispute resolution clauses in commercial agreements are often prepared or reviewed last, often near the time of completion or execution of an agreement. This is not advisable, especially when multiple agreements or side letters are being executed by the same parties in parallel. Large or global companies should, ideally, ask their deal counsel to obtain input from disputes lawyers. Smaller companies might find it useful to adopt one of the model dispute resolution clauses published by major arbitral institutions such as the HKIAC on their website. These are ‘fill in the blanks’ type clauses that have been drafted by lawyers, and which can apply to most general types of commercial agreements. If in doubt, ask a disputes counsel to give an independent view. This can result in significant cost savings later down the road.

Bamforth: Disputes are inevitable. Preventing them entirely is not possible, but companies can take steps to minimise the likelihood of disputes arising and to handle them efficiently if they do occur. One fundamental approach should be establishing clear and detailed agreements outlining each party’s expectations, obligations and responsibilities. Companies should draft contracts with input from legal professionals to ensure that they cover all relevant contingencies and potential issues. They should also include unambiguous governing law and dispute resolution provisions, not leaving these until five minutes to midnight on the day the document is to be signed. Another important step is to establish clear internal policies for dispute resolution. Such procedures might establish communication principles, identifying potential disputes before they become major issues and maintaining good records of all communications and interactions, including emails, phone calls and in-person meetings. The lack of such policies leads to much time and pages being used on extrinsic procedural battles and irrelevant evidence and submissions.

Zimmerman: Relationship management and communication is critical. Consider contracting for structures such as alliance managers or joint steering committees, which can be useful tools for identifying and resolving disputes at early stages. Make sure the dispute resolution provision is carefully considered to promote a clear and efficient process and avoid a dispute about a dispute. Once a dispute is submitted to arbitration, early case assessment and settlement evaluation is key. Parties often wait until after the statement of claim and statement of defence to consider settlement. At that point, each side will have incurred substantial legal expenses, and both will be wary of entering into settlement discussions from a position of perceived weakness. Moreover, there may not be natural windows in the arbitration to engage in settlement discussions. Consider building a time for negotiation or mediation into the initial scheduling order to mitigate these issues.

FW: What issues do you expect to dominate international arbitration over the coming months? What overarching trends are likely to unfold?

Andersen: Conflict creates conflict. Recent geopolitical events, policies and restrictions have forced changes to commercial business that could increase arbitrations in certain sectors. Conversely, these same factors affecting solvency and currency could cause arbitration to decline in certain regions, as money is typically the primary remedy sought in an international commercial dispute. Increasingly businesses and attorneys will need to rely on arbitral institutions that truly have a global footprint and an independent service model. Another important consequential factor to consider is how these and other related global trends will affect international commercial business decision making. How many companies will change distribution partners and locations in areas around the world to minimise risk? Businesses will continue to create opportunities for increased revenue and profit margins. This balance of risk and revenue could change many deals going forward, not only in terms of business decision making but also toward the more independent, respected and recognised international dispute resolution institutions.

Rhie: Arbitration practitioners are expecting the new rules on outcome fee arrangements to popularise arbitration even more in the Asia-Pacific region. Hong Kong and Singapore, especially, may see growth in the number of domestic arbitrations being filed as parties become more incentivised to opt out of court litigation where conditional fee arrangements are still prohibited. These latest reforms also bring Hong Kong and Singapore closer in line with other jurisdictions such as Australia, England and Wales, and the US, where conditional fee arrangements for arbitrations are nothing new. This might level the playing field even more when it comes to choosing a seat for arbitration, especially if there are Asian or Chinese parties involved.

Rana: I expect to see continued use of technology to resolve disputes. One positive from the pandemic and lockdowns worldwide was that it accelerated the use of technology in all areas of life, including arbitration. This includes electronic submissions and videoconferencing for hearings, which saved on carbon emissions produced from flying everyone around the world and the cost of so doing. Efforts to regain the time and cost factors that once made arbitration attractive will continue. Arbitral institutions have been introducing initiatives to support what parties want with expedited arbitration, document-only arbitrations, videoconferencing and use of technology generally. Although international arbitration is maturing, there is still room for emerging centres of arbitration as parties look for a more local, neutral centre to administer their disputes. As well as newer sectors taking up arbitration as a means of dispute resolution, diversity in tribunals and sustainability are two trends that continue to dominate.

Bamforth: One overarching trend likely to continue is the revision of existing arbitration rules and treaties to align them more with modern practice and promote arbitration as a dispute resolution process. We may see reforms of national arbitration rules and existing investment treaties, modernisation of the Energy Charter Treaty and review of principles regarding transparency of arbitration proceedings. Another trend is the continued growth of arbitration involving states. This trend will likely continue due to the pandemic disturbances, financial distress, ongoing geopolitical tensions and changes in global trade relationships. Finally, we may see the increasing use of technology-driven approaches in international arbitration. This includes AI, electronic document management systems and online case management platforms.

