United States: London Arbitration: Increasing Its Appeal?

Is London-seated arbitration facing something of an existential dilemma?  Despite London maintaining its position as the most popular seat for international arbitration, it has recently been suggested in the English legal community that London's popularity is a threat to its own lifeblood. 

LONDON'S SUCCESS

The Queen Mary's School of International Arbitration's 2015 arbitration survey indicates that London remains the most popular choice of seat in the arbitral community. Participants in the survey had selected London as their arbitral seat in 45% of arbitrations over the last 5 years.1 Similarly, 47% of those participants nominated London as one of their three preferred seats.2 The survey suggests that its popularity stems largely from its "reputation", as well as the perceived neutrality and impartiality of the local law system and the national arbitration law.3

London cannot rest on its laurels though. The survey showed that other seats are threatening its position, as the infrastructure and national laws elsewhere are adapting and improving to meet parties' expectations.4 Given that party autonomy is the basic principle of arbitration procedure, it follows that flexibility and innovation are key to the continued success of a seat.

VICTIM OF ITS OWN SUCCESS?

London's popularity as the go-to seat for arbitration is not, according to one leading authority in English law, without its problems. In a lecture given earlier this year, The Right Honourable Lord Thomas of Cwmgiedd, Lord Chief Justice of England and Wales, expressed his concern that arbitration was hampering the development of English law. In particular, Lord Thomas lamented the fact that arbitration awards are subject to a limited right of appeal under English law, which means that very few awards find themselves under the scrutiny of the courts.5 As such, he argued, the law cannot develop as fluidly as it ought to, since the bedrock of the common law (i.e. court judgments) is drying up while arbitration thrives.

On the face of it, there is obvious sense in Lord Thomas' criticism. The English common law system relies on court judgments to define the law, and without a constant stream of cases that reflect the ever-changing dynamics of commerce, the law would be in grave danger of falling behind the commercial world that it serves. Consequently, if judges (and arbitrators alike) are increasingly bound by an English law that is outdated, London may no longer credibly hold itself out as the best place to resolve commercial disputes in the years to come. As a solution, Lord Thomas' view is that the law6 should be amended to encourage more appeals to the court and, more drastically, he would like to encourage parties to seek resolution of their disputes in court as opposed to arbitration.7

MEETING PARTIES' EXPECTATIONS

The London arbitration community has fought back, and the broad consensus seems to be that the current arbitration law was consciously adopted as it now stands in the Arbitration Act 1996 to meet parties' expectations, and there is no good reason to change it.

One of the architects of the Arbitration Act, Lord Saville, has warned in a recent article published in The Times of the "wholly retrograde step" of increasing court involvement on appeal, which would likely injure London's presence as an arbitration centre and undermine one of the key reasons for parties to refer disputes to arbitration.8 Lord Saville pointedly notes that parties use arbitration "to resolve their disputes...not to add to the body of English commercial law."9

Indeed, if the finality of an arbitration award were diluted by allowing extensive appeals to the courts in order to foster the development of the common law, the question must arise as to whether arbitration would, in effect, become a quasi-adjudication process. Parties would have to expect that a losing party would apply for permission to appeal, and that the courts would be inclined to grant permission. In those circumstances, would parties be prepared to spend the same time and effort in pursuing an award that has a significant chance of being appealed, or would they instead seek a quick, but potentially flawed, interim decision that will be binding unless or until the case is heard by the courts (as is generally the case in adjudication)? This is entirely at odds with the purpose of arbitration: to act as a genuine alternative to litigation for parties that want to avoid the national courts for the myriad of reasons that are well known.

Further, the current system already allows for the development of the common law through s.69 of the Arbitration Act, which gives parties the right to appeal against arbitral awards on points of law.10 Therefore, the courts can and do continue to develop the common law notwithstanding that the relevant dispute originates in arbitration: indeed, one of the tests as to whether permission to appeal pursuant to s.69 should be granted is whether there is a question of general public importance11 – a test that was recently applied by the courts and led to a judgment by the Supreme Court in the context of the concept of 'agency'.12

What the current system aims to prevent is parties seeking to use the appeal process for tactical purposes. This principle was confirmed in a shipping case earlier this year, when the Commercial Court ruled that, even if parties agree to allow appeals for any question of law, they always do so with s.69's requirements in mind, reaffirming the court's reluctance to allow a flood of appeals on trivial or simply factual matters.13

In any event, the data indicates that the English courts are not being starved of cases. The Ministry of Justice's Statistics Bulletins for the last three years suggests that the case load is fairly constant. These bulletins show that, in the Admiralty, Commercial and Technology and Construction Courts (amongst which the majority of commercial cases are handled), there were 1,763 cases in 2014, 1,854 in 2013 and 1,817 in 2012.14 Around 20% of those cases in the Commercial Court related to arbitration applications and appeals.15 The same bulletins show that the Court of Appeal heard 1,269 appeals during 2014, 1,142 in 2013 and 1,181 in 2012).16

The above appears to suggest that there are ample (and consistent) numbers of cases to ensure the adequate development of the common law.

