ARBITRATION & PUBLIC INTERNATIONAL LAW: An Introduction to Global Market Leaders

International arbitration has traditionally been the preferred method of dispute resolution for clients seeking to resolve cross-border disputes, whether they arise out of commercial arbitration agreements, or under Bilateral Investment Treaties (BITs). This remains true today as global industry emerges from the restrictions of the COVID-19 pandemic. The enduring durability of international arbitration as a dispute resolution mechanism is underscored by its popularity with clients not only in traditional sectors, such as energy, banking and finance, and construction, but also in variety of niche sectors including art and sports, and extending to new fields such as cryptocurrency. At its core, arbitration is founded on consent, and on allowing the parties to a dispute to determine the most efficient mechanism for the resolution of their dispute. This flexibility, and the autonomy that it grants the parties to a dispute, remains international arbitration’s most alluring characteristic. As a result of this flexibility, international arbitration is well placed to adapt to changes in the modern economy, such as those driven by the increased focus on, and investment in, green technologies. At the same time, it also provides a challenge to law firms and legal representatives, who are pressed to develop bespoke approaches to individual disputes, rather than adopt cookie cutter solutions across cases. This is one of the reasons why, as the Chambers guide makes clear, international arbitration is one of the few practice areas in which specialist firms occupy leading positions in the rankings. Below, we highlight some of the key developments and trends affecting the international arbitration market at present.

Economic Uncertainty 

Increasing interest rates around the world, coupled with persistent supply chain issues arising both from the after-effects of the COVID-19 pandemic and geopolitical developments such as the war in Ukraine, have dampened the appetite to incur legal costs. At the same time, there remains strong demand for high-quality legal representation, both with regard to disputes that have already risen, but also in advisory work intended to plan for disputes on the horizon, or to avoid them altogether.

With the global economic environment expected to improve over the course of the year, we can expect to see healthy numbers of disputes being submitted to arbitration, as companies in particular feel more secure in their long-term prospects.

Avenues for Growth 

Notwithstanding global economic headwinds, international arbitration continues to benefit from accelerated economic growth in countries outside the so-called first world, as well as specific initiatives such as China’s One Belt One Road infrastructure network. This trend is expected to continue both in 2023 and in the years to come, strengthening international arbitration’s pivot to new markets, and spurring the increasing diversification of the international arbitration space.

Beyond geographies, international arbitration is increasingly recognised as offering avenues for the resolution of disputes that courts may be reluctant to get involved with. For example, parties are increasingly turning to international arbitration to recover the proceeds of embezzlement, particularly in disputes involving the actions of State officials, and international arbitration has emerged as a unique tool in the global fight against corruption.

Changes to the Procedural Framework for International Arbitration

Procedural rules governing arbitration proceedings are of particular interest to clients, who remain attracted by international arbitration’s promise of flexible, speedy and cost-effective proceedings. Of particular interest in this regard are the recent changes to the International Centre for Settlement of Investment Disputes (ICSID) arbitration rules, which came into effect on 1 July 2022. These changes, which are the result of extensive consultations with a variety of stakeholders, contain new provisions on subjects including security for costs, the publication of materials from ICSID arbitrations, and optional rules for expedited proceedings, and are intended to ensure that the ICSID rules remain responsive to the needs and concerns of their users.

Beyond ICSID, efforts are also underway to modernise the procedural framework for international arbitration in individual jurisdictions. For example, the Law Commission of England and Wales recently published a set of proposals to update the Arbitration Act of 1996, which governs arbitrations in England. Given England’s and, in particular, London’s position as an arbitral venue of choice for many parties, the proposed changes – which touch on various areas including confidentiality and transparency; the independence and impartiality of arbitrators; arbitrator immunity; the summary dismissal of claims in arbitration proceedings; and the role of the courts in supporting arbitration proceedings and reviewing the jurisdiction of arbitration tribunals – are of particular interest to the arbitration community as a whole. The Law Commission has received responses from the public to its proposals and will now move to prepare a report for the government’s consideration.

Taking a step back, it is clear, both from the changes discussed above, as well as other changes occurring in parallel, for example to the Arbitration Institute of the Stockholm Chamber of Commerce Rules (2023), the London Court of International Arbitration Rules (2020) and the Hong Kong International Arbitration Centre Rules (2018), that arbitration practitioners across jurisdictions and institutions are animated by similar concerns, suggesting that the arbitration community is moving ever closer to adopting a transnational approach to international arbitration.

Challenges  

As mentioned above, clients remain attracted by the flexibility of arbitration proceedings, and the ability to tailor the procedure to meet their needs. However, a flip side to this flexibility is that it potentially allows parties to subvert arbitration proceedings, delaying their progress and driving up their costs. This is a challenge for parties, particularly when up against opponents who may be acting in bad faith. It is therefore important for parties to retain the services of sophisticated counsel who are adept at navigating international arbitration procedure, and to appoint effective arbitrators who can see through procedural gamesmanship and are willing to sanction such conduct.

Another development that clients need to keep in mind is the continuing efforts by certain states, most notably within the European Union, to temper what they view as the excesses of the investment arbitration regime as it exists today, for example by withdrawing from the Energy Charter Treaty, or publishing new model BITs with revised dispute resolution clauses. These efforts exist in parallel to steps taken by the European Court of Justice, in its Achmea judgment of 2018, as well as in subsequent decisions including Komstroy, PL Holdings and Micula to restrict investors’ ability to bring claims under intra-EU BITs. Taken together, these developments should spur investors to plan and structure their investments carefully.