Arbitration facing major challenges
International arbitration is facing four key challenges, according to a former judge of the High Court of England and Wales.
Speaking at Hong Kong Arbitration Week 2016 last month, Sir Vivian Ramsey provided insight into some of the challenges that arbitration is facing worldwide.
“I'm going to look at the challenge to arbitration as a dispute resolution method,” Sir Ramsey said.
“I think it’s facing challenges in four areas. The first is time and cost of arbitration, the second is competition from other ADR [alternative dispute resolution] methods, then there is competition from commercial courts, and finally there is concern that arbitration and ADR are depriving the courts of their ability to develop the law.”
Delving into the first challenge, Sir Ramsey referenced the 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration carried out by Queen Mary University of London.
“As the 2015 Queen Mary survey has shown, cost is seen as arbitration's worst feature. Lack of speed is another criticism,” he said.
“Although there have been initiatives about costs of arbitration, arbitration is lagging behind the court's adoption of various practices.”
Sir Ramsey said the issue of cost can only be solved if arbitration institutions look to make a change, not just individuals.
“It’s only really if institutions tackle cost management, rather than individual arbitrators. But that is a challenge which I think arbitration has to meet.”
The second challenge comes in the form of competition from other ADR methods.
“Arbitration proceedings are very often as lengthy as court proceedings, as costly as certain court proceedings, and arbitrators are invariably lawyers who are addressed fully by a legal team,” Sir Ramsey said.
“That has meant that the attraction of arbitration as a method of ADR has fallen and it’s meant that people have looked for alternatives such as mediation, conciliation and various others.”
The third challenge is the competition from commercial courts, which provide yet another alternative for parties seeking to resolve a dispute.
“These commercial courts are starting to provide a real alternative, I would suggest, to international arbitration,” he said.
There are nine points that parties consider when determining whether to engage with an international court or in international arbitration, according to Sir Ramsey.
“They are the availability interim remedies, the selection of the tribunal, procedural rules, number of parties and scope of disputes, costs of the process, cost decisions, confidentiality, the need for an appeal process, and enforceability of awards and judgments.”
Overall, he said, courts and arbitration are complementary, because each is better at some of the nine points.
“That complementary nature of courts and arbitration is important and I think the challenge for arbitration is to look at the strengths of court proceedings, particularly costs, and see how they can meet the challenge to come closer to the advantages of the other, because the courts are already looking the other way.”
The last challenge that Sir Ramsey covered was that courts are now seeing fewer commercial matters coming before them, which would contribute to the development of the law.
“When disputes are resolved outside the court system, the court will not be involved in developing the law,” he said.
“Equally, if you resolve the dispute by adjudication or by arbitration you’re not going to develop the law.”
Sir Ramsey had two ideas to solve this challenge.
“Arbitration decisions should now have come of age so that they are at least as important in developing the law as court decisions, and clearly in the international context an arbitration decision is likely to be of some persuasion for another arbitral tribunal,” he said.
“Equally, I think the solution from the courts' point of view is to make the courts more attractive and to attract the major cases, therefore to be able to develop the law.”
Sir Ramsey believes that the success of arbitration over the next few years will depend on the ability of arbitral institutions and arbitrators to tackle these four key challenges.