December 2010
- Editorial
- Legal update
- Choices in arbitration: users' survey
- Dispute resolution in London
- Jivraj developments
- New UNCITRAL rules
- Noticeboard
- Focus on London: Professor Robert Merkin
By Amy Armitage and Amanda Greenwood
London's position as a leading international arbitration centre has been given a boost in the recently published " International Arbitration Survey: Choices in Arbitration".The survey was prepared by the School of International Arbitration, Queen Mary College, University of London. The survey cites London as the most preferred seat of arbitration and suggests that this may be related to the popularity of English law. It also provides insight into corporate attitudes and practices regarding the appointment and performance of arbitrators and confidentiality.
The survey focuses on the key factors that influence corporate choices in international arbitration and builds upon themes identified in the previous two international Arbitration Surveys (published in 2006 and 2008). It also covers new ground, including corporate policies towards international arbitration and attitudes towards confidentiality. This year, the survey has captured the views of a more geographically diverse pool of respondents to reflect emerging economies.
Corporate dispute resolution policies
The survey reveals that 68 per cent of respondents have a corporate policy on the dispute resolution mechanisms to be incorporated into their contracts. Of those respondents, the majority have a "preferred" position on their choice of governing law, arbitral institution, language and seat.
"English law is preferred because of its 'predictability', 'certainty', 'developed jurisprudence' and respect for principles such as freedom of contract."
Many respondents referred to arbitration clauses as the "2 a.m. clause" and described how they were often brought in late to negotiations and expected to conclude these clauses with minimal negotiation. In our experience, a carefully drafted arbitration clause can avoid unnecessary conflict on peripheral issues and significantly reduce the risk of protracted disputes about procedure. If and when a dispute does arise, these clauses can become the most important clauses of all. It is well worth giving them the attention they deserve from the outset.
Choice of governing law, seat and infrastructure
With regard to the choices made in relation to the governing law, seat, institution and rules, 51 per cent of respondents said that the law governing the substantive dispute is the first issue to be decided. Many expressed the view that this was because the governing law is usually selected by the corporate lawyers before the negotiation of the dispute resolution clauses.
The survey confirms that 68 per cent of respondents believe that the choices made in relation to the governing law, seat, institution and rules influence one another. In particular, a number of interviewees considered that the choice of governing law informs the choice of seat.
The most important factors influencing parties' choice of law were the perceived neutrality and impartiality of the legal system (66 per cent), the law that was considered most appropriate for the type of contract (60 per cent) and the respondents' familiarity with the particular law (58 per cent). More experienced users also considered which laws would provide a strategic advantage regarding enforcement of the award and how the contract would be interpreted.
In terms of the most preferred law (other than the law of their home jurisdiction), 25 per cent of respondents chose English law. This was followed by Swiss (9 per cent), New York (6 per cent) and French (3 per cent) laws. English law was cited as the most recently used governing law by 40 per cent of respondents, followed by New York law (17 per cent).
"38 per cent of respondents said they would still choose arbitration even if it did not offer confidentiality."
This is a powerful endorsement of English law, which according to the survey is preferred because of its "predictability", "certainty", "developed jurisprudence" and respect for principles such as freedom of contract.
The survey suggests that choice of seat is most influenced by the "formal infrastructure" available (62 per cent). This includes the arbitration law and the court's record of enforcing arbitration agreements and arbitration awards and the degree of neutrality and impartiality.
"Parties would like to see arbitrators exerting greater control over the proceedings to reduce delays."
London was named as the preferred seat of arbitration (30 per cent), followed by Geneva (9 per cent), Paris, Tokyo and Singapore (7 per cent each) and New York (6 per cent). Respondents were also asked which five seats their organisation had used most frequently in the past five years. The most commonly cited seat was London, followed by Paris, New York, Geneva and Singapore (which has emerged as the most popular seat in Asia).
International Court of Arbitration (IC) was the most preferred arbitration institution (50 per cent), followed by the London Court of International Arbitration (14 per cent). Whilst, on the whole, it seems users are generally satisfied with the quality of the IC, the survey results suggest that there is still a perception that arbitral institutions are costly in general.
Arbitrator selection and performance
In terms of the selection of arbitrators, 68 per cent of respondents rated open-mindedness and fairness over experience of arbitration (62 per cent), quality of awards, (58 per cent), relevant legal knowledge (55 per cent), reputation (54 per cent) and availability (51 per cent) as the key factors that influence corporations' decisions about arbitrators.
Lack of availability was, however, identified as an area of "increasing concern". Many respondents considered that arbitrators should be required to publish information about their pending commitments as this was seen as a factor which can lead to delays.
This issue has notably already been identified by the IC which recently imposed a requirement on arbitrators to describe their availability over the following 12/18 months by completing a Declaration of Acceptance, Availability and Independence.
The survey reveals that 43 per cent of respondents prefer a "proactive case management style" from the tribunal. It is anticipated that one particular change following the IC's review of its current rules will be greater emphasis on active case management by the tribunal. The survey suggests that this move would be welcomed by corporate counsel.
A disappointing number of respondents (50 per cent) stated that they had been dissatisfied with the performance of an arbitrator and the survey reveals strong support for a review or assessment of arbitrators' performance at the end of the arbitration (75 per cent).
This is perhaps one of the most challenging issues for arbitral institutions in the future. In principle it seems right that the users of arbitral institutions should be allowed the opportunity to provide feedback on the performance of arbitrators as "consumers" of the arbitration product. However, the difficulty is ensuring that such feedback is captured and reported in an objective manner.
Confidentiality
Whilst confidentiality is important to corporate users (62 per cent considered it to be "very important"), the survey suggests that it is perhaps not as fundamental as one might think: 38 per cent of the respondents said they would still choose arbitration even if it did not offer confidentiality. Confidentiality is therefore only one of several reasons (including procedural flexibility, enforceability of awards, impartiality and neutrality) why parties choose arbitration.
Delays in proceedings
Respondents believe that the parties contribute most to the length of arbitral proceedings (31 per cent). However, 30 per cent consider that the tribunal is best placed to keep the arbitration timetable on track. The survey also reveals that parties would like arbitration to become more streamlined and disciplined and would like to see arbitrators exerting greater control over the proceedings to reduce delays.
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