1.0 Introduction
In recent years, arbitration has emerged as the preferred choice for dispute settlements, particularly in commercial cross-border transactions, interstate and foreign investment disputes.[1] International arbitration operates under a framework of various international conventions and laws, including the United Nations Commission on International Trade Law (UNCITRAL) Model Law, International Chamber of Commerce Rules (ICC Rules), etc. The current decade has witnessed the introduction of modern procedural practices designed to enhance the efficiency and effectiveness of international commercial arbitration. This recent growth in international arbitration has been described as rapid or even exponential[2] reflecting the growing reliance on arbitration as a viable dispute resolution mechanism.
2.0 Trends in International Commercial Arbitration
Reports indicate that arbitration cases are projected to triple by the end of 2024, driven by various global crises. These include geopolitical crisis, Environmental, Social, and Governance (ESG) challenges that have sparked disputes in the energy and mining sectors, decommissioning related disputes, economic strife, numerous regulatory and economic measures.[3] As a result, the international arbitration landscape is experiencing significant changes. The key trends in international arbitration include the following:
- An influx of new arbitrations in the energy industry, including in the evolving LNG, lithium, and hydrogen sectors; [4]
- A renewed focus on arbitrator disclosures, which has resulted in attempts to disqualify arbitrators and challenges to awards; [5]
- Varying jurisdictional approaches with respect to allegations of corruption in post-award enforcement challenges;[1]
- New interests in the use of summary disposition procedures and bifurcation measures; and
Upcoming reforms to national arbitration laws in important arbitration jurisdictions. - Due to the trends identified above, there have been several interesting developments in international arbitration. These are:
A. Virtual/Remote Hearings in Arbitration:
Virtual hearings in international arbitration have emerged as a transformative and indispensable aspect of the dispute resolution process in the digital age. With the advancement of technology and the global connectivity of stakeholders, virtual hearings offers a practical and efficient alternative to traditional in-person proceedings.
Article 19.2 of the London Court of International Arbitration (LCIA) Rules 2020 has expanded and clarified the modes of hearing to include virtual hearings and other forms of hearing such as conference call, videoconference or using other communications technology, with participants in one or more geographical places (or in a combined form).
Similarly, to maintain the effectiveness of international commercial arbitration as the preferred dispute resolution mechanism, many arbitral institutions have updated their rules to incorporate modern practices. The adoption of virtual hearings offers numerous benefits, including increased flexibility, reduced costs, and enhanced accessibility for parties and arbitrators across different jurisdictions. By conducting hearings online, parties can save time and resources that would have been expended on travel and accommodation, making the arbitration process more time and cost effective.
Additionally, virtual hearings have facilitated the participation of geographically dispersed parties, witnesses, and experts, ensuring a fair and inclusive dispute resolution process. Utilizing virtual platforms for presenting evidence, examining witnesses, and making legal arguments facilitates seamless communication and collaboration among all stakeholders involved in the arbitration proceedings.
While virtual hearings offer numerous benefits, challenges may arise, including technological glitches, cybersecurity concerns, and potential limitations in assessing witness credibility. To address these concerns, arbitrators and parties should establish clear protocols, use secure communication channels and conduct comprehensive technology test prior to hearing, to ensure the reliability and integrity of virtual proceedings.
B. Generative Artificial Intelligence:
Generative Artificial Intelligence (AI) has made significant advancements in the field of international arbitration, reshaping the landscape of dispute resolution on a global scale. With the help of AI-powered tools, arbitrators can automate tasks such as legal research, evidence analysis, and case management, significantly reducing the time required for complex cross-border disputes. By accelerating the information retrieval and analysis processes, Generative AI enables expedited proceedings and facilitates timely resolutions, ultimately benefiting parties involved in international arbitration.