ROOM FOR IMPROVEMENT?

The fact that London is (and has been) one of the most popular choices of seat, suggests that it has been offering what parties want - a viable alternative to litigation that empowers parties with more autonomy, flexibility and privacy, and a more certain route to a binding award.

That is not to say that London arbitration is perfect. While the limited rights of appeal have generally been seen as a positive aspect, the Queen Mary's 2015 survey indicated that 23% of participants were in favour of an appeal mechanism on the merits for arbitral awards in international commercial arbitration.17 Perhaps this points to an 'opt-in' option for parties to London arbitration?

There is also room for improvement in relation to the 'usual' criticisms of arbitration: cost and efficiency. For example, there is scope for improving the efficiency of London-seated arbitrations in disputes that the courts would otherwise dispense of on a summary judgment basis.18 This may go some way to addressing the concerns of parties to finance disputes for example, where the factual and legal issues are often straightforward matters of debt. However, London is not alone in this and it is, arguably, more of an issue for the major procedural institutions to address, rather than a matter of national law.

So continuing refinement and adaption is important, but (in many practitioners' view at least) policy-makers should resist the temptation to fundamentally change a recipe that has so far proven successful. Instead, arbitration needs to address the concerns of the parties, who ultimately will determine the success or failure of an arbitral seat, by improving efficiency and costs while maintaining the aspects of arbitration that are currently valued (including the limited scope of appeal).

Perhaps the more pertinent question is whether the courts can address the threat from arbitration by adapting their own systems and procedures to attract parties to litigation, rather than trying to change the rule book.

Footnotes

1 Paris was in second place, accounting for 37%, and Hong Kong in third place with 22%. http://www.arbitration.qmul.ac.uk/docs/164761.pdf. p.12.

2 Ibid.

3 Ibid. pp. 13-14.

4 Ibid. pp. 15-16. 

5 The Right Hon. The Lord Thomas of Cwmgiedd, Lord Chief Justice of England and Wales. "Developing commercial law through the courts: rebalancing the relationship between the courts and arbitration." The Bailii Lecture 2016. 9 March 2016. https://www.judiciary.gov.uk/wp-content/uploads/2016/03/lcj-speech-bailli-lecture-20160309.pdf.

6 Namely, s.69 of the Arbitration Act 1996, which currently permits parties to appeal against arbitral awards only on points of law.

7 https://www.judiciary.gov.uk/wp-content/uploads/2016/03/lcj-speech-bailli-lecture-20160309.pdf. p.14.

8 Lord Saville. "Reforms will threaten London's place as a world arbitration centre". The Times. 28 April 2016. http://www.thetimes.co.uk/article/reforms-will-threaten-londons-place-as-a-world-arbitration-centre-02t50mgrd.

9 Ibid.

10 Albeit the parties can opt to exclude this right by agreement.

11 Appeals from the High Court to the Court of Appeal are also restricted, in that an appellant must first obtain the court's permission by demon-strating that it has a real prospect of success, or that there is some other compelling reason why the appeal should be heard (CPR 52.3(6)). Similarly, restrictions apply on second appeals (i.e. appeals against a decision that was made on appeal) in that the question must raise an important point of principle or practice, or there is "some other compelling reason" for the Court of Appeal to consider the decision (CPR 52.13(2)).

12 NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20.

13 ST Shipping and Transport PTE Ltd v Space Shipping Ltd [2016] EWHC 880 (Comm) [42].

14 Civil Justice Statistics Quarterly, England and Wales and Appellate Court Statistics 2014. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/432070/civil-justice-statistics-jan-march-2015.pdf. p.26. 

15 Ibid.

16 Ibid. p.24.

17 http://www.arbitration.qmul.ac.uk/docs/164761.pdf. p. 8.

18 See, for example, the recent revisions to the Stockholm Chamber of Commerce Arbitration Rules, which allow parties to request the tribunal to rule on factual or legal matters at the beginning of a case. The English courts have shown some willingness to allow summary judgments in arbitration, when the court refused to dismiss an enforcement application relating to an Award made under the ICC Rules on a summary basis. While the court did not rule on the availability of summary judgment (as it deferred judgment pending a determination in New York), it did note that summary judgment would not, in principle, amount to a denial of due process and that the real question was whether, in the circumstances, the Tribunal had acted fairly. See Travis Coal v Essar Global Fund Ltd [2014] EWHC 2510 (Comm) (24 July 2014). 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Wilson Elser Moskowitz Edelman & Dicker LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions