HSF’S PAULA HODGES QC TO PARTICIPATE IN THE VAARB-CIArb INTERACTIVE ROUNDTABLE: “INSTITUTIONAL REFORMS – TRANSFORMING INTERNATIONAL ARBITRATION”

Head of HSF’s Global Arbitration Practice and President of the London Court of International Arbitration (LCIA) Court, Paula Hodges QC, will be taking part in the joint Vietnam Academy for Arbitration-CIArb Vietnam Chapter roundtable discussion on “Institutional Reforms – Transforming International Arbitration“, taking place on Wednesday 8 September 2021.

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HKIAC publishes average costs and duration

The Hong Kong International Arbitration Centre has released an updated report on the average costs and duration of HKIAC arbitral proceedings, following previous reports in 2018 and 2016. The report demonstrates that HKIAC offers parties administered arbitration, as well as expedited and emergency proceedings, that are both efficient and reasonably priced.

The updated report reflects data from all cases in which a final award or decision was issued between 1 November 2013 and 31 May 2021, totalling 186 arbitrations, including 44 expedited arbitrations and 13 emergency arbitrations. Arbitrations which were withdrawn, settled or terminated prior to the final award or decision were not covered.

Cost and duration are presented by both median and mean values, but the HKIAC comments that “the median value is the more meaningful and robust value, as it minimises the skewing effect of outliers“.

Key takeaways are summarised below:

  • Overall duration and costs.The median duration was 13 months (representing a decrease from 16.2 months in the 2018 report) and the mean duration was 16.9 months. The median total costs of arbitration were US$64,606 and the mean US$137,332.
  • Payment to the arbitral tribunal. Under the HKIAC Administered Arbitration Rules, parties have the option of paying an hourly rate (capped at HK$6,500 or approximately US$840) or on ad valorem Of the 186 arbitrations reported, the vast majority opted for the former. Arbitral tribunals were paid by an hourly rate in 175 proceedings, and by reference to an ad valorem fee scale in the remaining 11 proceedings.
  • Expedited arbitration.The median duration of expedited proceedings was 8.9 months and the mean 9.3 months, a slight increase as compared to the 2018 report. Likewise, the median and mean costs for expedited arbitration increased slightly to US$24,212 and US$51,239, respectively.
  • Emergency arbitration.The duration of emergency arbitrations was measured from the date of HKIAC’s acceptance of the application to the date of the emergency arbitrator’s decision, inclusive of any stays. The median duration was 15 days (a slight increase from 14 days in the 2018 report) and 22.6 hours from application to the HKIAC to the appointment of the emergency arbitrator.

For more information, please feel free to get in touch with any of the contacts below, or your usual Herbert Smith Freehills contact.

Simon Chapman QC
Simon Chapman QC
Partner, Regional Head of Practice - Dispute Resolution, Asia
+852 21014217
Kathryn Sanger
Kathryn Sanger
Partner, Hong Kong
+852 21014029
Briana Young
Briana Young
Foreign Legal Consultant (England & Wales)/Professional Support Consultant, Hong Kong
+852 21014214
Sophia Li
Sophia Li
Associate, Hong Kong
+852 21014178

ICC AND SIAC ATTAIN “PERMANENT ARBITRATION INSTITUTION” STATUS IN RUSSIA

On 18 May 2021, the Russian Ministry of Justice granted the status of “Permanent Arbitration Institution” (“PAI”) to the ICC International Court of Arbitration (the “ICC”) and the Singapore International Arbitration Centre (“SIAC”).

This is a major development for users of international arbitration in Russia who will now have access to three of the “top-five most preferred arbitral institutions” in the world, according to the respondents of the 2021 International Arbitration Survey prepared by Queen Mary University of London. Following their successful registration in Russia, the ICC and the SIAC, have joined the Hong Kong International Arbitration Centre (HKIAC) (and the Vienna International Arbitration Centre (VIAC)), which secured similar licenses from the Russian Ministry of Justice in 2019.

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RISE IN ARBITRATION CASES IN 2020 DESPITE REDUCED VOLUME OF IN PERSON HEARINGS DUE TO CORONAVIRUS PANDEMIC

Most arbitration institutions that have released their statistics for 2020 have reported increased caseloads and/or claim amounts, despite the COVID-19 coronavirus pandemic impacting in person hearings.  The strong demand for arbitration services and the fact that most arbitration institutions were able to move quickly to virtual hearings and avoid costly delays to proceedings establish arbitration as a resilient and reliable choice for commercial dispute resolution.  In this blog post we review both interim and full caseload statistics so far released for 2020.

