Parties to international commercial arbitrations are pressurising providers to deliver greater cost efficiencies and exploring other forms of alternative dispute resolution, the head of the London Court of International Arbitration (LCIA) has reported.
However, the continued rise in popularity of international arbitration suggests that a boom in arbitrated disputes after the global economic downturn of 2008 was part of a general upward trend, said Adrian Winstanley, the court’s director general.
He made the observations in the wake of an announcement that he is to step down next year to pursue a career as an independent commercial arbitrator. The move will end a 17-year career with the LCIA, which he first joined as registrar in 1997 from practice as a solicitor at Clifford Chance.
Speaking to Litigation Futures, Mr Winstanley said that despite the upward trend, there was “no room for complacency in the field of arbitration”. But while litigation was an “attractive option” in competition with arbitration, the majority of cross-border transactions was likely to include a provision for commercial arbitration on the basis that “neither contracting party will want to find itself in the courts of the other”.
Parties were expecting more from arbitrators, he said. “Something I've noticed on the back of the economic downturn and the arbitration boom [is that] parties are looking to have ever more efficient, ever more cost-effective services from the arbitration providers. They are looking also at alternatives [such as] mediation, dispute resolution through dispute review boards, dispute avoidance, and so on.”
He said the number of arbitrations had been increasing slowly for many years, followed by a predictable surge as a result of the economic downturn – in which the number of disputes referred to the LCIA doubled between 2007 and 2009. “When we saw this bubble coming on the back of the collapse in 2008/2009, we thought there might have then been a falling away. But in fact our figures have held up extremely well after a plateauing, and that does suggest indeed that there is an underlying upward trend.”
In 2012 a total of 265 arbitrations were referred to the LCIA, 18% more than in 2011. An all-time high of 285 arbitrations were referred in 2009. The single largest area giving rise to referrals in 2012 was commodity transactions, at 16%, followed by loan or other financial agreements (11%) and joint ventures and shareholders’ agreements (9%).
Mr Winstanley, who will step down on 30 June 2014, said the LCIA’s recent overseas activities, involving joint ventures in Dubai, Mauritius and South Korea, and opening offices in India, were “a recognition, I think, of the growing sophistication in arbitration in other jurisdictions”.
He pointed out that around 85% of LCIA-arbitrated disputes involved no English party, adding that while London was an “attractive place to be arbitrating a dispute, you have to recognise the realities of the world in which we are operating”.
The move into other jurisdictions was “natural” and a reflection that parties based in Asia or Africa could not always come into London for their arbitrations.
He continued: “We are competing in a global market and you should be able to take the LCIA rules and apply them elsewhere with different governing laws, different procedural laws, different venues and so on.”
Mr Winstanley was awarded an OBE this year for services to international arbitration. Bill Rowley, QC, chairman of the LCIA’s board, said: “The fact that the LCIA has become one of the few truly global arbitral institutions is due in very large part to Adrian’s tremendous leadership, commitment to excellence, and the exercise of great judgement over the past 17 years.”