Arbitration statistics and alternative facts

Arbitration statistics and alternative facts
The death of Hans Rosling, the Swedish statistician, prompts James Clanchy of the Lexis PSL Arbitration team to reflect on statistics and misconceptions in the international arbitration community. 

 

Like the best Swedish arbitrators, Hans Rosling, the professor of medicine turned TED star who died on 7 February, had a talent for grasping the issues that really mattered and for explaining his reasoning with stunning clarity (in his second language).  His mission was to blow away misconceptions and replace them with facts, particularly with statistics.  He was an optimist not just by nature but because the data made him so.

In his 2015 CIArb Alexander Lecture, V V Veeder QC called for more comprehensive statistical data on arbitration in order better to defend and explain arbitration to others.  A failure sufficiently to research and report the statistical facts for investment arbitration had led to a ‘baleful result’ in the European Commission’s proposals for an investment court, he said.

The collection of statistics in arbitration is no easy business.  By its nature, commercial arbitration is generally private.  International trade associations, many of which are based in London, administer hundreds of arbitrations every year but they are often reluctant to let the world know the extent to which their members have disputes with each other.  Institutions are rather better at publishing their own statistics and in recent years these have included some useful data on diversity.

In November 2015, the LCIA took the pioneering step of publishing costs and duration data.  It invited other institutions to follow its example. They did so but they each chose different data collection methodologies and sampling.  Comparisons which did not make allowances for these differences were not always favourable to the LCIA, which is unsurprising.  The LCIA deserves credit for its initiative and will no doubt be able to provide further data in due course.

The early months of the year are the season for arbitral statistics.   ICSID has already reported on its numbers for 2016.  They show a slight decline in the annual total of ICSID arbitrations: 48 in 2016, down from 52 in 2015.

Lexis®PSL Arbitration carries news of the institutions’ statistics as soon as they are made available.  It also collates these reports in a table, which subscribers can access here. If you're not a Lexis®PSL subscriber, click here for a free trial.

Whilst the availability of statistics is patchy, they should not be ignored.  Otherwise, there is a risk of misleading the international arbitration community and the public at large, turning non-issues into topics of debate, and sowing unnecessary anxiety.

London’s (not) going down the pan

In the wake of the Brexit referendum, London’s future as an arbitral seat came under the spotlight.   Attention was drawn to the ICC’s statistics which showed that in 2008, the UK was chosen as a seat in 61 ICC arbitrations but by 2015, it was specified in 57 ICC cases.  The ICC’s caseload had grown by 20% during that period but the UK had seen a decline, indicating, it was said, that London was already falling out of favour before the referendum.

I was Registrar of the LCIA during much of this period.  We saw a massive growth in the LCIA caseload:  215 new arbitrations in 2008 (up from 137 in 2007), 272 in 2009 at the peak of the global financial crisis, and 265 in 2012 (my last year).   The LCIA has reported that in 2015, 326 new arbitrations were filed, a 52% increase on 2008’s figure.  The vast majority of LCIA arbitrations have London as their seat.

When I was in the LCIA secretariat, we knew that our competition came not only from the ICC and other institutions but also from ad hoc arbitration, which is a popular choice for commercial arbitrations, particularly for those with a London seat.

Arbitrations conducted under the London Maritime Arbitrators’ Association (LMAA) Terms are ad hoc, not institutional.  Even though the association does not have a secretariat and no means of registering new arbitrations, it does sterling work in collating data from its members.  It estimates that 1,813 new LMAA arbitrations were commenced in 2015, a figure which eclipses the ICC’s and LCIA’s numbers mentioned above.

As the CityUK concluded in its 2016 survey of international dispute resolution services, “the number of cases dealt with in maritime arbitration in London far exceeds the number of all other international arbitrations in London”.

Nevertheless, both LMAA and trade association arbitrations tend to be omitted from tables of numbers of international arbitrations.  Their omission gives a misleading impression of the size of the market as a whole and of London’s place in it.

 Arbitration data in a post-factual world

I recently found myself unable to persuade another member of our international arbitration community that maritime arbitration had a substantial share of the market.  They told me that this was impossible because they had never met a maritime arbitrator at any of the conferences they attended.   When I mentioned this remark to a maritime arbitrator, their response was that they were so busy that they didn’t have time to go to conferences.

Who attends international arbitration conferences, and their reasons for doing so, might be a worthwhile subject of research if anybody had the time to conduct it.  In the meantime, we should look to the statistics which are available when reaching conclusions about the health or constitution of international commercial arbitration.  To do otherwise risks creating alternative facts, which could be dangerous.

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About the author:

James is an arbitration specialist. He has more than 25 years’ experience of ad hoc, trade association, institutional and investment arbitrations as a solicitor in London and Paris, as a former Registrar of the London Court of International Arbitration (LCIA), and as a case assessor for legal costs insurers and third party funders. His background as a lawyer is in international trade, commodities, shipping and insurance.

He trained at Withers in London and then spent four years in the firm’s Paris office. He was admitted as an avocat at the Paris bar (1994 – 2008). Returning to London, he spent more than 13 years at Holman Fenwick Willan in its Trade & Energy group. As Registrar and Deputy Director General of the LCIA in 2008 – 2012, he oversaw the administration of more than a thousand commercial arbitrations and assisted with a review of its Arbitration Rules. He subsequently spent two years at Thomas Miller Legal, assessing and managing a wide range of commercial and investment claims on behalf of insurers and funders. Returning to private practice in 2015, he spent a year in Stephenson Harwood’s International Arbitration group where he assisted on ICC and LCIA arbitrations, principally oil and gas disputes.

James is a Fellow of the Chartered Institute of Arbitrators. At LexisNexis, James works on the Lexis®PSL Arbitration module.