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International Arbitration in 2022

Drives towards greater efficiency in international arbitration

Making international arbitration cheaper and faster for its users has been a key goal for years and is driving recent reforms to arbitral procedure.

Arbitral institutions as well as UNCITRAL have introduced (or are planning to introduce) provisions in rules governing arbitrations to improve efficiency. A recent reform that considerably improves efficiency for certain disputes is the introduction of expedited proceedings. This and other procedural tools are discussed further below, in the context of both investor-State arbitration and international commercial arbitration.

As these new provisions come into force and are used by parties, we hope to see arbitral disputes being resolved more quickly for a lower cost. However, given the sensitivity involved in resolving investor-State disputes, which entail issues of State sovereignty, it remains to be seen whether States will opt in to using the new expedited provisions and whether they will be widely adopted.

Hinda Rabkin
Senior Associate,
New York

Investor-State arbitration

This past year has seen the introduction (or proposal) of rules that provide for expedited proceedings that can be used in investor-State arbitration.

In September 2021, the UNCITRAL Expedited Arbitration Rules (UNCITRAL EA Rules) took effect. These rules do not apply automatically. The parties must expressly agree to use them. Although these rules were not specifically designed for investor-State arbitration, in practice the UNCITRAL rules are often used in such proceedings and there may well be opportunities to use them in investor-State disputes.

The main features of the UNCITRAL EA Rules are: (i) a sole arbitrator is the default; (ii) hearings are optional; (iii) the tribunal can decide to forgo the document production phase; and (iv) an accelerated timeline for the conclusion of the arbitration, with the award to be issued within six months of the date of the constitution of the tribunal.

In November 2021, ICSID released its Working Paper #6, which marked the culmination of a five-year process on updating the ICSID rules for arbitration. ICSID Working Paper #6 addresses topics that States and the broader public had raised on the previous iteration of the proposed amendments to the ICSID rules and sets out the complete set of amended rules. These rules include a fast-track procedure. ICSID said that it plans to table the amendments for a vote of approval by member States in early 2022.

The ICSID expedited procedure is opt-in. Its main features are: (i) no bifurcation, so jurisdiction, merits and quantum issues would be considered in a single phase of the arbitration; (ii) quicker timelines, with an award to be issued within 120 days of the hearing; (iii) limited length of written submissions; (iv) limited procedural applications; and (v) expedited annulment proceedings.

In addition to amending rules governing proceedings, States are also including certain procedural features that would apply in investor-State arbitration in newly issued bilateral or multilateral investment treaties. These include treaties recently concluded with the EU as well as Canada's Foreign Investments Promotion and Protection Agreement Model 2021 (Canadian Model FIPA). Thus, for example, the Canadian Model FIPA provides that where damages claimed by an investor are less than CA$10m, an expedited procedure applies. This procedure entails a sole arbitrator, a compressed procedural schedule, and a virtual hearing.

Commercial arbitration

In commercial arbitration, the following procedures have been playing an important role in improving efficiency in recent years and it is expected that they will continue to do so in the coming years:

  • The use of expedited rules continues to increase. According to the ICC’s 2020 statistics, 261 cases have been conducted under its expedited rules since the procedure was introduced in March 2017. The success of the expedited rules has led the ICC to widen the scope of their automatic application from disputes valued at US$2 million to US$3 million. This mechanism is also popular in SCC proceedings: 31% of cases registered in 2020 were registered under its expedited rules.
  • A comparison of the length of proceedings under the expedited rules versus those under the standard ICC Rules shows a clear time benefit. The ICC Statistics for 2020 reported that 67% of final awards rendered under the Expedited Procedure Provisions were delivered on or around the six-month time limit. The average duration of proceedings in cases that reached a final award in 2020 was 26 months.

Expedited rules need to be handled with care, especially when they contain a time limit for the arbitral tribunal to render the award. There are issues for the respondent in presenting their case in a very short time frame, and there is a latent risk that exceeding the time limit may be considered a relevant procedural error in a jurisdiction of enforcement.

Nicholas Lingard

  • Many of the leading arbitration rules (LCIA, SCC, SIAC, HKIAC, etc) have introduced summary dismissal procedures, which are being used with increasing frequency. This procedural tool empowers arbitral tribunals to render prompt decisions on discrete claims, allowing the tribunal to dispose of frivolous claims.
  • Most leading arbitration rules contain provisions on joinder and consolidation (ICC, SCC, SIAC, HKIAC, etc). The 2021 version of the ICC Rules allows for joinder of a party after the arbitrator’s appointment or confirmation. It also allows for consolidation of proceedings under multiple agreements with compatible arbitration clauses. Simplified procedures that allow for joinder and consolidation reduce parallel proceedings and, potentially, the inefficiencies that such proceedings entail.
  • The potential benefits of electronic filings and virtual hearings became evident during the COVID-19 pandemic. As the international arbitration community has grown further accustomed to them, they are expected to continue to be widely used. Similarly, new online platforms (such as the recently launched HKIAC Case Connect or the existing SCC, ICC and other electronic case management platforms) make document sharing and case organisation more efficient.
  • Institutions have begun incentivising the timely rendering of awards. Certain arbitral rules (such as the SCC's) provide time limits for rendering an award but do not penalise non-compliance. The ICC, however, reduces the arbitrators’ fees if an award is delayed in the absence of a valid reason, which has proven to be an effective tool. The ICC Statistics for 2020 reported that the number of instances of delays of three to six months in final awards has halved since this new practice was implemented in 2016.
  • The number of emergency arbitrations has increased. Emergency arbitrators usually render a decision within two weeks (five days under the SCC Rules, and 14 days under the SIAC, LCIA, HKIAC and ICC Rules) that may later be revisited by the tribunal once constituted. This procedure was initially used for construction and engineering disputes but is now being used by parties operating in other industries.

Technology and digitalisation of proceedings will change the way arbitrators and counsel work. Efficiency gains will result in faster and more cost-effective proceedings. Virtual hearings are just the beginning. Expect artificial intelligence to help with legal research, dealing with data, the analysis of evidence, etc, both on the arbitrator bench and at the counsel table.

Patrick Schroeder