There is a notoriously high hurdle to overcome in order successfully to challenge an arbitration award under English law. In figures published by the Commercial Court in 2018, 112 challenges were brought...

Hypothesis: Most arbitration rules do not require tribunals to encourage or facilitate settlement In any dispute, parties are free to settle at any time. In order to avoid the time, cost and risk associated with pursuing or defending litigation or arbitration proceedings to their conclusion, it is generally in the best interests of both parties to consider all forms of alternative dispute resolution (ADR) mechanisms, with a view to achieving settlement.   But what role, if any, does (or should) a tribunal play in this process? In England and Wales, it has long been understood that the courts should play a role in promoting and encouraging the early settlement of cases. Under the English Civil Procedure Rules, courts are required to actively manage cases to further the overriding objective of dealing with cases justly and at proportionate cost.  Active case management expressly includes “helping the parties to settle the whole or part of the case” (CPR r.1.4(f)). By contrast, arbitrators in many jurisdictions have traditionally held the view that their primary duty is to determine cases and issue enforceable awards, believing that interfering with the parties’ right to freely negotiate between themselves would undermine the role of a tribunal as a neutral and impartial forum. Legal practitioners have grappled for some time with the question of whether an arbitrator’s role does, and in fact should, go beyond the mere determination of the merits of a case and if so, how involved they should be in the parties’ decision-making. In this fifth and final article in a series of data sheets exploring arbitration topics as part of our Data Driven Disputes campaign, we posed the hypothesis that most arbitral institutions adhere to the traditional mindset of non-in­ter­ven­tion, and accordingly do not contain provisions in their rules mandating that tribunals encourage or facilitate settlement. Research and methodology To investigate, we analysed the rules of 29 arbitral institutions around the world and spoke to some of those institutions about whether they were seeing any increase in parties settling and, if so,  whether there was any one factor to which they attributed that increase.

Hypothesis: Tribunals generally have the power to make early determinations, but are reluctant to do so because of due process paranoia  Recent years have seen many arbitral institutions update their rules to include procedural mechanisms aimed at increasing efficiency in arbitral proceedings. Efficiency is often held out as one of the advantages of arbitration over litigation, both in terms of time and cost, but effective procedural tools are essential to ensuring that arbitration maintains this ‘edge’ over litigation.  One such tool is an 'early determination' pro­ced­ure. Based on our own experience, and in light of the considerable focus in recent years on the issue of ‘due process paranoia’, we hypothesised that tribunals generally have the power to dispose of cases at an early stage, but are reluctant to do so. In order to investigate our hypothesis, we analysed the rules of 29 arbitral institutions from around the world. Our results are below, together with our views on what the results of that analysis mean for arbitration’s promises and aspirations as to efficiency. Results: the rules of the majority of arbitral institutions do not explicitly empower tribunals to make early determinations of an entire claim or defence An ‘early determination’ or ‘early dismissal’ procedure allows a tribunal to reject unmeritorious claims or defences at an early stage of proceedings, avoiding the wasted time and cost of pursuing and defending matters that need never see a final hearing. Given the widespread adoption of summary judgment procedures in court processes, particularly in common law jurisdictions, the inclusion of early determination procedures in arbitral rules is crucial if arbitration is going to go toe-to-toe with litigation in the efficiency stakes. Only 9 of the 29 arbitral institutions we considered have an express early determination provision in their rules allowing for summary disposal of an entire claim or defence.[1] Our analysis shows that the rules of these 29 institutions broadly fall into four categories: 

