Arbitration: A look forward to 2014

To start the week, and as our first arbitration post of 2014,  Christopher Style QC, Angeline Welsh and Steven P Finizio consider the key cases, legislation and trends they think will impact arbitration during 2014.

What are the key developments we will see in 2014?

Christopher Style QC (CS): The process of mid-Atlantic procedural codification continues. With the International Bar Association (IBA) Rules of Evidence and the Guidelines on Conflicts, we also have the International Chamber of Commerce (ICC) on Controlling Time and Costs and the IBA Guidelines on Party Representation—so rules are continuing to develop.

Steven P Finizio (SF): I think the question is more whether we’ll see courts in a number of jurisdictions take steps to properly implement modern arbitration legislation. I think it is fair to say that a greater number of regions and jurisdictions are embracing arbitration. Sometimes it is a matter of two steps forward and one step back, but both domestic and international arbitration is growing in popularity and acceptance in many places. We are seeing noteworthy decisions in places like Brazil, India and China where the supreme courts in those countries are taking steps to support international arbitration.

Many countries in Latin America have introduced modern arbitration laws based on the UNCITRAL Model Law and courts there are starting to implement those laws. At the same time, there is a real growth in the use of arbitration by companies in the region and in the number of arbitration practitioners there. A number of countries in the Gulf States, including Saudi Arabia, have enacted modern arbitration legislation as well, but the question now becomes how the courts will implement that legislation. Arbitration has zoomed along in Asia. I think Africa will be next. At the same time, there are ongoing issues in the US about the use of arbitration for consumer and employment disputes, and, while commercial arbitration seems to be booming in Latin American, there is some push back in some Latin American countries against investment treaty arbitration. A question for the future will be whether more countries will want to step back from the use of arbitration under investment treaties.

What are you seeing in the way of trends?

CS: We can conclude that arbitration is going to remain the dispute resolution method of choice in international trade. And we practitioners are going to have to work hard to keep abreast of developments. Luckily, the tools are available. The conference circuit is as busy as ever. In 2014, as in 2013, you will be able to attend a seminar on international arbitration somewhere in the world every day of the year. All of us will be at the International Council for Commercial Arbitration (ICCA) in Miami at Easter. And electronic communications will be better than ever.

Some of the challenges that lie ahead are already clear. The arbitration community is prone to self-examination. At ICCA in Singapore and the Chartered Institute of Arbitrator’s conference in Penang, Sundaresh Menon made the case for change-training, accreditation and appraisal of arbitrators, codes of conduct and regulation by institutions and generally greater transparency. Third party funding is creating new problems around conflicts and abusive claims. The need to manage a more ethical process is the hot topic of today. There remain many important problem areas—an example is the continuing schism between China International Economic and Trade Arbitration Commission Beijing and the sub-commissions in Shanghai and Shenzhen. And no doubt a bunch of new issues will emerge. So, interesting times!

SF: We’ve seen many arbitral institutions revise their rules in the past couple of years, and we are waiting for new versions of the London Court of International Arbitration (LCIA) and the American Arbitration Association’s international arbitration rules in 2014. As institutions have revised their rules, we are seeing a number of them adopt very similar provisions. We’re also seeing a number of arbitration institutions expanding their geographic reach. For example, the ICC, which is based in Paris, opened in Hong Kong a few years ago and has just opened in New York and will have a case management team there. The Singapore International Arbitration Centre has opened in India. The LCIA has moved into Dubai, India and Mauritius. Two US institutions (JAMS and CPR) are trying to have more international appeal. New institutions are being established and smaller regional arbitration institutions are becoming more active. It says something about the broadening appeal of arbitration, and maybe about competition among the institutions. One issue is whether being in new jurisdictions will eventually affect how institutions approach cases.

We also are seeing broader use of international arbitration across industries, including in some areas that have traditionally been more reluctant to embrace arbitration. For example, we are seeing an increased use of arbitration in financial services disputes and in IP disputes—particularly in the pharmaceutical field.

In terms of talking points, in 2013, the IBA released its Guidelines for Party Representation, which is an effort to identify standards of conduct, and whether and how to regulate ethics and the conduct of arbitration is going to continue to be a topic of discussion, as will some of the conflict of interest issues I mentioned in Arbitration—a review of 2013.

What are your predictions for future developments?

