1.1 Prevalence of Arbitration

International arbitration is a frequently used and broadly accepted method of dispute resolution in Malta for both general commercial and sector-specific disputes. It is particularly prevalent in certain sectors such as construction and information technology, where most domestic parties engaged in international contracts have recourse to institutional or ad hoc international arbitrations, but even so it still occurs regularly on a more generic level across various industries. Further to this, international arbitration clauses are increasingly featuring in commercial contracts governed by Maltese law or involving a Malta based entity.

There has been a discernible uptake in the use of international arbitration in relation to contracts involving public and private entities, shipping, insurance, as well as financial services disputes. Various factors such as geographical location, legal framework and cost-to-quality ratio, may incentivise parties into resorting to arbitration as opposed to court litigation in Malta.

The principal advantages of arbitration in Malta are flexibility of procedure, the value added brought by arbitrators, as well as the relative ease of enforceability of awards. The jurisdiction is generally supportive of arbitration, and the courts have extensive powers of support (including interim relief) for both domestic and international arbitrations having their seat in Malta.

On a purely domestic level, litigation remains the predominant method of dispute resolution in Malta amongst local market players. Litigation costs in Malta are generally low and in domestic disputes arbitration has never managed to break through as the prevalent method of dispute resolution although the number of cases has been consistently on the increase.

1.2 Impact of COVID-19

Following the initial disruption of proceedings in the second quarter of 2020 caused by COVID-19, the efficient adaptation to the new reality in international arbitrations having Malta as the seat of arbitration was very much a direct reflection of the experience of the arbitration tribunals. More experienced arbitrators have adapted to the new reality quite easily and have readjusted procedural timetables very efficiently, promoting an increased use of technology by the parties. There has been a largely seamless transition to remote hearings and use of secure platforms for data and document exchanges.

In international arbitrations managed by the Malta Arbitration Centre (MAC), which is the designated institution under the Arbitration Act (the "Act") for domestic arbitrations but is often also designated as the institution managing international arbitrations with Malta as their seat of arbitration, the MAC has invited tribunals and parties to conduct proceedings electronically through various technology platforms and in so doing, proceedings have been unaffected and uninterrupted on account of the pandemic. Both arbitrators and the parties to the dispute have proven willing to adopt this manner of proceedings.

1.3 Key Industries

The use of arbitration in Malta has been increasing steadily. In particular, due to the increased number of large-scale infrastructure projects, the construction industry has seen a significant increase in arbitration, especially since FIDIC contracts have become the prevalent construction contract in Malta for medium-to-large-scale developments. Accordingly, a number of claims have been arbitrated. Arbitration clauses are increasingly being incorporated in contracts which are the subject of public procurement processes with public authorities clearly indicating to the market the preference to refer disputes to arbitration.

Moreover, a marked increase in arbitrations relating to areas which were hitherto the exclusive domain of the Maltese courts has been witnessed. This includes shareholder's disputes and certain intellectual property disputes, largely due to the flexibility afforded by arbitration as well as an experts' focus on the subject matter. In this context, it appears that the COVID-19 pandemic has had little effect on the incidence of disputes being referred to arbitration.

1.4 Arbitral Institutions

The MAC is the principal institution that oversees the conduct of domestic arbitrations and a good number international arbitrations having Malta as their seat of arbitration. It is run by a publicly appointed board of governors that is responsible for the policy and general administration of the affairs and business of the Centre. The MAC offers facilities for the conduct of arbitration, may act as the default appointing authority with a choice of arbitrator(s) from panels of professionals practising different areas of law.

Malta serves as the seat of ad hoc international arbitrations, as well as the seat of institutional arbitrations under the rules of leading arbitration institutions, most commonly, the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA).

No new institutions have been established over the past year.

1.5 National Courts

The superior courts (First Hall of the Civil Courts and the Court of Appeal) are vested with the powers to stay arbitration proceedings, grant interim relief, hear procedural challenges and make recognition orders. The specific division of powers and jurisdiction of the particular courts depends on the nature of the relief sought. They are regulated by the Act and the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta) and will be addressed in more detail in further questions.

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Originally published by Chambers International Arbitration Global Practice Guide

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