Arbitration on the rise again
The last two posts in this annual series reported on drops in the numbers of new cases and of appointments of arbitrators across the six international arbitration bodies chosen for our survey. The highpoint on both counts had been seen in 2020, the year after the outbreak of the global Covid-19 pandemic. As the graphs below illustrate, the statistics from these bodies show renewed increases in 2023 with the number of appointments of arbitrators reaching a slightly higher total than in 2020.
Shortly after releasing its caseload numbers for 2023, the International Chamber of Commerce (ICC) published its detailed statistical reports not only for 2023 but also for 2021 and 2022. This was welcome. As is clear from its reports, the range, diversity and international reach of ICC arbitration are unique. The data which the institution collates and publishes is fascinating and instructive.
One of the motivating factors for our initial survey in 2018 was a suggestion circulating in the international arbitration community that London was already losing its pre-eminence as a seat, notably in ICC arbitrations, before the Brexit referendum in 2016 and that political uncertainty in its wake would further damage London’s appeal to commercial users. We were keen to see what the data showed and how it would develop. Six years later, Paris, the home of the ICC, is seeing political uncertainty of its own. In 2023, the London Court of International Arbitration (LCIA) and the London Maritime Arbitrators Association (LMAA) saw more new cases than they had in 2016 while the ICC saw fewer. London was the second most popular choice for seat in ICC arbitrations in 2023 and the ICC’s newly released report reveals that it was first choice in 2021.
As discussed in last year’s post, Arbitration statistics 2022: ad hoc strengthens as institutions recede, another motivating factor in 2018 was the treatment which ad hoc arbitration received at the time in the arbitration media, surveys and in a controversial keynote speech by Chief Justice of Singapore Sundaresh Menon in which he asserted that arbitral institutions had a ‘duty to shape the future of arbitration’. In 2023, the LMAA, an association of professional arbitrators which publishes rules for use in ad hoc arbitrations, saw its highest number of new cases in the eight years covered by our analysis. Its 3268 appointments of arbitrators, also its highest number, represents 56% of all the appointments made across the six bodies in 2023.
While Menon CJ’s claims for institutional arbitration were excessive, if not hubristic, he was rightly proud of the progress made by Singapore’s home-grown institution, the Singapore International Arbitration Centre (SIAC). SIAC comes out top in terms of caseload growth over the eight years in our study. Its number of new cases in 2023 (663) was nearly double the number in 2016 (343). It saw its second highest number of appointments of arbitrators in 2023 (359) but this was only fractionally higher than 2016’s number (341). Once again, the institution saw a substantial shortfall between arbitrations commenced and tribunals appointed, a phenomenon discussed in our 2021 post, Arbitrations without arbitrators: an institutional paradox.
Shipping, commodities and the ICC exception
One of the major reasons for SIAC’s success is that it has established itself as the arbitral institution of choice for disputes arising from international trade transactions in the Asia-Pacific region. It reports that in 2023, 47% of its disputes related to trade and 13% maritime/shipping, making a total of 60% (400 arbitrations) across these two categories. Construction/Engineering had just 8% (50 arbitrations).
For the LCIA in 2023, ‘The ongoing impact of global developments on energy prices and supply chains has contributed to the continued dominance of transport and commodities cases.’ The subject matter of the latter was wide ranging and included LNG, coal, metals, fertilisers and agricultural products. The institution saw 36% (118) of new cases under its rules (327) in this combined category, on a par with 37% in 2022. However, the LCIA saw fewer cases in these sectors than SIAC. Its docket represents no more than 5% of the shipping and commodities arbitrations seated and/or administered in London in 2023. Apart from the LMAA’s 1845 estimated new references, Gafta (the Grain and Feed Trade Association) reported 337 new arbitration claims received in the period 1 October 2022 to 30 September 2023, a 29% increase on the previous year. To these should be added new cases submitted to other international trade associations headquartered in London as well as other ad hoc arbitrations. The LCIA’s institutional offering has been and remains a useful addition to the range of options available to parties involved in the sectors which the data shows to be the most productive of arbitrations worldwide.
Hong Kong is another significant hub for shipping and international trade. The Hong Kong International Arbitration Centre (HKIAC) reports that in 2023, 16% of its registered cases concerned maritime disputes and a further 5% international trade/sale of goods. These two categories thus had a combined 21% of the institution’s new cases, making them first equal with corporate disputes and ahead of construction and energy (17.5%).
In contrast, the ICC reports that disputes arising from the construction/engineering and energy sectors ‘which traditionally generate the largest number of ICC cases’ represented over 45% (398) of all new cases registered in 2023 while transportation, metal and raw materials, and general trade and distribution were among the sectors representing 3% to 6% of new cases. Having relatively few arbitrations arising from international commodities and shipping transactions and focussing instead on projects disputes, notably in the energy and construction sectors, the ICC’s caseload is similar to, but much bigger than, the international caseload (97 cases in 2023) of the Stockholm Chamber of Commerce (SCC), which reports that the contracts from which the largest numbers of arbitrations stemmed were service agreements and business acquisition agreements.