Recently, Generative AI has begun to permeate every industry, and the Alternative Dispute Resolution (“ADR”) sector is no exception. AI is used in many parts of arbitration practice for managing and reviewing large batches of documents and also preparing chronologies. A well-known example of AI already employed in international arbitration proceedings is AI-backed translation software, used to sieve through the large volume of foreign language documents often present in arbitrations.[1]
C. Third Party Funding (TPF):
In the past five years, third-party funding for pursuing arbitral claims has become increasingly common. Additionally, the monetization of awards—where a finance provider advances capital to the award creditor in return for a portion or assignment of the award, is also on the rise. The International Chamber of Commerce International Court of Arbitration expressly referred to the practice of third-party funding under Rule 11(7) of the Arbitration Rules.[2] Additionally, in the case of Excalibur v Texas Keystone,[3] the English Court of Appeal observed in the opening sentence of its decision that “third-party funding is a feature of modern litigation”.
TPF is gaining interest in Africa, and some arbitral institutions, like the Cairo Regional Centre for International Commercial Arbitration (CRCICA), have updated their rules to allow and promote these funding practices.[4] Nigeria’s arbitration legislation, the Arbitration and Mediation Act, 2023 (“AMA”) makes provision for third-party funding. It specifically makes provision for a party to fund arbitration costs for another party in the hope of sharing from the gains of the party, if the party’s claim succeeds.[5] If a party enters a TPF Agreement[6] on, before or after the commencement of arbitration, such party is mandated to immediately notify the other party, arbitral tribunal and arbitral institution where applicable.[7] This notification is necessary to avoid conflict of interest.
However, parties and funders must pay close attention to the varying rules and challenges regarding TPF in different countries, to avoid their funding arrangements being ruled unenforceable by national courts. Recent developments in England and Wales, Ireland, the European Union, Nigeria and India illustrate the varied stages of market development, and the unique challenges parties and funders may face in different jurisdictions.
3.0 Advancement in Domestic Arbitration Legislations
The field of international arbitration is evolving quickly, with numerous updates to national arbitration laws in jurisdictions that are often selected as arbitral seats. Countries like the United Kingdom and Germany are taking initial steps to amend their arbitration laws, while others, such as Nigeria, have already implemented changes to their arbitration laws. In 2019, the International Arbitration and Mediation Centre (IAMC) was established in Hyderabad, and the India International Maritime Arbitration Centre is set to open in Mumbai later this year.[1]
In early 2024, China introduced new rules for both the China International Economic and Trade Arbitration Commission (CIETAC) and the Shanghai International Arbitration Centre (SHIAC).[2] A significant development in the UK is the progression of the Arbitration Bill, which reached the committee stage following the second reading held on 17 January 2024. The Bill, based on recommendation from the Law Commission of England and Wales implements changes to the existing 1996 Arbitration Act. These changes aim to clarify the laws governing arbitration agreements, strengthen court powers, and expedite dispute resolution. .[3] Taken together, these recent changes highlight the global trends toward adapting arbitration frameworks to cotemporary needs.
4.0 The Rise of Arbitration in Novel Sectors
Novel sectors across the globe have witnessed a rise in the use of arbitration in resolving disputes. These sectors are:
- Life Science
Life science companies frequently enter long-term, cross-border collaborations to pull capital, access talent, leverage new technologies and materials, share risks, and drive the next innovation in medicine or medical technology. However, the international nature of these partnerships can lead to jurisdictional issues in the event of a dispute often requiring international arbitration. Institutions like the London Court of International Arbitration (LCIA), American Arbitration Association Centre for Dispute Resolution (AAA-ICDR) and WIPO Arbitration and Mediation Center have reported a growing prominence in life sciences disputes.[4]
Common contractual disputes in this sector include issues around royalty rates and payments, product liability, contractual milestone breaches, ownership of intellectual property related to product improvements, use of licensed products, and indemnification obligations.
By exploring the use of arbitration, life science companies can choose experienced decision-makers with industry knowledge and experience to act as arbitrators in their case. These companies can also choose the arbitration rules they want to govern proceedings, giving them more control over the process. The arbitration process can be adapted by parties, who can narrow the scope of evidence collection and the scope of issues to be examined by the arbitrators.[1]
- Climate Change
Arbitration is well placed to play a lead role as an arena for solving climate change and sustainability related disputes, especially with its features of neutrality and allowing parties choose their expert adjudicators. Arbitration has also been described as having the potential to fill an existing lacuna and become a key mechanism for the enforcement of international environmental law. The rise of international arbitration in the climate change sector signifies a significant shift in the approach to resolving environmental related disputes. In recent years, the global community has witnessed a surge in climate-related conflicts, stemming from issues like carbon emissions, deforestation, and sustainable development. Traditional legal mechanisms often fall short in adequately addressing the complexities inherent in such disputes. As a result, international arbitration, with its specialized expertise, neutrality, and enforceability, has become the preferred method for effectively and efficiently resolving climate change disputes.
