In the past few decades, arbitration has become a mainstay in resolving legal disputes. Arbitration is a consensual, binding method of dispute resolution and is becoming increasingly popular, particularly in relation to international contracts. The support of arbitration by courts in most states is increasing correspondingly.
There are many reasons for choosing arbitration. Arbitration awards are easier to enforce internationally than judgments handed down by national courts, the proceedings are generally confidential, the forum is neutral and the parties have a considerable choice in the way their disputes are conducted – to name just a few of the key advantages of arbitration.
New arbitral institutions are being regularly created on each continent, in a reflection of an increasingly globalised world requiring neutral, but effective, dispute resolution mechanisms. But which one is the right institution for your client`s concrete business relationship? What are the advantages and disadvantages of the respective institutions? Given the myriad of arbitration rules worldwide, such a question by no means has an easy answer.
This Tool Box on Arbitral Institutions shall provide you with a first overview of the key features of the most popular arbitral institutions that should be considered before drafting an arbitration clause. The benefit of arbitration is that it can be tailored to the needs of the parties. It is therefore important, before agreeing on an arbitration clause, to consider issues such as costs, the location of the parties, whether the local courts can rely on them to recognise and enforce an arbitral award of the respective institution, if the arbitral tribunal is able to grant interim relief, etc. The toolbox does not claim to be exhaustive; there are simply too many aspects that need to be taken into consideration when choosing the most appropriate arbitration institution. Your Taylor Wessing Arbitration Team is happy to assist you in all matters from the drafting of the arbitration clause to the conduct of the arbitration proceeding up to the enforcement of the award.
Internationally accepted institution, which administers both national and international arbitral proceedings. The costs are moderate and the proceedings are in general handled quite quickly. The revision of the rules conducted in 2018 provide for many mechanisms that enhance the efficient conduct of the proceedings.
Moreover, the arbitral tribunal is required to promote settlements at any stage of the proceedings.
Still not very popular in international cases.
The involvement of the DIS is relatively reluctant, e.g. the DIS Secretariat does not review
The rules adopted in 2018 focus on fast and efficient procedural management. Settlements are also encouraged.
Commercial disputes with either two German parties or at least a European context.
The ICC is perhaps the most well-known and used of the international arbitration institutions.
It is well-recognised, and its decisions are considered to be high quality, particularly because each is reviewed by the ICC Court before publication; this can be helpful in enforcement.
The ICC procedure can be more costly than that of some of the ICC’s peers.
The requirement that each ICC decision be reviewed by the ICC means that it can take longer for a decision to be rendered.
One notable feature of ICC arbitration is its use of Terms of Reference. At the outset of the arbitration, the Tribunal draws up a document – with input from the parties in writing, or at a case management meeting – which identifies the claims and reliefs sought, the positions of the parties and a list of issues to be determined by the Tribunal. The Terms of Reference may also record the agreements between the parties as to the place of arbitration, governing law and language to be used and procedural timetable for the arbitration. The Terms are signed by the parties and form a useful reference point for the scope and procedure of the arbitration.
The ICC Rules also offer an optional expedited procedure for streamlined arbitration with a simplified process and reduced fees. This streamlined procedure has no Terms of Reference, and the case may be decided on documents only (with limited written submissions and written witness evidence only).
The degree of supervision of the ICC Court is also noteworthy; it has advantages in terms of the quality and regularity of ICC decisions, but comes with an associated cost, both in financial terms and in terms of timing. The costs of the ICC should be balanced against its reputation as a leading institution, its very broad membership (it has members in over 120 countries), and the extent of its 92 national committees.
Well-known arbitration institution.
High flexibility for parties and arbitrators to agree on procedural matters.
Costs computed without regard to the amounts in dispute/hourly rates for arbitrators’ fees.
The Request for arbitration as well as the Response shall be submitted in electronic form, either by email or other electronic means including via any electronic filing system operated by the LCIA (Art..1.3, 2.34,.24.3 LCIA AR).
Parties’ authorised representatives must agree to comply with general guidelines in the Annex to the LCIA rules (Art. 18.5.). A change or addition by a party to its authorised representatives must be approved by the Arbitral Tribunal (Art. 18.3).
The arbitrator(s) is (are) appointed by the LCIA court.
The LCIA rules provide for an explicit provision on Data Protection to stress the need for compliance of all participants (parties, arbitrators, counsel, the LCIA itself or others) with any applicable data protection legislation.