HKIAC

The Hong Kong International Arbitration Centre broke a number of its own records this year.  With 318 cases, HKIAC received its highest number of new arbitration filings in over a decade.  The total amount in arbitration disputes handled by HKIAC was HK$68.8 billion (approximately US$8.8 billion).  Again, this is a record high since 2011.

203 of the arbitrations filed were administered by HKIAC (under rules such as the HKIAC Administered Arbitration Rules, the UNCITRAL Arbitration Rules and the HKIAC Electronic Transaction Arbitration Rules), representing a 20% year-on-year increase.  The amount in dispute for administered cases was HK$51.3 billion (approximately US$6.6 billion).

There was a small reduction in the proportion of new arbitration filings that were “international” (defined as at least one party not being from Hong Kong).  The proportion of all arbitration cases that were international also recorded a small drop.  The vast majority of cases (99.4%) chose Hong Kong as the seat of arbitration.  Hong Kong law was also the most commonly selected governing law for disputed contracts handled by HKIAC.

In 2020, HKIAC processed 22 applications under the Hong Kong-Mainland China Interim Relief Arrangement (Arrangement), which came into force in October 2019.  The total value of the evidence, assets or conduct sought to be preserved amounted to ¥6.4 billion (approximately US$988 million), of which ¥4.4 billion (approximately US$683.3 million) were successfully preserved.  This is an encouraging number, as it shows in the early days of the Arrangement that there is a realistic chance that assets and evidence sought to be preserved would likely be ordered to be preserved.

Fourteen emergency arbitrator applications were submitted to HKIAC in 2020. This is a large number, particularly given that only twenty-seven emergency arbitrator applications in total had been filed with HKIAC before 2020.  While it appears that 11 of the 14 applications were made in related arbitrations (which likely refer to a series of arbitrations arising from a related set of contracts or arise from the same or similar set of facts), there were still more applications than in past years.  Only three emergency arbitrator applications were filed in 2018, while none were filed in 2019.

The HKIAC granted 24 applications for expedited procedure in 2020, from a total of 28 applications.

There was a clear pivot to virtual hearings in 2020: 80 out of 117 hearings hosted by HKIAC in 2020 were fully or partially virtual, doubtless as a result of the pandemic.  Only 37 hearings were in-person, hosted at the HKIAC’s Hong Kong premises.

Fifty-two HKIAC arbitrations were concluded by Final Award in 2020, while four reached party settlement.

Finally, HKIAC released statistics on diversity of arbitrator appointments.  Of the 149 arbitrator appointments by HKIAC in 2020, 34 were of female arbitrators.  This continues an upward trend from 17.6% in 2018, to 20.5% in 2019 and 22.8% in 2020.

SIAC

The Singapore International Arbitration Centre is expected to report its full case load information later this year, but it has already announced that it had crossed the 1000-case threshold with 1005 new cases in 2020 as of 30 October 2020.  This is another record year for SIAC, breaking the previous record caseload it had reported in 2019.

CIETAC

The China International Economic and Trade Arbitration Commission also saw growth in its caseload in 2020.  A total of 3615 ongoing cases were registered by CIETAC, representing an 8.5% year-on-year growth.

CIETAC reported that it handled disputes amounting in total to ¥112.130 billion (approximately US$17.3 billion).

There was growth not only in the number of cases handled by CIETAC, but also in terms of its international caseload.  In 2020, 739 cases were categorised as “foreign-related cases”, compared to 617 in 2019.  67 of these were cases where both parties were considered “foreign”, which was a record high for CIETAC.  CIETAC made 5213 arbitrator appointments in 2020.

As part of its response to the pandemic, CIETAC also established new virtual hearing centres, handling 819 virtual hearings.  This was an increase of 628 cases that were heard virtually.

ICC

Like HKIAC, the International Chamber of Commerce Court of Arbitration also announced record demand for its arbitration services last year.

ICC reported 946 new arbitration cases in 2020, the highest since 2016.  The majority of the new cases (929 cases) adopted the ICC Rules of Arbitration, while the remaining 17 (which were ad hoc cases) were filed under the ICC Appointing Authority Rules.

