Arbitration proceedings offer a flexible alternative to the traditional dispute-resolution court procedures via a process that provides an accessible means of resolving disputes. Arbitration is used by a range of parties and circumstances, such as large investor-state disputes, cross-border trade litigation or sector-specific matters such as construction liabilities in order to swiftly and effectively finalise proceedings.
Benefits of arbitration?
Compared to the traditional court system, arbitration provides a number of benefits to parties in a dispute. The procedural autonomy of arbitration enables parties to choose the arbitrators, complexity, location and legal system of their dispute (such issues often being pre-determined on the basis of the contract). Additionally, given the nature of the issues brought to arbitration, the arbitrators appointed by parties are often experts in their particular field and may offer a greater level of understanding into the niche trade, commercial or technological matters at hand than that provided by the traditional judicial system in the contracted jurisdiction.
There is no requirement for the parties to be represented by a qualified lawyer and instead, for example, a senior executive may choose to conduct the proceedings on behalf of their organisation. Nevertheless, each individual arbitration centre will have its own requirements for the procedure and ethical conduct of the arbitration. Qualified solicitors acting within an arbitration process remain subject to their respective professional and ethical obligations as stipulated by their national regulator.
Arbitration’s ability to provide the parties with a binding decision in a format that is confidential may help to preserve commercial relationships, avoid negative publicity or reputational damage. Meanwhile, the parties may choose a neutral location for the hearing to reduce any power imbalance from the outset, lending arbitration to cross-border disputes involving state actors while also offering organisations the option to participate remotely via video call even before the Covid-19 pandemic. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 offers enforceability of an arbitration decision in over 150 jurisdictions. Despite the United Kingdom’s departure from the European Union, the New York Convention on Arbitration continues to apply and arbitration in the UK, at a practical level, will continue as before.
Due to the international nature of arbitration, customary seats are often adopted in contractual negotiations. Locations such as London, Singapore, Hong Kong and Paris are all favoured jurisdictions for arbitration. Internationally, arbitration has common features but each individual centre of arbitration will have its own procedures which may influence the contracting parties’ choice of the arbitration seat. The parties’ choice of arbitration environment can offer important differences with factors such as the local language, facilities, transport links and accommodation all coming into consideration.
Future for London
With the UK’s application to accede to the Lugano Convention ongoing, the 1958 New York Convention offers an alternative means of resolving international disputes. Parties may choose to adopt arbitration as a dispute-resolution process safe in the knowledge that UK qualified solicitors can continue to represent them at an international level without the issues of cross-qualification or recognition, while relying upon the enforceability of decisions in over 150 jurisdictions.
Going forward, it is likely that the adaptability and innovation of the legal sector and in particular its adoption of alternative forms of dispute-resolution will be under the spotlight as remote-hearings become the norm and an ever growing court backlog places strain on the traditional system. As the world recovers from the challenges of the Covid-19 pandemic, the ADR sector needs to offer an accessible means of resolving disputes to enable trade and commerce for SMEs, multinational corporations and even state actors.
The APPG’s recognition of ADR is an excellent starting point and will hopefully enable the UK to continue to competitively rival the likes of Singapore and Hong Kong.