Any kind of dispute especially involving common-law countries.
The SIAC is very well recognised (especially all over Asia). Singapore has a good geographic location, being situated in the heart of South-East Asia. Singapore court decisions generally try to uphold arbitration agreements, enforce foreign awards, and express a public policy that the decision of contracting parties to arbitrate their disputes should be upheld and given effect except in the most extreme situations.
The SIAC is known to be time efficient.
May be costly (depending on the number of claims).
Singapore has emerged as one of the world’s leading centers for international commercial arbitration. Singapore is seen as a neutral venue for the holding of international commercial arbitration as it is situated in a geographically convenient location and is supported by a physical, legal and political infrastructure that is sophisticated, skilled and of high integrity.
Disputes in Asia and the South-east Asia region. Neutral venue for the holding of international commercial arbitration.
SIAC generally administers commercial, construction/engineering, corporate, shipping/maritime, trade and insurance arbitrations. However, as SIAC’s competence and jurisdiction to administer arbitrations is derived from the arbitration clause found in a contract, the types of disputes SIAC can administer are not necessarily limited to the above sectors but can potentially be any type of contractual dispute (subject to certain limitations).
SIAC Model Clause - revised as of 12 January 2023
Swiss arbitration is frequently used if a “neutral” territory must be found for establishing the dispute resolution. The Rules are harmonised and apply to most of the Swiss Cantons. Swiss State Courts rule generally in support of the tribunals.
Support by the Secretariat/Court (e.g. Art.3 initiation of the proceedings, Art.8 confirmation of arbitrators, Art. 10, 11 appointment of arbitrators, Art. 9.3 recommendation to only appoint one arbitrator).
No supervision of the award (but with the exception of ICC this is not a generally offered feature of institutions).
Relatively cost-intensive. Wide range of arbitrator’s fees to be determined at the discretion of the arbitrators (with the capacity of the Court to approve or adjust) and therefore quite unpredictable.
After consulting with the parties, the tribunal may appoint a secretary to support the tribunal (Art. 16.3).
With the agreement of the parties, the arbitral tribunal may take steps to facilitate a settlement of the dispute.
Such an agreement by a party shall constitute a waiver of its right to challenge an arbitrator’s impartiality based on the arbitrator’s participation and knowledge acquired in taking the agreed steps. (Art. 19.5).
Paperless proceedings (inter alia Art. 3.1 for the Notice of Arbitration and for the Answer to the Notice of Arbitration) and Remote hearings (Art. 27.2).
Cross-Claim, Joinder and Interventions (Art. 6) as well as consolidation of proceedings (Art. 7) are possible.
International commercial disputes with no specific roots in a certain jurisdiction (like e.g. local patents only in one jurisdiction), especially between parties from a different cultural environment like Europe/Asia, East/West etc.
Well recognised in Eastern European Countries for historical reasons (established as neutral venue for dispute resolution between companies located in former communist countries on one side and western companies on the other side).
Recent cooperation with Chinese arbitration organisation make VIAC look further east.
Flexible and lean Rules.
Not very well recognised outside of Europe.
After the recent revision of the Vienna Rules they now express to also apply for Investment Treaty Arbitration and for VIAC as appointing authoriry.
Disputes in Eastern European Countries.
Relatively moderate costs in comparison to other institutions (e.g. ICC, LCIA); well recognized. However, costs are continuously being raised with every revision of the rules.
The determination of the arbitrators’ fees is at the discretion of the Board to a certain extent.
The SCC 2017 Rules have introduced the possibility to decide one or more issues of fact or law by way of summary procedure at any time during the arbitration. A request for summary procedure may concern issues of jurisdiction, admissibility or the merits. It may include, for example, an assertion (1) that an allegation of fact or law material to the outcome of the case is clearly unsustainable or (2) even if the facts alleged by the other party are assumed to be true, no award could be rendered under the applicable law (Art. 39).
Appendix III of the Arbitration Rules contains special provisions for investment arbitrations (investor state arbitration).
International business relationships.
In particular for business relationships with parties from Eastern states (Russia, states from the ex-Soviet Union, China). The SCC was recognized in the 1970’s by the United States and the Soviet Union as a neutral center for the resolution of East West trade disputes. China recognized the SCC as a forum for resolving international disputes around the same time.
Comparatively inexpensive. The rules provide for short proceedings.
