Parties normally decide on arbitration or litigation to resolve disputes during their contract negotiations. Those who choose arbitration, despite the cost of the tribunal and venue, are often swayed by its confidential nature and the option to choose the tribunal. In cross-border disputes, arbitration can also ensure neutrality (in governing law and location) and the comfort of being able to enforce awards under the New York Convention.
Much of arbitration’s appeal lies in the flexibility of the process (compared to litigation). Procedures can be tailored to the dispute and parties to improve efficiency, reduce costs and save time. In recent years, however, such flexibility seems to be in shorter supply – as touched on in the 2021 International Arbitration Survey: Adapting Arbitration to a Changing World, published by The School of International Arbitration, Queen Mary University of London and White & Case.
Respondents to the survey, including arbitrators, commented on a trend to over formalise proceedings and arbitrators exhibiting “due process paranoia”. Yet, a more formal approach that mimics court processes can deprive parties of the efficiency, time and cost savings they expected when choosing arbitration. Maybe arbitration should, as one respondent put it: “stop taking itself so seriously”.
Respondents suggested a number of practical ways to take a more flexible approach:
Respondents were divided on whether more or different rules are needed to “encourage” such flexibility. Some suggested new “rules” such as cost-budgeting rules to manage cost risk or setting paperless proceedings or virtual procedural hearings as the default position. Others thought overregulation through “soft law” should be avoided.
To halt the gravitation towards litigation-like processes, the arbitration community might consider a combination of: (1) making guidance on the options [more widely] available (particularly on IT and cybersecurity solutions) to help parties in the initial planning stages; and (2) strengthening tribunals’ case management powers, including the ability to sanction [unreasonable] behaviour.
An increased focus on flexibility could help promote diversity and embed climate-aware practices within arbitration. On diversity, while it might be overstretching the concept of procedural flexibility, arbitral institutions could review the criteria for accepting panel arbitrators to increase diversity. Parties and their legal representatives could also be less rigid and consider a wider range of tribunal options beyond their personal experience or their colleagues’ recommendations.
On reducing their environmental impact, parties can reduce travel through virtual hearings and reduce paper consumption by producing, submitting and managing documents in electronic form (alongside the implementation of reliable cybersecurity measures). Respondents largely regarded these green benefits as “a welcome side-effect” but, as we approach COP26 and work towards net zero targets, parties can expect this goal to be an increasingly important factor when deciding on procedural options.
This article was first published in Construction Law on 1 June 2021 as "Arbitration exhibiting "due process paranoia". You can subscribe to Construction Law's newsletter here.