Global Survey Reveals Corporate Choices in International Arbitration

This week sees the results of a major survey on international arbitration by the School of International Arbitration at Queen Mary, University of London (QMUL), sponsored by global law firm White & Case LLP.

The survey, entitled "Choices in International Arbitration," considers the key factors that influence corporate choices about international arbitration: how decisions are made about arbitration, who influences these decisions and what considerations are uppermost in the minds of corporate counsel when they negotiate arbitration clauses.The main findings of the 2010 survey are:

• Choice of law governing the substance of the dispute, the seat of arbitration and arbitration institution:40% of respondents use English law most frequently, followed by 17% who use New York law. Choice of seat is mostly influenced by 'formal legal infrastructure,' the law governing the contract and convenience. London is the most preferred seat of arbitration (30%), followed by Geneva (9%), Paris, Tokyo and Singapore (each 7%) and New York (6%). Respondents have the most negative perception of Moscow and Mainland China as seats of arbitration. The International Chamber of Commerce (ICC) International Court of Arbitration is the most preferred and widely used arbitration institution (50%), although there was a perception amongst a majority of interviewees that ICC arbitration is too expensive and that arbitration institutions in general are costly. Respondents have the most negative perception of the Cairo Regional Centre for International Commercial Arbitration, Dubai International Arbitration Centre and China International Economic and Trade Arbitration Commission.
• Policies about arbitration: 68% of corporations have a dispute resolution policy. Whether or not they have a policy, corporations generally take a reasonably flexible approach to negotiating arbitration clauses. They have strong preferences regarding confidentiality and language and reasonably strong preferences regarding governing law and seat.
• Selecting arbitrators: 50% of respondents have been disappointed with arbitrator performance. The top scoring reasons for this were 'a bad decision or outcome' (scoring 20% based on a weighted percentage), followed by excessive flexibility or failure to control the process (scoring 12%). Next was arbitrator caused delays (score of 11%), followed by poor reasoning in the award and lack of arbitrator knowledge and expertise in the subject matter of the dispute (both scored 9%). Arbitrator tardiness in rendering the award scored 8%. Lack of independence, bias and awarding oneself excessive fees were also other concerns expressed by respondents.
• Confidentiality: 50% of respondents erroneously believe that arbitration is confidential even where there is no specific clause to that effect in the arbitration rules adopted or the arbitration agreement, and a further 12% did not know whether arbitration is confidential in these circumstances.
• Time and delay: Disclosure of documents, written submissions, constitution of the tribunal and hearings are the main stages of the arbitral process that continue to suffer from delay.

"This year's research adds to our 2006 and 2008 studies and confirms that global corporations are becoming increasingly sophisticated in their understanding and use of arbitration," commented Professor Loukas Mistelis, Director of the School of International Arbitration at QMUL. "It shows that corporations exercise strong preferences regarding the law that governs disputes and London comes out as a clear winner as the preferred seat of arbitration, which is consistent with our last two surveys. The questionnaire responses and the interviews we conducted also indicated that Singapore and the Singapore International Arbitration Centre emerged as increasingly important regional options in Asia, a significant finding for companies operating in the region," he continued.

This year's survey has a significantly larger, and a more geographically diverse sample, than the previous two surveys with an unprecedented 67 in-depth interviews and 136 questionnaire responses.

"The 2010 survey provides significant insight, unavailable until now, into the choices that corporate counsel make in relation to the use of international arbitration. Choice of law is shown to be a determinant of choice of dispute resolution mechanism, including place of arbitration and arbitral institution. This may surprise some in our field and has an impact on predicting future trends in international arbitration," commented Paul Friedland, head of White & Case's Global International Arbitration Practice.