Broadly speaking, the cost of a dispute includes parties' expenses in relation to attorney fees, procedural costs (court or arbitration fees) and additional expenses (eg, transport and food costs). In terms of these costs, on a superficial analysis, arbitration appears costlier than litigation, as the parties must pay arbitrators' fees, while judges are paid by the government of the countries where the dispute occurs. However, on a more careful analysis, it is evident that the inverse conclusion is true.
Various innovative procedural features (eg, emergency arbitrators, expedited arbitration and summary procedures) have been introduced in recently adopted institutional arbitration rules in order to increase the efficiency of arbitral proceedings. It is not yet clear how extensively these provisions will be used, nor how resulting decisions and orders will be recognised and enforced. However, the idea of granting tribunals powers to dispose of certain issues by way of summary procedure should be welcomed.
One of arbitration's cornerstone principles is that parties can agree on how to resolve their disputes. However, parties commonly agree on asymmetric, rather than symmetric, rights. The classic case is where only one party has the right to refer disputes to arbitration, but the other must litigate. Parties wishing to include asymmetric arbitration clauses are advised to consider carefully the courts' approaches to such clauses in all relevant jurisdictions.
Smart contracts are a hot topic in almost every industry sector. There is a misconception that, because they perform automatically and their performance cannot be stopped, they remove the potential for disputes. At least for the moment, this is wishful thinking. Although smart contracts provide huge potential benefits in terms of reducing transaction costs and increasing security, disputes can and will arise.
As the number of electronic devices, applications and other technologies increases, there has been a corresponding growth in the volume of potentially disclosable data in a dispute. While parties' disclosure obligations are clearly defined in the context of litigation, international arbitration offers a more flexible approach to disclosure which will often be influenced by the legal jurisprudence of the tribunal.
In time, Big Data will lead to the automation of most human tasks. The change potential for all organisations (and for society at large) is enormous, and it is already happening in an arbitration context. Some will consider that human discretion will always be a necessary part of dispute resolution. However, if arbitration exists to serve the interests of businesspeople – and if technology can offer quicker, cheaper, data-driven solutions that reduce the margin for error – human arbitrators could become irrelevant.
There are known difficulties with litigating IP and technology disputes, particularly where the disputes are global and involve rights protected in different jurisdictions. A recent international survey of IT and telecoms suppliers found that although respondents identified arbitration as their preferred mechanism of dispute resolution, in practice the most common mechanism over the past five years was litigation.
Arbitration is well placed to lead the way in adopting new technological and procedural innovations – indeed, arbitral institutions, tribunals and practitioners have a responsibility to do so, particularly where such innovations can reduce cost and improve efficiency. Online dispute resolution presents an opportunity for international arbitration to fulfil its early potential as a cost-effective and efficient means of dispute resolution.
Arbitral institutions are constantly seeking to update their rules to keep in line with existing trends and to distinguish themselves among their peers. In early 2017 new or amended rules came into force for three of the most prominent global arbitral institutions. Important changes include the introduction of expedited procedures in International Chamber of Commerce and Stockholm Chamber of Commerce arbitrations and new Singapore International Arbitration Centre rules for investment arbitrations.
Recent trends indicate a growing interest in investor-state mediation. Previously, the intermittent dialogue in investor-state mediation was speculative and often sceptical. The perception has been that compulsory mechanisms would be necessary for any dispute resolution process involving states to be effective. However, governments, investors and institutions now seem to be considering meditation as a viable tool for resolving investor-state disputes.
Generally, parties to international arbitrations assume that decisions are final and binding and that tribunals will not – or cannot – revisit decisions once they have been made. However, circumstances may arise, such as when new evidence is discovered, that prompt parties to call for a tribunal to reconsider its prior determinations, having regard to the appropriate balance between finality and flexibility.
The International Centre for Settlement of Investment Disputes (ICSID) is an important institution for the settlement of investor-state disputes. A review of its 2016 case statistics is a useful indicator of recent trends in international investor-state dispute settlement, including the state parties and economic sectors involved, the success rates of states versus investors and the changes to the composition and diversity of ICSID tribunals.
Investor-state dispute settlement (ISDS) is a mechanism that enables foreign investors to resolve disputes with the government of the country where their investment was made (host state) in a neutral forum through binding international arbitration. Without ISDS, many foreign investors would be left with no meaningful remedy in the face of arbitrary, capricious or other unfair treatment by a host state.
Third-party funding can provide access to justice for under-resourced parties and a more convenient financing structure for adequately resourced parties. However, despite the benefits, there are concerns about funding and there is a level of risk involved. Clear insight into the potential downsides and sufficient risk preparation are therefore essential when making a decision on funding.
Where parties in international arbitration come from different legal jurisdictions, disputes over what is privileged can be complicated by disagreement over which jurisdiction's rules of privilege apply. Whereas most countries recognise the concept of legal privilege, the precise rules vary across jurisdictions. How, then, are privilege issues resolved in international arbitration, where claimants, respondents and arbitrators may all come from different jurisdictions?
If properly drafted, a sealed offer can be a major incentive for parties to settle cases at an early stage of proceedings and can protect them against the costs consequences of arbitration. Parties should consider the advantages and disadvantages of a sealed offer, the consequences of accepting or rejecting a sealed offer and whether a tribunal is obliged to take a sealed offer into consideration.
Arbitration is becoming an increasingly popular choice for engineering, procurement and construction contracts, particularly when international entities are involved or parties are engaging in cross-border transactions. The form and forum of dispute resolution are of great importance and must be given careful consideration at the outset of any transnational deal and in the course of drafting contracts.