1.0. INTRODUCTION
It is often said that arbitration is quicker and cheaper than litigation and most textbooks list speed and cost as part of the advantages of Arbitration. However, arbitrations may in certain cases actually be more protracted and more expensive than litigation. This paper seeks to dispel some myths surrounding arbitration and proffer solutions to some of the problems presently witnessed in international arbitration.
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2.0. CONTEMPORARY CHALLENGES FACING INTERNATIONAL ARBITRATION
Many writers and jurists are unanimous on the fact that the problems associated with arbitration derive from the pool of international arbitrators, known as the international arbitration club, or, more pointedly, as the international arbitration mafia.
The small number of top arbitrators being appointed to tribunals meant that they were not available to hear disputes as quickly as the parties would like. The end users of arbitration increasingly began to express unhappiness with the arbitration process, particularly in relation to the level of costs. There has been an increase in complaint as regards delay in international arbitration. At the beginning, the complaint is about the time that it may take to constitute an arbitral tribunal, so that the arbitral process can start to move forward. At the end of the arbitration, the complaint is about the time that some arbitral tribunals take to make their award, with months – and sometimes a year or more – passing between the submission of the post-hearing briefs and the delivery of the long-awaited award.
The above thought was echoed by Ciaran Fahy in an article titled: “Dispute Resolution in the Irish Construction Industry: Future Trends” thus:
“In my view arbitration as a process in Ireland, and indeed in other countries, is in decline and the significant growth of other dispute resolution methods is a testament to its shortcomings. In simple terms arbitration is perceived, in my view rightly, as too slow and consequently too expensive. It is by no means uncommon to find an arbitration on a one-year construction job takes up to two years or so to find the cost associated with an arbitration are a multiple of the award and even sometimes the amounts claimed. To me, that is simply unacceptable.
She went further to state the reasons for the decline in the growth of arbitration and a way out, thus:
However, I believe the situation I have described above derives mainly from a lack of expertise and also a lack of creativity on the part of those involved rather than an inherent problem with the process itself. I have frequently heard it said that the pool of arbitrators in Ireland is very limited and that apart from a few individuals the quality is at best uneven. In my view that is true but it is not the full truth of the situation since I believe the lack of expertise extends across the full range of people involved in arbitration and in particular it seems to me to apply to lawyers where, with a few notable exceptions, the level of knowledge or understanding is limited.
In order to rectify this I believe the two approaches are required. First, the professional bodies involved in this area should recognize the need to provide ongoing training at an increasingly high level not only to those who are or who wish to be, arbitrators but also to those who themselves engaged in arbitration work.
3.0 WAY FORWARD
I suggest two solutions as antidotes to the problems associated with cost and delay in international arbitration proceedings – mentorship and transparency. The two concepts are interwoven as will be seen shortly.
MENTORSHIP
Joanna Steele in her paper titled “The LMAA in the Twenty-First Century: Securing the Future for London Maritime Arbitration” said:
“Is LMAA arbitration future proofed? First of all, most arbitrators practicing now were experienced and respected arbitrators when I started out in shipping litigation over 20 years ago. Do we have the next generation of arbitrators lined up for the future and can London still offer the same range of differing qualifications? I do not know the answer to those questions but I believe that the LMAA could try to play a positive role in encouraging the development of maritime arbitrators. This may need some thought about the qualifications required for full membership and some thought about whether the association might play greater role in recruiting. We have all become accustomed to the presence of assistant mediators at mediations for training purposes; if assistant/pupil arbitrators were similarly visible, I think that would send out a positive message about renewal.”
In order to forestall a situation where only few qualified arbitrators are appointed as arbitrators in international arbitrations thereby leading to delay and increased costs, arbitral institutions should put in place structures whereby young arbitrators can work closely with experienced arbitrators to tap from their wealth of experience.
The young arbitrator through the practical mentorship sessions will learn how to conduct arbitral proceedings, how to draft orders and ultimately how to draft valid and compelling awards. For the purpose of emphasis, the mentorship programme should be regulated and monitored by the concerned arbitral institution as is presently done at the International Council for Commercial Arbitration (ICCA). Once a young arbitrator has met some set criteria, he or she may then be appointed as an arbitrator in Small Claims Arbitration from where he or she can be given more challenging roles going forward.
