How Sector Preferences Shape International Arbitration
Hypothesis: The Energy and Construction sectors dominate in international arbitration On the international arbitration stage, the energy and construction sectors have long held the spotlight. With their complex, high-value contracts and cross-border transactions, which often involve a political element, disputes in these sectors are well suited to adjudication by a neutral, international arbitral tribunal. In this second report in a series of data sheets exploring arbitration topics as part of our ‘data driven disputes’ campaign we take another deep dive into the data to investigate whether our hypothesis was the whole “sector story”. Adopting a global perspective, we analysed institutional data to identify which sectors have experienced a surge in arbitrations, which have fallen by the wayside, and we queried whether specific regions have become arbitration hotspots for particular sectors. We also spoke to the institutions about which sectors they anticipate to be areas of growth in the coming years. Research and methodology In order to conduct this analysis, CMS carried out desk research and qualitative interviews: Results The data clearly showed that, whilst energy and construction remain dominant in the arbitration world, that dominance is not universal. Indeed, other specific sectors are increasingly prominent for certain arbitral providers. For example, whereas construction takes the top spot in Dubai, the ICDR in the U.S. has seen an increase in technology arbitrations. Meanwhile HKIAC is enjoying a FinTech boom and Japan is seeing a gaming surge. Various factors are likely to be behind this. The regions in which the institutions are based are likely to be relevant; construction has seen significant growth in the Middle East due to tourism and foreign investment, while in contrast the gaming industry is thriving in Japan, home to some of the biggest names in the sector. Reputation and track record remain key. Banking and finance parties, for example, continue to look to the LCIA in light of its history of dealing with high-value and complex financial disputes. Customised rules also play a part; the ICDR’s technology-specific clauses allow tech companies to tailor their arbitration process to suit the subject matter of their contract. Looking to the future, there appears to be a cross-regional expectation that green energy cases will account for a significant number of disputes in due course. As we determined in our first report, there is clear scope for more specialist centres to emerge, with these centres coexisting with the more generalist institutions. We consider below how the existing institutions may try to adapt and evolve as a result. Technology and AI Several of the institutions that we spoke to highlighted Technology as a sector that had experienced a recent uptick in cases and one that they expected to experience continued growth. The Vienna International Arbitration Centre (VIAC), for example, has seen ‘Technology’ knock ‘Commercial Contracts’ from the top spot, with 29.7% of cases relating to the Technology sector in 2022. Similarly, Technology is now number one for the International Centre for Dispute Resolution (ICDR) in the U.S. Interestingly, despite the extent to which the benefits, risks and regulation of artificial intelligence (AI) is currently dominating the public discourse, only one institution (the Korean Commercial Arbitration Board (KCAB) International) specifically highlighted AI to us as an area in which they anticipated seeing future disputes. KCAB International described the work they are doing internally to ensure they are up-to-speed on the developments for their consumers. We consider the approach of the institutions to AI in more detail in a future edition of this report.