Gary Born, president of the Singapore International Arbitration Centre and chair of WilmerHale’s international arbitration group, looks at some of the latest developments in international arbitration
Over recent years we have seen exponential growth in the use of institutional international arbitration. This has been accompanied by a rising tide of issues, including the perceived high cost of arbitration, debates over whether state sovereignty is being impinged and trends such as third party funding and multi-party arbitration. Meanwhile arbitration centres around the world have been evolving and modernising their procedures as they expand. IFLR speaks with Gary Born, president of the Singapore Arbitration Centre (SIAC), about the growth SIAC has experienced and the series of landmark rule changes it implemented in late 2016 and early 2017.
SIAC had a record year in 2016, and before that in 2015 – what do you attribute this growth in cases to?
2016 was a record breaking year for SIAC with 343 new cases worth an aggregate sum of $11.85 billion. This is a 55% increase in the number of new cases and a tremendous 300% increase in the aggregate sum of disputes compared to 2014, which saw 222 new cases valued at $3.81 billion. In terms of nationality of the parties, 2016 saw parties from six continents and 56 jurisdictions submit cases to SIAC. These figures are a strong market indicator that today, users globally are entrusting SIAC with the most complex and high-value arbitrations. SIAC's exponential growth is the result of a confluence of factors over the last decade.
At the core of SIAC's administration philosophy is a commitment to pre-eminence as a global arbitral institution dedicated to providing for its users arbitral rules and case management techniques that prioritise efficiency, minimise costs, and deliver a personal level of service. In order to ensure that its arbitral rules are cutting-edge and reflect international best practices, SIAC has taken, and continues to take, a proactive effort to update and amend its rules. The provisions on early dismissal and multi-party arbitration in the 2016 SIAC Arbitration Rules, and an entirely new set of bespoke Investment Arbitration Rules in 2017 are two recent examples of this.
The right choice of rules can significantly enhance the dispute resolution process for parties
In keeping its arbitral rules and services state-of-the-art, SIAC is guided by the Court of Arbitration and board of directors, which are comprised of eminent arbitration practitioners and experts from across the world. This brings a wealth of expertise to the institution, guaranteeing unparalleled and exceptional dispute resolution services for users worldwide.
As an institution, SIAC has also taken dedicated steps to grow its presence in various jurisdictions. SIAC now has overseas representative offices in India, South Korea and China, which has led to an increase in SIAC's popularity among parties in those regions. Since the SIAC India office was opened, the number of Indian users has almost tripled (57 Indian parties in 2014, 91 Indian parties in 2015 and 153 Indian parties in 2016). With the establishment of SIAC's Seoul office, the number of Korean users has nearly doubled from 20 users in 2014 to 38 users in 2016. SIAC's popularity with Chinese parties is also set to increase further with SIAC's presence in Shanghai and China's One Belt, One Road initiative.
Apart from institutional factors, SIAC's growth is also attributed to Singapore's popularity as an arbitral seat. Singapore is well-known, regionally and internationally, to provide neutral, transparent, and high quality dispute resolution services, particularly in the arbitration sphere.
The Singapore judiciary strongly espouses a non-interventionist approach to arbitration and has, over the years, also contributed valuable jurisprudence to develop the field of international arbitration. This judicial philosophy is complimented by the legislature's commitment to ensure Singapore's arbitral laws are regularly updated to reflect global trends and best practices. Most recently, Singapore has implemented legislation permitting third party funding for international arbitration, and related court and mediation proceedings, a much welcome change by practitioners and disputing parties.
What trends across the region are you seeing in international arbitration?
International arbitration is a constantly evolving landscape with various emerging trends. I will touch on three such trends, which also reflect broadly trends in SIAC and the region.
In recent years, there has been a marked shift towards institutional arbitration, both regionally and across the world. This is a result of various factors. First, there has been a proliferation of arbitral institutions globally, in particular in emerging markets in Asia, Africa and Latin America. Second, leading arbitral institutions, including SIAC, are conscious of the need to make arbitral rules more user-friendly, efficient and cost-effective. Expedited arbitration is one such example, which SIAC users have embraced to great effect since its introduction in 2010. Third, arbitral users are becoming savvier about arbitral rules, and the options they offer parties in case management. The right choice of rules can significantly enhance the dispute resolution process for parties.
Complex and multi-party arbitration is also gaining traction in the region, and globally. This is in part due to the nature of international commerce today, but in equal measure is also due to sophisticated institutional rules, which are able to provide mechanisms to resolve such disputes in a cost-effective manner. Thus, one of the key developments in the 2016 SIAC.
Arbitration Rules was the introduction of multiple contract, consolidation and joinder provisions. Since the rules were launched last June, we have already received a multitude of applications under the relevant provisions, and expect the numbers to grow further.
The third trend is third party funding. There is a growing appetite for funding in both commercial and investment arbitration, which has been met by an increase in the number of institutions that are now willing to provide such support. Today, the market has specialised third party funders, insurance companies, investment banks, hedge funds, and law firms that are willing to provide funding services through a range of financing options. Regulation is also catching up. Singapore recently passed legislation aimed at legalising and regulating third party funding, and Hong Kong is on the same path. SIAC has also sought to address the topic in its 2017 Investment Arbitration Rules.
Last year SIAC released new Arbitration and Investment Arbitration Rules – what should be the key takeaways of these rules and what issues were they aimed at tackling?
