The evolution of international arbitration

Ben Giaretta, Partner, Michael Weatherley, Associate, Singapore

Speedread

As cross-border trade and investment continues to grow, so does the need for fair, neutral and efficient resolution of international commercial disputes. International arbitration has emerged as the principal dispute resolution method for such disputes, but has become hampered in recent years by increasing costs and delays. Various proposals have been made to improve the situation. Two of these have already gained traction, namely emergency arbitration and expedited arbitration; and three new proposals are now circulating, namely appeals from arbitral awards, Bilateral Arbitration Treaties, and Hybrid National Arbitration-Courts.

Expedited arbitration

Various arbitral institutions around the world now offer an option to conduct arbitration on an expedited or "fast-track" basis.¹

An expedited procedure imposes strict-limits on the time in which the arbitral tribunal must hear and dispose of the parties' case. Under the Singapore International Arbitration Centre (SIAC) Rules for instance, where the expedited procedure applies, the tribunal must make an award within six months of the date when the tribunal was constituted, and that time-limit will only be extended in "exceptional circumstances".

Expedited arbitrations are generally only appropriate for smaller value claims, or ones which can be decided based on documents alone.

Emergency arbitration

Emergency arbitration is an increasingly popular mechanism by which parties can apply for and be granted urgent interim relief, prior to the constitution of the main tribunal and without having to go to a national court. Most of the major arbitral institutions now have emergency arbitration provisions in their rules.²

Within one or two days of the institution receiving an application for emergency arbitration, an emergency arbitrator is appointed and quickly establishes a procedural schedule. That includes written and/or oral submissions by the parties, followed as soon as possible by a ruling. Timelines vary under the different rules, but a typical emergency arbitration under the SIAC Rules, for example, takes around seven to ten days from application to award. An emergency arbitrator can usually order any interim relief necessary, such as asset freezing orders.

Despite the increasing use of emergency arbitration, there are lingering doubts as to the enforceability of rulings issued by an emergency arbitrator, especially whether or not these can be considered "final and binding", and therefore enforceable under the New York Convention. In response to this, Singapore and Hong Kong have both amended their arbitration laws to specifically allow for the enforcement of emergency arbitrator awards.

Appeals from Arbitral Awards

One of the main policy objectives of national arbitration laws is to achieve finality in dispute resolution. Accordingly, most laws only permit challenges to arbitration awards on very narrow grounds, mainly concerning procedural defects rather than the merits of an award.

The American Arbitration Association (AAA) has recently introduced a system of appealing arbitration awards on the merits. Specifically, parties are permitted to appeal on the grounds that the underlying award is based on errors of law that are material and prejudicial, and/or on determinations of fact that are clearly erroneous. This is an "opt-in" system, so the parties have to specifically agree to the use of AAA's new set of "Optional Appellate Arbitration Rules" for such appeals to be available. However, the AAA believes these rules will be suitable "for the types of large, complex cases where the parties think the ability to appeal is particularly important.^"3

While the AAA is the only major institution at present to offer this, it is an idea that will undoubtedly be considered by other institutions in the next revisions of their rules.

Bilateral arbitration treaties

A novel idea that has been proposed by Gary Born is the introduction of Bilateral Arbitration Treaties (BATs). This involves countries agreeing by treaty that commercial disputes between nationals of each state will be resolved by arbitration, subject to any opt-out agreed by the parties (e.g. a court jurisdiction clause in a contract).

This idea has not been adopted by any country yet, and it remains to be seen how it would work in practice. However, if successful it could assist in easing congestion in local courts, and promote foreign investment in a state. It would also mark a sea-change from the approach in certain countries, such as Thailand and Indonesia, where the policy of state-owned companies is to insist on local court jurisdiction, rather than arbitration.

Hybrid national arbitration-courts

Finally, there is the emergence of national courts which consciously share many of the features of international arbitration: one might call these "Hybrid National Arbitration-Courts". The Dubai International Financial Centre (DIFC) courts have been operating on these lines for a while; and a new Singapore International Commercial Court (SICC) has recently been proposed.

The proposed SICC is akin to arbitration because it is a forum for disputes with no connection to Singapore, arising from contracts not governed by Singapore law, and heard by a panel of decision-makers who may not be Singaporean; though it would still be part of the Singapore court system. It thus would have the international qualities of arbitration, but would also permit appeals and joinder/consolidation of disputes (which are usually not available in arbitration). Question-marks remain, however, over how judgments would be enforced internationally, since the New York Convention would not apply. Again, though, if successful in Singapore, it may be copied in other commercial centres.

_{¹Institutions which have incorporated an expedited procedure into their rules includes the Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), Australian Centre for International Commercial Arbitration (ACICA), Japan Commercial Arbitration Association (JCAA) and the Kuala Lumpur Regional Centre for Arbitration (KLRCA).
²This includes the SIAC, HKIAC, ACICA, International Chamber of Commerce (ICC), International Centre for Dispute Resolution (ICDR), Stockholm Chamber of Commerce (SCC), Swiss Chambers' Arbitration Institution, Netherlands Arbitration Institute (NAI) and Panel of Recognised International Market Experts in Finance (PRIME Finance). The London Court of International Arbitration (LCIA) is currently revising its rules and the latest draft, published in February, includes provision for emergency arbitration.
³See: http://go.adr.org/AppellateRules}