Failure to observe a (short) deadline may result in the institution‘s acting on behalf of the defaulting party. And also in general the institution is heavily involved in almost any step of the procedure. If the parties fail to agree on an issue, the matter is almost invariably decided by the institution.
Freedom to choose arbitrators is somewhat restricted (roster).
In the absence of an agreement, the place of oral hearings shall be in Beijing for a case administered by the Arbitration Court.
Obviously, CIETAC is very China-centred with a strong role of the institution. That said there is room for party-agreement on procedural issues. The CIETAC–rules provide for rather short deadlines; the award is to be rendered six months from the constitution of the tribunal (Art. 48), hence there are short deadlines for the submission of e.g. a counterclaim (45 days from receipt of the RfA); failure to appear in the hearing is deemed withdrawal of the respective application (Art. 39).
Please note, in case of the absence of an agreement, the language of arbitration to be used in the proceedings shall be Chinese.
This cannot be answered on the basis of the rules, but requires practical experience. However, Art. 3 says that CIETAC accepts cases involving economic, trade and other disputes of a contractual or non-contractual nature, based on an agreement of the parties.
CIETAC is not recommended for an arbitration procedure without any relation to China. CIETAC is very China-centred with a strong role of the institution.
A recently modernised set of rules that follows western standards and is quite similar to the ICC rules, but does not copy typical, sometimes criticized features of the ICC rules including the terms of reference and the scrutiny of the award.
Costs are inferior to ICC.
The remuneration system for arbitrators is unusual. The parties and the arbitrator may agree on either remuneration at an hourly rate or on the basis of the fee schedule. Moreover, the designating party and the respective co-arbitrator agree on the rate. Hence, the co-arbitrators may be remunerated differently.
In 2000 the Arbitration (Amendment) Ordinance implemented legislation for an arrangement between China and Hong Kong on the mutual enforcement of arbitral awards. The said amendment also further clarified the procedure for enforcement of arbitral awards, orders, and directions, made either in or outside of Hong Kong. Arbitral awards, including ad hoc awards, issued in Hong Kong are recognized and enforceable in mainland China under a mutual arrangement. However, non-monetary awards, such as injunctions, are not covered by the arrangement. A claimant should therefore consider the desired outcome when choosing between Hong Kong and the PRC as an arbitration seat.
Please note that the place of arbitration is generally Hong Kong if the parties did not agree otherwise.
International disputes with a focus in East Asia.
New arbitration center with very modern Arbitration Rules (for further explanations see below), founded by experienced arbitrators and backed by institutions with longstanding arbitral experience (Hamburg Chamber Of Commerce and Verein Rechtsstandort Hamburg) and Latin American business (Lateinamerikaverein); less expensive as compared to ICC and DIS.
Recently founded Start-up and therefore not yet very well recognized/known. But this will change: The ELArb is in the process of being heavily promoted, in particular in Europe and Latin America.
Interesting features are:
In particular for commercial disputes between parties from Europe and Latin America but open and fit for parties/disputes from all over the world. The Arbitration Rules are drafted in consideration of the world-wide accepted standards of UNCITRAL. They in particular comply with the legal environment in most Latin American and European countries.
In comparison with some other institutions, the AAA offers a more flexible and less bureaucratic procedure. An application for emergency relief prior to the constitution of the arbitral tribunal may be made.
The International Centre for Dispute Resolution (ICDR) maintains a list of more than 400 independent arbitrators and mediators.
The list of approved arbitrators mostly includes citizens of the United States.
The costs are very unpredictable, since the Administrator shall designate an appropriate daily or hourly rate of compensation in consultation with the parties and all arbitrators.
May be considered especially for relationships within the framework of US businesses.
The UNCITRAL Rules offer parties considerable flexibility, and the review process and requirement of reasonableness helps to keep costs under control.
The fees of the arbitrators are unpredictable since UNCITRAL does not provide for fixed fees but the arbitrators are entitled to charge “reasonable fees”.
UNCITRAL is not an arbitral body of its own right, and an arbitration under the UNCITRAL Arbitration Rules must be conducted either with ad hoc elements or with the assistance of an established arbitral body. Its Rules provide a framework in which an arbitration can be conducted. The presumption in favour of a three- person Tribunal is unusual and should be considered in advance if possible.
Disputes in which no arbitration procedure has been agreed between the parties; ad hoc arbitrations.