Zimmerman: In North America, legacy claims under the North American Free Trade Agreement are set to expire as of 1 July 2023, which could result in a number of notices of intent and requests for arbitration. In Central and South America, the past five years have seen the election of numerous left-leaning governments, most recently in Brazil, Chile and Colombia. Changes in government often result in new policies on issues such as state-owned entities, natural resources and foreign investment, which could give rise to commercial and investment disputes. Lastly, in Europe, the continuing war in Ukraine resulted in new rounds of sanctions from both the US and the EU in February. Beyond the direct impact of sanctions, the conflict is having downstream effects on existing commercial relationships, particularly in the energy sector, and spurring an incredibly rapid transition to renewable energy sources. The resulting disputes may be more than a few months away, but are on the horizon.

Ripley-Evans: International arbitration is likely to continue to evolve and adapt to changing circumstances and emerging issues over the coming months, with a continued focus on efficiency, transparency and fairness in the arbitration process. Furthermore, we will likely see institutions and parties responding to the increasing pressure to promote diversity in arbitrator appointments and proceedings as well as tackling the issue of sustainability, with parties and institutions seeking to address issues such as climate change and social responsibility in arbitration proceedings. Hopefully, we continue to see the international arbitration landscape positively transformed by further developments in AI, ML and other technologies to streamline and improve the arbitration process. It is also expected that investor-state disputes will be a significant feature of international arbitration, with ongoing debates around the appropriate scope of investment protection and the role of arbitration in resolving investment disputes.

Richard Bamforth is a disputes partner at CMS based in London and co-heads the CMS international arbitration group. He has a pragmatic, commercial approach to the resolution of disputes and his clients benefit from his advice and experience in formulating creative strategies at all stages of their disputes. In his 30-year career, he has represented clients in arbitration and litigation disputes across a wide range of sectors and spanning all the major jurisdictions and also sits as arbitrator. He can be contacted on +44 (0)20 7067 3641 or by email: richard.bamforth@cms-cmno.com.

Jonathan Ripley-Evans is a partner based in the Johannesburg office and heads up the South African disputes practice. He has extensive experience in alternative dispute resolution and general commercial litigation. He has also acted as mediator and as adviser and representative in both mediations and arbitrations, domestic and international. He is an AFSA accredited mediator and arbitrator and currently sits on the AFSA management committee. He can be contacted on +27 10 500 2690 or by email: jonathan.ripley-evans@hsf.com.

For over a decade, clients facing complex cross-border disputes in the life sciences, energy, construction and infrastructure sectors have turned to Sam Zimmerman for strategic guidance. Whether the dispute is in arbitration, federal and state courts, or a regulatory proceeding, he provides clients with the practical and calculated direction they need to succeed. His practice area spans the globe, including the US, Latin America, Europe, Asia and the Middle East. He can be contacted on +1 (212) 918 3241 or by email: samuel.zimmerman@​hoganlovells.com.

Steve Andersen directs the International Centre for Dispute Resolution (ICDR) in Canada, Mexico and the US. Mr Andersen recruits and maintains the highest qualified panel in those areas for the ICDR’s international panel of arbitrators and mediators, with a focus on aerospace, aviation, national security, energy and technology, among other industries. He is responsible for the ICDR’s cross-border arbitration and mediation in the region, providing executive oversight of large cases. He can be contacted on +1 (213) 271 9915 or by email: andersens@adr.org.

Rashda Rana SC is a commercial and construction law silk with extensive experience in international legal practice gained across the UK, Europe, the Middle East, Australia and the Asia-Pacific region, having worked as counsel in a number of international jurisdictions including London, Australia, New York, Paris, Milan, Brazil, UAE, Hong Kong, Singapore, Malaysia and China on transactional, litigious and arbitrated matters. She also has experience as general counsel at a number of the world’s leading project management, design and construction and energy companies. She can be contacted on +44 (0)7484 163 273 or by email: rr@ranaidrs.com.

John Rhie is managing partner of Quinn Emanuel’s Hong Kong office and the head of the international arbitration practice in Asia. He specialises in international arbitration, both commercial and investment treaty, as well as cross-border/international litigation and white-collar crime. In relation to international arbitration, he has acted as counsel and arbitrator in arbitrations under most arbitral institutions such as the HKIAC, ICC, ICSID, KCAB, LCIA, SIAC as well as ad hoc arbitrations around the world. He can be contacted on +852 3464 5602 or by email: johnrhie@quinnemanuel.com.

© Financier Worldwide

THE PANELLISTS

Richard Bamforth

CMS

Jonathan Ripley-Evans

Herbert Smith Freehills

Sam Zimmerman

Hogan Lovells

Steven Andersen

ICDR

Rashda Rana

Senior Legal Consultant to National Grid

John Rhie

Quinn Emanuel Urquhart & Sullivan LLP