Angeline Welsh:

New LCIA arbitration rules

In the past couple of years the major arbitral institutions have been refreshing their institutional rules. In 2013 Asia led the way with new institutional rules published by both the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC). Both the HKIAC and SIAC rules provide for relief from emergency arbitrator. HKIAC has followed the ICC’s lead and given the tribunal the power to consolidate proceedings and join parties. As institutions compete for business, it appears that they are beginning to harmonise their procedural rules by adopting the current best practice.

All eyes are now on the LCIA which is currently reviewing the LCIA Arbitration Rules 1998. It is hoped that the new edition of the arbitration rules will be issued early in 2014. It will be interesting to see to what extent this trend of harmonisation of institutional rules continues to be a self-reinforcing trend.

UNCITRAL Rules on Transparency for Treaty-based Investor-State Arbitration come into force

Another important development to come into force in 2014 is the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. There has been a growing movement in favour of investment treaty proceedings being matters of public record, and this of course has long been the case for ICSID proceedings. The UNCITRAL Rules on Transparency are intended to ensure that investment treaty arbitrations conducted in accordance with the UNCITRAL Rules are clearly brought into line with this trend. Pleadings, awards, and hearings will now be held in public in accordance with these rules (subject to an ability to redact confidential or protected information). These rules will apply to investment treaties commenced after 1 April 2014, unless the parties to the treaty agree otherwise. We should therefore see a relatively immediate impact of this change.

Developments in Myanmar

The general trend of an increase in the use of arbitrations continues, especially in Asia. One of the new frontiers for international arbitration is Myanmar which ratified the New York Convention this year, coming into force in July 2013.

The Republic of the Union of Myanmar presents one of the world’s most interesting commercial opportunities. With a population of 60 million people at the heart of ASEAN, it is a country currently undergoing significant political and economic change. As Myanmar opens its economy to multinationals, the government is taking active measures in pursuit of foreign investment alongside foreign expertise. Such measures have generated a significant amount of commercial and legal interest in Myanmar’s investment and legal policies.

One significant development which has attracted a lot of interest from foreign investors is Myanmar’s ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), which came into force on 15 July 2013. The reason this is a significant development is because there are concerns from foreign investors in the domestic court system and arbitration in Myanmar.

The legal regime in Myanmar, which is descended from the English common law system, has seen little material development since independence in the late 1940s. As with many countries with developing legal systems, foreign investors in Myanmar tend to lack confidence in the ability of the domestic courts to deal fairly and effectively with any dispute concerning their investment. Typical concerns include among others, unfamiliarity with the legal system, the language and the culture of the court system and a legal system with little prior exposure to complex commercial financial transactions.

Myanmar’s Arbitration Act of 1944 (the 1944 Act) sets out the arbitration regime which applies to domestic arbitrations seated in Myanmar and arbitration agreements which are governed by Myanmar law. The 1944 Act is outdated and requires modernisation in order to provide even minimal comfort for investors that their investments can be protected. By way of example, the courts have the power to rule that an arbitration agreement ceases to have effect where a court has removed all of the arbitrators (effectively placing the ability to continue arbitration in the hands of the courts) and the 1944 Act imposes short time limits for the conduct of proceedings that are unlikely to be workable for complex disputes. Under the 1944 Act, the courts in Myanmar have a role in supporting arbitral proceedings and are entitled to intervene in certain circumstances. However, the attitude of the Myanmar courts to international arbitration remains untested and it has been reported that the Myanmar courts have previously refused to acknowledge an arbitration agreement on the basis that it attempted to eliminate recourse to the courts.

Foreign investors widely regard international arbitration as the best forum for the resolution of disputes relating to Myanmar. However, while Myanmar has taken an important step forward by ratifying the New York Convention, it has not enacted domestic legislation to give effect to it. There remains therefore a great deal of concern about the ability to enforce international arbitration agreements and awards in Myanmar.

Interview by Diana Bentley. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Christopher Style QC of One Essex Court Chambers, Angeline Welsh, counsel at Allen & Overy LLP and is a specialist in international arbitration and public law, and Steven P Finizio is a partner at WilmerHale

This article was first published on Lexis®PSL Arbitration on 18 December 2013. Click here for a free 24 trial of Lexis®PSL.

Filed Under: Arbitration

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