TRANSPARENCY
At one extreme, arbitral scholars believe that it is an inherent element of arbitration that there is a general duty of confidentiality. It might be seen as an important aspiration of commercial parties to deal with their disputes in a way which does not adversely affect their status in the market place through bad publicity. Many disputes also deal with confidential aspects of technology and business know-how. At the other extreme, some argue that an undue concern for confidentiality comes at the expense of transparency and the ability to promote consistency through adoption of similar logic to other arbitral tribunals.
In Commonwealth of Australia v. Cockatoo Dockyard Pty Ltd , the Australian court concluded that whilst there was a ‘high level of confidentiality’ in arbitral proceedings, this should not prevent disclosure where the public interest was concerned.
Apart from public interest cases, there is a need to relax the rule of confidentiality in some cases to ensure the continuous growth of arbitration and to ensure that we raise more quality arbitrators. David Rivkin argued that “growth in caseloads has strained international arbitration institutions, parties, counsel and the core of international arbitrators themselves”, leading to serious delays and unnecessary costs :
The complexity of cases today and the size of the claims have led to more extenuated proceedings, mountainous written submissions and longer hearings … The broad public policy issues raised in cases involving governments cause arbitrators to allow longer proceedings. Arbitrators who are too busy cannot schedule timely hearings and take a long time to draft the award. All of these factors today combine to create a crisis that we must find ways to resolve if international arbitration is going to continue to be the favoured means of resolving international disputes.
The dearth of large pool of qualified arbitrators is responsible for the scenario painted above. The argument for making international commercial arbitration more transparent appears compelling in that increase in knowledge and understanding of the arbitral process is likely guaranteed, thereby increasing the legitimacy of the use of arbitration more generally. In particular, increasing transparency in arbitration has quite a number of benefits.
Publication of reasoned awards would bring about the development of consistency in the law of arbitration. While arbitral awards do not have precedential effect, they “do have persuasive value and ‘can coalesce into collective arbitral wisdom’ that may be drawn upon by future parties and arbitrators.” Increasingly transparent arbitration may provide an opportunity for practitioners and academics to understand, analyze, critique and improve the efficacy of the dispute resolution system at issue.
As Professor Buys notes, “There are, of course, costs to making arbitration more transparent. . . . It is true that if arbitration is made more transparent, parties will not be able to so easily hide damaging allegations.” This potentially negative consequence should be weighed against the greater efficiency and democracy achieved” by allowing the public to observe and hold the parties accountable for their actions, especially where large publicly held corporations or government parties are involved.”
There are legitimate fears that transparency could lead to exposure of business confidences or trade secrets, it has been suggested that parties could designate such information in a detailed confidentiality agreement “at the very outset of arbitration and any references to that information could be redacted from the final award prior to publication. . . . [Therefore], it would seem that such sensitive information could still be fairly easily protected without making the entire proceeding and/or result confidential.”
In sum, a more nuanced approach to confidentiality in arbitration and allowing a greater degree of transparency where appropriate could be achieved through a careful weighing of the costs of confidentiality versus greater transparency under the facts of the particular situation. In most cases, it is more likely than not that such a balancing will at least result in a decision to publish the [“sanitized” arbitral] awards to the benefit of the international arbitration community as a whole.
4.0 CONCLUSION
The need for mentorship and transparency in international arbitration cannot be dispensed with, if we are to bring to an end or reduce to the barest minimum delay and high cost of international arbitration. There is a need to provide platforms for young and inexperienced arbitrators to acquire practical hands on experience from the more experienced members of the arbitration community in order to ensure a steady growth in the pool of qualified arbitrators.
I am of the view that transparency should be the rule and confidentiality the exception in arbitral proceedings. Arbitral institutions should consider amending their rules to create a presumption that awards will be published unless both parties object in advance. Finally, institutionalizing mentorship and allowing transparency in the arbitral process, in deserving cases, will expand the frontiers of arbitration and ensure that users have confidence in arbitration as a fast, affordable and effective means of dispute resolution.
Ahmed Adetola-Kazeem, MCIArb(UK)
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