The complexity of climate change issues, characterized by multi-jurisdictional disputes involving diverse stakeholders, poses a challenge for traditional litigation processes. International arbitration offers a flexible and tailored approach to resolving disputes, allowing parties to select arbitrators with expertise in environmental law and climate change matters. The specialized knowledge enables arbitration panels to thoroughly address the scientific, technical, and legal intricacies of climate-related conflicts, fostering a more informed and nuanced decision-making process.
- Cryptocurrency
Cryptocurrency (crypto) related disputes are rising globally, as many crypto businesses now include arbitration clauses in their contracts due to the conceptual and practical advantages arbitration offers over traditional litigation. These disputes cover a wide range of issues, from breaches of contracts with crypto platforms and fraud claims to matters involving the sale of cryptocurrency or Non-Fungible Tokens (NFT). Other disputes include investment conflicts; supply of services disputes; sale of goods; fraud and mis-selling; outstanding debts; and intellectual property, or more technically on the crypto transaction itself. P However, crypto
arbitration is still an emerging area with unique challenges. In cases involving blockchain transactions, parties may need to address novel legal questions. Key issues include determining which law applies to blockchain transactions when no governing law clause exists and whether a binding dispute resolution clause can be embedded in a smart contract.
The fact that certain countries have banned or heavily regulated crypto assets creates additional complexity for parties looking to pursue legal action, or enforce arbitral awards involving crypto assets. For instance, enforcing an award that orders damages in either fiat currency or cryptocurrency can be challenging. On the procedural side, identifying the correct counterparty to the arbitration, securing interim measures over crypto assets, accurately valuing these assets and quantifying loss are all more complicated in crypto disputes. In some cases, identifying the wrongdoer is also difficult. Class actions may arise, particularly if a crypto exchange experiences an outage. The boundaries of joinder and consolidation will be tested in these cases, and whether these can be brought will depend on the jurisdiction.
5.0 Recent Trends: Essential Skills for Arbitration Practitioners
Legal practitioners and arbitrators alike need to stay abreast of emerging trends in international arbitration. They must also develop essential skills to navigate the complex landscape of international arbitration to remain effective.
- General Skills
The skills typically expected of an arbitrator are;
i. Adhering to the Principles of Natural Justice
To ensure the legitimacy and fairness of arbitration proceedings, it is important for arbitrators to uphold the principles of natural justice. There are three principles of natural justice, which include the hearing rule which states that, any party affected by the arbitrator’s decision deserves the opportunity to defend themselves; the bias rule which requires that the arbitrator must make their decision in a fair and free manner; Lastly, the reasoned decision which asserts that the decision must be based on reasonable and valid grounds. By following these principles, arbitrators help maintain trust in the arbitration process.
ii. Maintaining Privacy and Confidentiality
Maintaining the privacy and confidentiality of legal proceedings is crucial for arbitrators to maintain. One of the benefits of arbitration is that it offers a more confidential means of dispute resolution than traditional methods. Arbitrators typically sign confidentiality agreements that cover all legal submissions, witness evidence and documents in advance. However, a recent development allows for the possibility of non-confidential arbitration if both parties consent, Disclosure is necessary for the interests of justice, if the court orders disclosure or if the disclosure is in the public interest.[1]Article 30.1 of the London Court of International Arbitration Rules provides; “unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards in their arbitration…”
iii. Analytical and Problem-Solving Skill
Arbitration practitioners must possess strong analytical and problem-solving skills. They need to evaluate legal issues, assess evidence, and identify viable solutions to resolve disputes effectively. Critical thinking and the ability to analyze information accurately are essential for understanding the complexities of each case and formulating arguments that support equitable outcomes.