Looking outside the organisations in our graphs, the Swiss Arbitration Centre reports that in 2023 the most common type of agreement in dispute was sale of goods (33%) with commodity mining and trading coming second to banking and finance in the key industry sectors in its caseload. Similarly, the Shenzhen Court of International Arbitration, which saw 414 new international cases in 2023, had finance and capital markets in first place with domestic and international trade in second and infrastructure and construction in fifth. The Lexis®PSL Arbitration practice note Arbitration statistics and surveys [subscription required] includes statistics from 18 different arbitral bodies going back to 2012 and contains links to their reports.
Its relatively small proportion of arbitrations arising from international commerce (buying, selling and transporting goods across borders) makes the ICC’s caseload exceptional. Other factors which make it stand out include the high proportion of arbitrations between parties of the same nationality (29%), the number of different cities where arbitrations were seated (116), the number of different laws chosen to govern the contracts in dispute (112), and the number of different arbitrators appointed (935, which exceeded the number of new cases filed). With so many different contracts, seats, and laws at play, it is hardly surprising that so many different arbitrators are appointed in ICC arbitrations. Furthermore, the institution has a policy not generally to appoint the same individual as arbitrator within the 12 months following that appointment.
Although it is exceptional in these and other respects, the ICC finds itself treated as a paradigm or gold standard in international arbitration. The tiny number of appointments which it considers appropriate for arbitrators to take annually (ideally only one) is effectively treated as the norm in the IBA Guidelines on Conflicts of Interest in International Arbitration. The new edition of the Guidelines, published in February 2024, still fails to include any recommendations for arbitrators to disclose relationships with, and numbers of appointments from, institutions. These are factors capable of making arbitrators reluctant to challenge an institution’s decisions and delays which may be contrary to the interests of the parties. On the other hand, the Guidelines include a revised footnote to deal with repeat appointments by parties in ‘certain types of arbitration, such as maritime, sports or commodities arbitration’. While the pool of arbitrators is no longer described as ‘smaller’, which is to be welcomed from the point of view of diversity, the wording of the exception has become more equivocal. If the IBA’s subcommittee took account of the statistics outlined above both in its own composition and in the drafting of its guidelines, it might consider instead that a representative and inclusive approach would dictate that it reverse its assumptions and recommend that only in certain types of institutional arbitration, in which the custom or practice is not to appoint from a specialised pool but to distribute appointments sparingly, should two or more appointments by the same institution or parties in the past three years have to be disclosed.
Speed without urgency
The ICC’s newly published reports reveal that the use of its Expedited Procedure Provisions (EPP) almost doubled between 2020 and 2023, reaching 189 new cases. Meanwhile the overall average duration of ICC arbitrations which reached final awards in 2023 was 27 months and the median duration was 25 months. In 2021, those periods had been 26 months and 21 months respectively.
While the EPP responds to some demands from ICC users for a quicker and more cost-effective process, parties and lawyers, notably those practising in the fast-moving tech sectors, are looking to new online procedures. Two members of the ICC UK Arbitration Committee founded pinqDR, an online dispute resolution platform which aims to see disputes determined in just eight weeks, regardless of urgency. See the LexisNexis Blog post by Guy Pendell and Iain Quirk KC, Background to pinqDR – new online arbitration service .
One of the main causes of delay in institutional arbitration is the process for the appointment of the tribunal, which can take weeks, even months. In ad hoc arbitrations in London under the Arbitration Act 1996 (AA 1996), the parties must appoint (not just nominate) the first two arbitrators within 14 days of service of the notice of arbitration (section 16). The two so appointed are then to appoint the third ‘forthwith’. The LMAA Terms allow them to take charge of the procedure immediately without waiting for the third appointment. This is the ordinary timescale in London seated arbitrations. Against that background, parties not only in the tech sectors but also in shipping and commodities, are often surprised by the more generous timetable under institutional rules. An application to the LCIA for expedited formation of a tribunal might result in a decision to reduce the period for the filing of a response and nomination of an arbitrator by the respondent from 28 to 14 days, which would do no more than bring the timing in line with the regime under the AA 1996. However, according to its report, in 2023 the LCIA Court granted only three of the 15 applications which it received for expedited formation.
Conclusion
The 2023 statistics and the release of the ICC’s detailed reports for 2021 and 2022 give much food for thought. The major institutions are making efforts to speed up and simplify their processes but they and new entrants, as well as the arbitration media, professional organisations, university law schools, and practitioners could usefully pay more attention to the rules and practices more frequently used by the sectors which are the most productive of international commercial arbitrations, namely shipping and commodities.