Hypothesis: The total sum in dispute spiked and settled in line with arbitration caseloads[1]  In our first report exploring arbitration topics as part of our ‘data driven disputes’ campaign, we saw arbitration caseloads spike in 2020 and 2021 due to the COVID pandemic and other international geopolitical issues. The numbers have since settled back down. In this third report, we look at whether the Total Sum in Dispute[2] followed the same trajectory as the Arbitration Caseloads, with a spike in 2020 and 2021 before stabilising. We also considered whether the average value of an arbitration dispute (the Mean and Median Sum in Dispute) changed in response to those same global dynamics and, if so – how? Our starting point was to consider whether fire-fighting the effects of COVID-19 and the financial crisis may have forced many small and medium sized-en­ter­prises (with correspondingly small and medium-sized disputes) not to pursue arbitrations when they otherwise might have done. This could have artificially inflated the Mean Sum in Dispute for arbitrations registered in 2020-2021, given that only large and more financially stable organisations would be in a position to bring their typically (albeit not always) larger disputes. In the process of testing our hypotheses, we discovered that there was a noticeable lack of data on disputes values published by arbitral institutions, and where data is available, there is a significant lack of uniformity in terms of what is reported and how it is reported. In our view, this is a cause of concern, as institutions should be striving for transparency and accountability, not only as an end in itself, but also to helps arbitration users when selecting an institution to administer their disputes. Greater transparency would also allow institutions to consider global trends and identify how best to position themselves and their services. Research and methodology In order to conduct our analysis, we carried out desk research and qualitative interviews: Trajectory of total sum in dispute vs arbitration caseloads – regional disparities As noted above, there was a significant discrepancy in the amount of data that was publicly available in relation to the Total Sum in Dispute as compared with the institutions’ caseloads. However, we did observe that despite the overall increase in arbitration caseloads globally, the Total Sum in Dispute did not follow the same trend globally, only in Europe. As shown in the graph below, most of the major European institutions saw the Total Sum in Dispute increase (for instance, the ICC’s Total Sum in Dispute increased from USD 37bn in 2017 to USD 101bn in 2022). However, in the APAC region, the statistics show an overall decline in the Total Sum in Dispute over the past five years (with the exception of CIETAC, which consistently saw growth over the last five years from USD 10 bn to USD 17 bn, save for a slight dip in 2020). Given that APAC was the best performing market in terms of the number of arbitrations filed in 2022, one might have expected a correlating increase in the Total Sum in Dispute. However, as shown on the graph below, both SIAC and HKIAC, the two major institutions in APAC, did not see any significant growth in the Total Sum in Dispute overall. The SIAC did see a spike in 2019-2020, and this may be due to increased cases as a result of the COVID-19 pandemic, which has since stabilised. Unfortunately, there is not enough data available from institutions from other regions to discern a trend in terms of dispute values outside of Europe and Asia. The ICDR-AAA publishes data on Total Sum in Dispute and this has been fluctuating, at USD 8.2bn in 2018, dipping to USD 4.8bn in 2019, increasing to USD 6.1bn in 2020, and dipping to USD 4.2 bn in 2022. Largest players In terms of arbitral institutions with the highest dispute values, ICC is at the top of the table with a Total Sum in Dispute of US$ 37 bn – US$ 112 bn over the period 2017 to 2022, followed by CIETAC with US$10.11 bn – 17.85 bn over the period 2017 to 2022. ICDR, DIS, HKIAC, and SIAC make up the next category of institutions, with Total Dispute Values falling in the US$ 4bn – US$ 8bn range over the period 2017 to 2022. Most other institutions have a Total Sum in Dispute Value of US$ 2bn or less, such as SCC, VIAC and SAC. Impact on SMEs and average dispute values Only five of the institutions that we analysed report the Mean Sum in Dispute, while only two report the Median Sum in Dispute. Due to the scarcity of data on the Mean or Median Sum in Dispute, we were not able effectively to test our second hypothesis on whether average dispute values did indeed spike alongside caseload numbers in 2020/2021 and then settle back down. However, in APAC, the fact that (a) there was an increase in case numbers and (b) the Total Sum in Dispute declined suggests that the Mean Sum in Dispute in APAC fell, contrary to what we hypothesised. Scarce and inconsistent data on dispute values As is evident from our analysis above, our ability to identify trends around dispute values has been limited by the fact that many arbitral institutions do not publish data on dispute values, and where such data is publicly available, there is a lack of consistency across institutions in how this data is reported. Most institutions that publish data on dispute values provide the Total Sum in Dispute[3], a handful provide a breakdown of those administered by the institution[4] and some include counterclaim amounts[5]. Some institutions only report on the Median Sum in Dispute[6], while others indicate the percentage of cases within different ranges[7]. Only five of the institutions we analysed report the Mean Sum in Dispute[8], whereas only two report the Median Sum in Dispute[9]. Bodies such as the International Federation for Commercial Arbitration Institutions[10] are exploring the possibility of institutions harmonising the way they arrive at and report their statistics. Such standardisation would certainly help users, though it does not yet seem to have gained much traction with the arbitral institutions. A call to action for arbitral institutions The broader conclusion from our analysis is that institutions should strive towards greater transparency and consistency in reporting the Total, Mean, and Median Sum in Dispute, as well as the general spread of cases.

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.  

CMS conducted a data-driven project to assess whether the number of arbitrations is decreasing and if there are trends that can be identified in this type of dispute resolution. We are publishing our findings in a series of five data-driven articles.