International arbitration needs coordination

The international arbitration market is booming. It offers a highly effective means of resolving cross-border disputes away from litigation in national courts. Effective dispute resolution is important to the risk assessment and investment appraisal of a transaction. If litigating in another country will entail high costs, delays and an unpredictable process, leading to a ‘bad’ or unenforceable result, the transaction risks increase and might even jeopardise the viability of the investment.

However, with international arbitration as an effective and binding alternative, the risk factor can be reduced, which may increase directly a transaction’s value. International arbitration can provide benefits to parties, providing their legal advisers are equipped with the right knowledge, tools and tactics to conduct international arbitration proceedings and the parties are wary of the pitfalls.

This should be an easy sell to businesses and financiers. But is the message getting through? And is the international arbitration community doing enough to respond to what the market is saying? A study by the School of International Arbitration at the University of London tested perceptions of international arbitration among in-house counsel at more than 140 corporations globally. The study found that awareness of the benefits of arbitration is increasing, but there is still more that lawyers can do to educate their clients on how to use this dispute resolution method better to manage the risks on a transaction.

The users expressed concerns that need to be addressed if international arbitration is to fulfil its potential. Some of these – third-party joinder, intervention in arbitral proceedings by national courts and the enforcement of awards in certain countries – will require intervention by law makers. But the solutions to adverse perceptions about the costs and delays in arbitration proceedings, and about a shortage of high-quality arbitrators and institutions, lie in the hands of the arbitration community.

Reforming the structural issues of arbitration’s coexistence with national litigation may take time. However, arbitration lawyers can play an important role to influence legislators and galvanise the investing and financial users of arbitration to lobby for the changes to improve the environment for investment.

The arbitration community can address directly the aforementioned concerns. The procedural flexibility and party autonomy in arbitration provide opportunities to cut back on the cumbersome processes and costs that are features of litigation, thereby emphasising arbitration’s differentiator. Arbitrators should be bold, grasp the issues at the outset of a case and use effective case management to direct the process to a prompt resolution. Arbitration lawyers are conditioned to work flexibly and should be up to the challenge of driving efficiencies through. Reducing time and costs should not result in poorer practitioners. On the contrary, a more effective dispute resolution process will attract more business.

The arbitration community – and the arbitration institutions in particular – needs to support the emergence of new arbitrators. New faces are coming through, although acquiring sufficient experience inevitably takes time. However, the incentive is there. The smart use of flexible procedures, a new generation of arbitrators and an evangelical approach by practitioners to sell the benefits of arbitration should combine to create a virtuous circle of growth for the industry.

There is evidently a strategic opportunity for the arbitration community to shape the supply and demand for its services. But how does this ‘community’ work? While an individual law firm can move quickly to spot an opportunity and invest in its capabilities, the international arbitration community is a club of sole practitioners, individuals and firms that are well networked globally, yet compete with one another. How will this disparate group marshal its collective efforts to effect change and shape a ‘win-win’ future for itself and the wider business, investment and political worlds? It has a good product, clear demand and the chance to promote international arbitration as a viable alternative to litigation.

Gerry Lagerberg, partner, PricewaterhouseCoopers