LCIA

The London Court of International Arbitration also reported a record breaking 444 cases referred to the institution in 2020, which broke the record caseload LCIA had reported in 2019 by an increase of about 10%.  These results were published on an interim basis and further statistics are expected to be released later this year.

VIAC

The Vienna International Arbitral Centre received 40 new cases in 2020, with the majority of cases involving an Austrian party.  The total amount of disputes handled by VIAC by the end of 2020 was €428 million (approximately US$518 million).

Compared to 2019, where VIAC saw 45 new cases, there was a small drop in the number of new cases received.  However, looking at the statistics for VIAC over the past few years, the number of new cases each year has generally ranged from 40 to 60 cases, so the small drop is likely part of a normal fluctuation over a longer period.

While the number of new cases did not grow, on the diversity front, more than 30% of arbitrators nominated or appointed in VIAC cases were female arbitrators.  This is the highest that VIAC has seen in recent years, and is a highlight for the institution.

DIA

The statistics from the Danish Institute of Arbitration indicate that it is primarily focused on domestic arbitrations, but about one-fifth of its cases were international in nature.  At 28 cases in 2020, DIA’s international caseload was approximately the same as during  the past five years, which ranged from 27 to 33 cases.

SCAI

The Swiss Chambers’ Arbitration Institution reported 83 new arbitration cases in 2020, with 61 being international.  While the number of new cases was not the highest that SCAI has received, it continues an average growth trend over the past decade.

AAA-ICDR

The American Arbitration Association-International Centre for Dispute Resolution reported that it handled 9538 cases in 2020, worth approximately US$18 billion.  This is a slight drop from 9737 cases in 2019, but – notably – an increase in claim amount when compared to the US$15 billion in claims in 2019.  AAA-ICDR also saw an increase from 94 filings for emergency arbitration in 2019 to 111 filings in 2020.

The largest claims, in aggregate, were from the technology sector (US$1.4 billion) followed by financial services, telecommunications and energy (in that order).  This is in contrast to the largest claims in 2019 coming from life sciences (USD 1 billion) followed by construction, real estate and technology.

In terms of changes in caseload by sector, cases related to the cannabis industry saw a 100% increase, the largest rise of any sector (the same industry saw a 225% increase in 2019, which was also the largest sector rise in 2019).

On the diversity front, AAA-ICDR reported 33% of appointments as “diverse appointments” (which refers to gender and ethnic diversity).

Commentary

A majority of arbitration institutions globally reported growth in case load and/or claim amounts in 2020, many of them even breaking their previous records.  This goes to show that arbitration remains a robust dispute resolution mechanism, which has proven its ability to adapt to the highly challenging circumstances of the past year.

It was also a clear side effect of the pandemic that there was a significant shift to virtual hearings.  While users have been slowly moving towards virtual hearings for a number of years, it appears that 2020 will be recognised as the year in which virtual hearings went mainstream, allowing arbitral institutions all over the world to continue to serve the needs of their users.

Simon Chapman
Simon Chapman
Partner
+852 21014217
Rebecca Warder
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418
Jacob Sin
Jacob Sin
Associate
+852 21014230

COEXISTING WITH COVID-19 [2]: A CATALYST FOR PROGRESS IN INTERNATIONAL ARBITRATION?

This blog post was originally published on 16 July 2020. This version of the post has been amended to include an updated table of the individual steps taken by different arbitral institutions and organisations as at 02 October 2020 in response to the evolving situation. 

As the Covid-19 pandemic continues, infection rates in many countries are starting to fall, and businesses and governments alike are seeking to establish a “new normal” recognising that the virus will be present in society for some time yet. Other countries still face climbing numbers and a peak yet to come. For all, the prospect of multiple waves of high infection rates throughout the year and beyond remains. As such, we will continue to see an ever shifting patchwork of lockdowns and other government responses internationally.

In our earlier series of blog posts, we highlighted the individual steps taken by different arbitral institutions, organisations and the wider community as an initial crisis response to the pandemic. We produced a table setting out those steps and will continue to monitor and update this information going forward. An updated table, accurate to 02 October 2020, can be found here.

In this blog post, we turn to the future and look at how the arbitration community continues to respond to the challenges of operating internationally, as different countries prepare in different ways to live with the Covid-19 virus in the medium term at least.

