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Global Arbitration Round-Up

February 21, 2017

For many institutions, arbitration can be a viable option in terms of dispute resolution. At the moment, there are several developments in key areas of the world that can have far-reaching effects on global arbitration. International arbitration laws are subject to constant amendment, and newer arbitration venues continue to become available in more and more countries. Global companies and investment institutions should be aware of current developments in this area, as they can affect operations and returns. 

International Court of Arbitration Reports Record Numbers for 2016

The International Chamber of Commerce (ICC) has reported record figures for new arbitration cases filed in 2016. In particular, there have been substantial caseload increases in Latin America, South Asia, and East Asia. 2016 statistics highlights include:

  • A record total of 966 new cases administered by the ICC’s International Court of Arbitration in 2016. This involved a total of 3,099 parties from 137 different countries. This represents a 21% increase from 2015’ s total of 801 cases.
  • A 15% increase in arbitration cases for Latin America-based parties. Brazil climbed to third place in party rankings worldwide; Mexico breached the top five for the very first time
  • An increase in 22% party representation in both South and East Asia; 82 parties came from Korea
  • A 50% increase in the number of participating parties in North and Sub-Saharan Africa

Such growth may not be unique to the ICC: major arbitration institutions around the world are reporting increasing numbers of cases year after year.

UAE Penal Code Imposes Potential Criminal Liability for Arbitrators

Under a recent amendment to Article 257 of the United Arab Emirates Penal Code, any arbitrator, expert, or translator who issues biased decisions or opinions in UAE arbitration proceedings may potentially be subject to criminal liability. The amendment is causing concern among lawyers and arbitrators, as consequences can include:

  • A criminal investigation
  • A three- to 15-year jail sentence
  • Possible confiscation of passports
  • Lasting damage to the attorney’s reputation

Prior to the new amendment, the statute only imposed criminal liability upon court-appointed experts or translators who exhibited bias. Now, the losing party has the option of filing a criminal complaint for bias against any arbitrator, expert, or translator, whether court-appointed or selected by the parties.

In addition, Article 257 does not require any evidence of positive intent of wrongdoing by the arbitrator. There are already reports of arbitrators with cases seated in the UAE resigning from tribunals and rejecting appointments in upcoming cases. As such, international companies may expect delays in international arbitration proceedings in the UAE.

Lastly, arbitrators who are considering resigning must consider Article 207(2) of the UAE Federal Code of Civil Procedures. According to this article, an arbitrator who resigns “without a valid reason” may be held liable for compensation to parties to the arbitration. Here, it is unlikely that concerns regarding the new amendment to Article 257 would constitute a “valid reason” for resigning. 

Third-Party Funding in International Arbitration Cases

Third-party funding is the funding of an international arbitration proceeding by an entity that is not directly involved in the dispute. The entity typically receives a share of the damages or settlement sum. The financial risks are undertaken by the funder rather than by the claimant’s attorney. 

The main benefit of third-party funding is that the company avoids spending company resources on an arbitration claim, and can instead focus on other aspects of operations, such as business development. Another benefit is that the third-party funder will usually have a more objective approach to the claim assessment; in comparison, the parties involved may have a less objective claim assessment, resulting in the pursuit of unviable claims.

Third-Party Funding Laws in Singapore and Hong Kong
This style of funding is growing in its application to global arbitration proceedings, and will continue to grow in 2017. For instance, Singapore recently passed a bill which allows businesses involved in international arbitration in Singapore to use funding from third parties to finance their case. Until now, Singapore laws have restricted funding of arbitration proceedings to the parties involved, mostly to avoid potential abuses of the judicial system. 

Initially, third-party funding in Singapore will be restricted to international arbitration proceedings and related court and mediation proceedings. The bill also provides categories of proceedings in which third party funding will be allowed. Additional legislation may be developed to further impose conditions on funders. 

The relaxation of previous laws is intended to enhance Singapore’s competitiveness as an international dispute resolution center. Hong Kong, another major international arbitration center in Asia, also intends to move forward with similar legislation legalizing third-party funding. 

Global Arbitration Progress in India
India has formed a high-level committee to draft a roadmap for making India a global arbitration hub. Goals of the committee, led by Supreme Court Judge B.N. Srikrishna, include:

  • Analyzing the effectiveness of the arbitration mechanism
  • Identifying amendments in laws which will encourage international commercial arbitration
  • Devising an action plan for implementation of laws to ensure speedy arbitrations

Issues such as third-party funding will likely be worked out at a later time by the committee. 

Global arbitration is a highly complex field of law that is constantly evolving. It is important for financial institutions, foreign investors, and global corporations to be able to navigate the existing channels for arbitration around the world. If you have any inquiries or concerns regarding global arbitration issues, contact us at Kessler Topaz. 

Our lawyers have a deep understanding of the unique rules and processes involved in global arbitration. We utilize industry knowledge and experience to work in ways that are most advantageous to our clients. Our efforts have helped achieve landmark arbitration results, such as a $75-million award for Transatlantic Holdings, Inc. and its subsidiaries in a dispute against AIG.