- Skills Based on Recent Trends
Considering recent trends, more skills that may not have been considered at the initial rise of arbitration will be considered below:
i. Effective Use of Artificial Intelligence (AI) Tools
AI tools can be used by arbitrators and mediators to boost efficiency, offer deeper insights and provide an enhanced level of precision to their work. Platforms like ChatGPT and Claude can generate human-like text. While not legally foolproof, they allow professionals to craft customized drafts more quickly. It must be emphasized that while these AI tools are powerful, they are not a substitute for the specialized expertise of human arbitrators and mediators. When thoughtfully balanced, generative technologies can amplify their judgment, efficiency, and insights.
ii. Enhancing Sustainable Arbitration Practice
The Greener Arbitration Campaign centrally advocates for sustainable arbitration practice, promotes awareness of the environmental impact of arbitrations and issues best practice guidelines for reducing carbon emissions in this field.
The Green Protocol for Arbitral Proceedings specifically encourages environmentally friendly practices such as minimizing paper use, conducting virtual/remote hearing for the whole or part of the proceedings, avoiding unnecessary travel in international arbitration and using electronic versions of documents, etc. This campaign is considered to have ushered in a new era of environmental consciousness in the practice of international commercial arbitration.[1] Section II (A1) of Green Protocol for Arbitrators provides that unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards in their arbitration.
6.0 Conclusion International arbitration is an evolving field characterized by increasing complexities. Key trends in shaping this future include the integration of technology, the rise of third-party funding, the growing importance of ESG factors, and the need for well-rounded soft skills.
Legal professionals and arbitrators must adapt to these trends and develop diverse skill set to thrive in the evolving landscape of international dispute resolution. . By staying informed about industry developments and honing their expertise in this area, legal professionals can be better prepared to tackle the challenges, and seize the opportunities that the future of international arbitration presents
[1] International Arbitration, https://peacepalacelibrary.nl/research-guide/international-arbitration
[2] Ben Rigby “The explosive growth of international arbitration” Commercial Dispute Resolution, 22 August 2016https://www.cdr-news.com/categories/arbitration-and-adr/6643-the-explosive-growth-of-international-arbitration
[3] International Arbitration Trends, 2024, https://riskandcompliance.freshfields.com/post/102j0m8/international-arbitration-top-trends-in-2024
[4] Jeremy Richmond KC & Williams Mitchell, Long-term LNG agreements ad short-term volatility: Global Arbitration Reviewhttps://globalarbitrationreview.com/article/long-term-lng-agreements-and-short-term-volatility-buyers-beware
[5] Tom Jones, Mourre calls for universal standard of disclosure, Global Arbitration Review (June 2,2023),https://globalarbitrationreview.com/article/mourre-calls-universal-standard-of-disclosure
[1] In recognition of the rise of corruption related issues in the arbitration proceeding, institutions have sought to parties and tribunals. Most recently, December 2023, the ICC announced the publication of the 2023 edition on Combating Corruption, developed under the leadership of the ICC Global Anti-corruption and Corporate Commission. ICC, ICC Rules on Combating Corruption 2023,https://iccwbo.org/news-publications/policies-reports/icc-rules-on-combating-corruption/#:~:text=The%20new%202023%20edition%20of,in%20uncovering%20and%20deterring%20
Green Protocol for Arbitral Proceedings, https://www.greenerarbitrations.com/green-protocols/arbitral-proceedings
[1] Life Science Businesses looking to Arbitration to resolve Disputes, https://www.pinsentmasons.com/out-law/analysis/why-life-sciences-businesses-looking-arbitration-resolve-disputes
[1] International Arbitration Global Trends, https://www.pinsentmasons.com/out-law/analysis/international-arbitration-global-developments-current-trends
[4] https://www.pinsentmasons.com/out-law/analysis/why-life-sciences-businesses-looking-arbitration-resolve-disputes
[1] AI and Arbitration: The Perspective from England and Wales, https://www.lexology.com/library/detail.
[2] International Chamber of Commerce Arbitration Rules
[3] [2017] 1 WLR 2221
[4] International Arbitration Global Trends, https://www.pinsentmasons.com/out-law/analysis/international-arbitration-global-developments-current-trends
[5] Section 61 of the Arbitration and Mediation Act, 2023
[6] Section 91 of the AMA defines third Party funder and third-party funding agreement
[7] Section 62 of the Arbitration and Mediation Act, 2023