A steep learning curve: the initial response

The initial wave of the pandemic created an unprecedented need for arbitral institutions and organisations to adapt at very short notice to new and different ways of working, and offer solutions to parties and practitioners that would enable disputes to continue to be resolved at a time of quarantine, enforced social distancing and fast-changing government guidance from across the globe. What became clear was that there was no “one size fits all” approach to be taken by those institutions or organisations. Some institutions (such as the SCC) already functioned largely online with online filing systems. For other organisations (such as the LMAA) the majority of their cases were resolved “on the papers” rather than in face-to-face hearings. Other institutions (such as the ICC or LCIA) needed to introduce changes in their processes, enabling cases to be filed virtually while their secretariats worked remotely and for parties and tribunals to communicate online.

As the truly global nature of the pandemic unfolded, one of the first questions faced by parties, arbitrators and practitioners was whether merits hearings ought to be held virtually or postponed. While electronic communication and the use of other online tools in an arbitration is nothing new, most arbitrations, until now, involved a face-to-face substantive hearing on the merits. For many, a shift to a fully virtual merits hearing was, at least initially, viewed as a step too far. We saw many arbitration hearings in March and early April being postponed to later in the year. However, with the realisation that this “new normal” might be with us on a global scale for some time came a change in attitude towards virtual hearings.

The institutional joint statement in April 2020 mirrored the approach of many national courts in encouraging parties to continue with the resolution of disputes, and many arbitral institutions began encouraging arbitrators to adopt virtual hearings wherever possible. As a consequence, many parties with upcoming merits hearings found their arbitrators inclined towards that option.

Where a decision has been taken to hold a hearing virtually, the arbitrators, practitioners and clients involved have been on a steep learning curve. Just as we have all become used to operating through Skype, Teams and Zoom in the workplace, we have adapted to using that same virtual technology (and others) to hold hearings.

There has been a very positive response from a number of practitioners who have participated in virtual hearings, with many surprised at how well they have worked. We have seen the development of guidelines, protocols and procedural orders to govern the efficient and effective running of virtual hearings and to ensure that the hearing remains fair to all.

We have also seen other new ideas and initiatives come from within the community during this challenging time. New websites and initiatives have been launched to help keep practitioners up to date with Covid-19 developments or to facilitate the use of online platforms to enable cases to truly operate virtually.

Responding to an ever-shifting international picture: the need for flexibility

So what does the “new normal” mean going forward?

Commercial arbitration has grown in popularity over the past decades as parties recognise the benefits it brings in cross-border transactions by offering a neutral forum and an adaptable, international, procedure. But the international nature of the parties, practitioners, institutions and arbitrators also means that arbitration must be able to adapt and flex to fit the unique requirements of those international participants, both in terms of their transactions and disputes, but also to the specific implications of the pandemic for each country in which those participants reside.

Clearly, if circumstances require it, all those involved in the process should be able to revert back to “lockdown” ways of working. And if circumstances require it, all the learning of the past months will be able to be put into use in continuing to hold wholly virtual substantive hearings. But what seems more likely is that we will see more flexible and adaptable approaches to respond quickly to the immediate, and often changing, circumstances.

“Hybrid” or “semi-virtual” hearings are likely to be the answer to that need for flexibility. A mixture of virtual and physical attendance will help to mitigate the effects of travel restrictions and local or national lockdowns. They will also enable those involved in hearings (such as the parties and their counsel, the Tribunal and any witnesses or translators that might be involved) to participate to the fullest extent possible. Some participants may meet in a single or in multiple locations, with appropriate social distancing, while others attend virtually. These hybrid hearings can be set up to change format at short notice, enabling those involved to plan for a myriad of different scenarios but ensure that the final hearing remains fair, offering each party the opportunity to put their case.

Impact on the future: a catalyst for change in the post-Covid world?

Many sectors of the economy have proven themselves to be extremely adaptable in the face of the pandemic, and arbitration is no different in that regard. At this stage, however, it is difficult to gauge the longer term impact of Covid-19 on the process and procedure of arbitration globally, particularly if a future vaccine were to reduce or remove the need for social distancing.

However, the longer arbitral participants are required to work in a different way, the more those new ways of working will be seen as the norm. The more positive experiences participants have of virtual or hybrid hearings, the more likely it is that these will remain at least options for future merits hearings. When faced with participants from across the globe, parties may become less comfortable with the expense of holding a face-to-face hearing if they are reassured in the effectiveness of a virtual or hybrid option. Indeed, the dramatic reduction in the carbon footprint of these virtual and hybrid hearings may lead to an environmental “silver-lining” to the pandemic in terms of changes in business practice for many, including in international arbitration.

