International arbitration is by far the preferred method for resolving cross-border disputes, and London and New York are among the most favored seats for such arbitrations, according to more than 1,100 respondents to “The 2018 International Arbitration Survey: The Evolution of International Arbitration,” a newly released international arbitration survey conducted by Queen Mary University of London and White & Case LLP.
The survey respondents — in-house counsel, private practitioners, full-time arbitrators, experts and other stakeholders — believe international arbitration is likely to increase in the energy, technology, and banking and finance sectors.
In-House Counsel Overwhelmingly Favor International Arbitration
Survey respondents overwhelmingly favored international arbitration for resolving cross-border disputes, including 92 percent of in-house counsel. Overall, 97 percent of respondents favored international arbitration and 99 percent said they would recommend international arbitration to resolve cross-border disputes in the future.
Notably, less than 1 percent of respondents preferred cross-border litigation (i.e., resolving cross-border disputes in local courts), and no in-house counsel voted in favor of cross-border litigation. This is because cross-border litigation lacks key components of international arbitration: worldwide enforcement of awards, a neutral forum for resolution, and confidentiality. These were cited by respondents as reasons why they preferred international arbitration. The ability to enforce arbitration awards in almost any jurisdiction arises from The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Courts in the 159 signatory states to the New York Convention are obligated (subject to limited exceptions) to enforce arbitration awards rendered in other signatory states as if they were decisions of their own courts.
Nearly half (46 percent) of corporate counsel respondents selected “confidentiality and privacy” among the top three most valuable characteristics of arbitration. This confidentiality arises from provisions found in the most commonly used arbitration rules, such as Article 22 of the International Chamber of Commerce (ICC) Rules of Arbitration (granting arbitrators authority to rule on confidentiality of “matters ... in connection with the arbitration”), and Article 37 of the International Centre for Dispute Resolution (ICDR) Rules of Arbitration (stating that “the members of the arbitral tribunal and the Administrator shall keep confidential all matters relating to the arbitration or the award”).
Reputation and Legal Infrastructure Make London & New York Hot Seats
London remains the crown jewel venue for international arbitrations, with 64 percent of respondents preferring London over second-place Paris (53 percent). Interestingly, most respondents did not feel that Brexit would cause any change as far as the use of London as a seat. For arbitrations in the U.S., New York has long been the favored venue for many of the same reasons as London. Both are leading international financial centers, with respected arbitration laws (the U.S. Federal Arbitration Act and the English Arbitration Act 1996) and, importantly for respondents, local legal systems characterized by “neutrality and impartiality.”
London and New York are also hosts to some of the most respected international arbitration institutions. Although respondents chose the Paris-based International Chamber of Commerce (ICC) by a wide margin as the most preferred institution, the London Court of International Arbitration (LCIA) and the ICDR were also among the favored institutions. The ICDR is based in New York and the ICC’s sole U.S. office is in New York. The LCIA is based in London and the ICC also has a presence there. Paris, Singapore, Hong Kong and Geneva were also recognized as leading seats.
Energy, Finance and Technology Sectors
A large majority of respondents believe the use of international arbitration is likely to increase even more in the future. This will be most noticeable in the energy, technology, and banking and finance sectors, as well as in construction and infrastructure. Eighty-five percent of respondents predicted international arbitration increasing in the energy sector, while 56 percent foresaw an increase in the finance sector. According to the survey, “this latest finding can be read as a clear indication that financial institutions and their counsel are contemplating arbitration with much greater interest than ever before.” Over 80 percent of respondents anticipate an increase in the use of international arbitration in the construction and technology sectors.
When to Consult With Counsel
Companies engaged in international dealings should consult with counsel when considering dispute resolution provisions for their international contracts. The major international arbitration institutions may appear similar, but each has its own particularities and nuances. Procedures and rules may differ when it comes to, for instance, arbitrator selection, confidentiality, discovery, interim and emergency relief, and scrutiny of awards. Seat selection is equally important because the law of the seat may ultimately determine important procedural issues that arise in the arbitration, such as arbitrator selection or production of evidence. Enforceability of an award may be impacted as only courts at the seat can vacate an award. That is why users of international arbitration favor major commercial centers with sophisticated arbitration laws controlled by neutral courts.
McGuireWoods’ international arbitration experts practice in the world’s principal forums, including London and New York. Our team has real experience representing clients worldwide and serving as arbitrators at prominent international arbitration institutions, such as the ICC, ICDR and LCIA. For further information, please contact a member of the McGuireWoods international arbitration team.