On August 1 2016, SIAC released the sixth edition of its Arbitration Rules. This is one of the most significant and forward-looking updates in SIAC's 25 years of operation. The 2016 SIAC Arbitration Rules provide a more efficient and flexible framework for arbitration, and are well suited to address disputes of all sizes and complexities.
This is one of the most significant and forward-looking updates in SIAC’s 25 years of operation
The key provisions include multiple contracts, consolidation, joinder of additional parties, early dismissal of claims and defences, and delocalisation of the seat of arbitration. In addition, the existing provisions on expedited arbitration and emergency arbitration have been amended to enhance efficiency. As of December 31 2016, and since the introduction of these two provisions in 2010, SIAC had received a total of 307 expedited procedure applications (of which SIAC accepted 181 requests) and 53 emergency arbitrator applications (all of which have been accepted).
On January 1 2017, SIAC released the first edition of its Investment Arbitration Rules. SIAC is the first commercial arbitral institution to offer a specialised, stand-alone set of investment rules. The rules are designed to address special features and concerns in investment arbitration today, including inefficiency, and lack of transparency. The rules adopt many of the streamlined procedures and strict time limits in the 2016 SIAC Arbitration Rules, including on the early dismissal of claims and defences, with a number of adjustments to accommodate the interests of states, state-owned entities, and intergovernmental organisations.
The rules also include a specialised 'list' procedure for the appointment of arbitrators by SIAC, a mechanism to permit third parties, such as amicus curiae, to participate in proceedings, and provisions on third party funding that, among other things, empower the tribunal to order disclosure on certain aspects of funding arrangements and to take into account funding arrangements in apportioning costs. Notably, SIAC is the first major arbitral institution to address third party funding in its arbitral rules.
What do you hope the new rules will mean for cases going forward and for international arbitration as a tool to resolve disputes?
The product of extensive deliberations and public consultations, the 2016 SIAC Arbitration
Rules, and the 2017 SIAC Investment Arbitration Rules are some of the most sophisticated institutional rules in the world. Not only do they reflect international best practices, they also promote the development of international arbitration around the world.
Going forward, it is expected that parties will make use of the provision for the early dismissal of claims and defences to weed out unmeritorious claims or defences at an early stage. Multi-contract disputes will be an increasingly common feature. These new provisions will help to build on the impressive results from SIAC's Costs and Duration Study, which showed that the average case under the 2013 SIAC Arbitration Rules took just 13.8 months to reach a final award, and the average total costs of arbitration were $80,337.
In parallel, innovations on topics such as early dismissal, multi-party arbitration, and third party funding will enhance on-going discourse on issues including procedural efficiency, consent to arbitration, and the jurisdiction of arbitral tribunals over third parties, cementing
SIAC's role as a thought leader in international arbitration.
Have you seen rule developments of note across other arbitration centres in the region or globally that you think are interesting?
2016 was a prolific year for the development of SIAC's arbitral rules, but indeed, other institutions have also introduced changes. The International Chamber of Commerce (ICC) recently introduced provisions on expedited arbitration in 2017, as SIAC's had in 2010.
Specifically on investment arbitration, earlier this year the Stockholm Chamber of Commerce (SCC) introduced an appendix to its rules that address specific issues in investment arbitration, such as amicus curiae participation. Together with SIAC's Investment Arbitration Rules, these provisions indicate a growing recognition that investment arbitration requires a different approach, at least in some aspects, compared to commercial arbitration.
As regards Brexit and the Donald Trump presidency, both are in their early stages and any comments on their impact on arbitration might be premature. I suspect there will not be much. It remains to be seen how these developments translate into practice. Ultimately, the US remains a capital exporting country, and it will no doubt seek to ensure that its nationals receive investment protections aboard.
What do you expect the biggest areas of growth to be in the coming year?
SIAC is a global arbitral institution and we expect strong growth from around the world. In terms of sectors, oil and gas disputes are most certainly on the rise. The volatility and price fluctuation of these commodities has triggered many contractual and price review disputes globally. There has also been a significant increase in disputes arising from joint-ventures, mergers and acquisitions and the telecommunication sector.
In terms of regulatory shifts, with legislative changes on third party funding on the rise, particularly in Singapore where it has now been legalised, I anticipate that more parties will be able to finance and therefore commence arbitration proceedings to resolve their disputes.
This is a step in the right direction towards enhancing parties' rights of access to justice.
More generally, many countries in the region are taking steps to update their arbitral laws and promote arbitration as a form of dispute resolution. For instance, last year, India implemented significant amendments to the 1996 Indian Arbitration and Conciliation Act. Various countries in the South Pacific are also in the process of revising existing, or introducing new arbitration legislation, which will no doubt lead to an increase in arbitration in those jurisdictions.
|About the author|
Gary Born is the president of the Singapore International Arbitration Centre (SIAC) Court of Arbitration and chair of the international arbitration practice group at Wilmer Cutler Pickering Hale and Dorr. He is widely recognised as the world's leading authority on international arbitration and litigation. He has served as counsel in over 650 arbitrations, including several of the largest arbitrations in ICC and ad hoc history, and has sat as arbitrator in more than 200 institutional and ad hoc arbitrations.
Born is the author of International Commercial Arbitration (2nd edition 2014), the preeminent treatise in the field, as well as International Arbitration: Law and Practice (2nd edition 2015) and a number of other notable works on international dispute resolution. He is an honorary professor of law at the University of St Gallen in Switzerland and Tsinghua University, Beijing, and teaches regularly at law schools in Europe, Asia, and North and South America.