Most importantly, we have seen innovation and blue sky thinking at its best in the last few months. And that shift in mind-set towards different ways of delivering the product of arbitration effectively and efficiently has been exciting to see and experience. That ability to adapt and change to challenging circumstances is likely to continue, and we will see the longer term impact of that innovation for many years to come.

For more information, please contact Craig Tevendale, Partner, Vanessa Naish, Professional Support Consultant, Charlie Morgan, Senior Associate, or your usual Herbert Smith Freehills Contact.

Craig Tevendale
Craig Tevendale
Partner
+44 20 7466 2445

Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

Charlie Morgan
Charlie Morgan
Senior Associate
+44 20 7466 3868

COEXISTING WITH COVID-19: A CATALYST FOR PROGRESS IN INTERNATIONAL ARBITRATION?

As the Covid-19 pandemic continues, infection rates in many countries are starting to fall, and businesses and governments alike are seeking to establish a “new normal” recognising that the virus will be present in society for some time yet. Other countries still face climbing numbers and a peak yet to come. For all, the prospect of multiple waves of high infection rates throughout the year and beyond remains. As such, we will continue to see an ever shifting patchwork of lockdowns and other government responses internationally.

In our earlier series of blog posts, we highlighted the individual steps taken by different arbitral institutions, organisations and the wider community as an initial crisis response to the pandemic. We produced a table setting out those steps and will continue to monitor and update this information going forward. An updated table, accurate to 16 July 2020, can be found here.

In this blog post, we turn to the future and look at how the arbitration community continues to respond to the challenges of operating internationally, as different countries prepare in different ways to live with the Covid-19 virus in the medium term at least.

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RUSSIAN MINISTRY OF JUSTICE CLARIFIES RUSSIAN ARBITRATION LEGISLATION UPON JOINT REQUEST OF HKIAC AND VIAC

In February 2020, the Hong Kong International Arbitration Centre (the “HKIAC”) and the Vienna International Arbitration Centre (the “VIAC”) jointly applied to the Russian Ministry of Justice (the “MOJ”) and the Council for the Development of Arbitration at the MOJ (the “Council”) for clarification of certain “grey areas” of Russian Arbitration legislation (the “Joint Request“). Both arbitration institutions have recently published the response issued by the Working Group No. 2 on Foreign Arbitral Institutions of the Council (the “Working Group”) on the questions posed in the Joint Request (the “Response“)[1]. Although the position in the Response was declared to be non-binding on the Russian courts, the Working Group’s views might impact Russian court practice on the reformed arbitration legislation.

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HKIAC announces new Co-Chairs, Vice Chairs; Herbert Smith Freehills’ Briana Young named Vice Chair

HKIAC has appointed David Rivkin and Rimsky Yuen as its new Co-Chairs, to succeed Matthew Gearing QC. HKIAC Council members Briana Young of Herbert Smith Freehills and Nils Eliasson of Shearman & Stearling have been promoted to Vice Chair, alongside Joseph Wan.

David W. Rivkin, Co-Chair of Debevoise & Plimpton’s International Dispute Resolution Group and Past President of the International Bar Association (IBA), and Rimsky Yuen GBM, SC, JP, arbitrator, mediator and barrister and former Hong Kong Secretary for Justice, are appointed Co-Chairs of HKIAC with effect from 15 June 2020.

Rivkin and Yuen succeed Matthew Gearing QC, whose three-year term as HKIAC Chair concludes on 14 June 2020.

Two members of HKIAC’s Council, Nils Eliasson, Partner at Shearman & Sterling, and Briana Young, Foreign Legal Consultant at Herbert Smith Freehills, are elevated to Vice Chair.

HKIAC’s press release is available here.

CASELOAD STATISTICS SHOW INCREASING DEMAND FOR ARBITRATION BY MALAYSIAN PARTIES

On 22 October 2019, the Asian International Arbitration Centre (“AIAC“) published its 2018 statistics, showing a steady maintenance of its arbitration caseload. Throughout the years, there has been sustained efforts by the Malaysian government and legal community to promote arbitration as a dispute resolution process of choice for Malaysian parties, with the AIAC largely at the forefront of this endeavour.

In this post, we navigate the trend of Malaysian participation and usage of institutional arbitration based on published statistics of leading arbitral institutions across the world.

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