International arbitration: global developments and current trends

Pinsent Masons’ international arbitration experts have created a series of articles containing our insights into global developments in arbitration across key geographies over the past 12 months, as well as our predictions and observations in relation to a series of specialist areas in which we expect to see developments in the year ahead.

Geographies

Middle East

The Middle East region continues to attract global businesses as development plans seek to accelerate growth through diversification of economies which have been built around oil and gas extraction and export. Saudia Arabia in particular plans to invest considerably in infrastructure, energy, sport, technology and telecoms projects which are complex and involve ambitious programmes.

Several important arbitration-related changes have recently been introduced in the region including changes to the UAE Arbitration law; the opening of the Abu Dhabi International Arbitration Centre (arbitrateAD); and the publication by Saudi Arabia of new arbitration rules by the Saudi Center for Commercial Arbitration (SCCA).

Africa

Much like the Middle East, there has been continued growth of international trade and investment across African countries. The past year has seen adoption of international arbitration trends and standards by several African countries and arbitral institutions including, for example, the adoption of the UNCITRAL Model Law 2006 by Nigeria. Significant recent developments include arbitration centres established in Johannesburg, Nairobi and Lagos, as well as the ongoing attempt by the Arbitration Foundation of Southern Africa (AFRA) to create a South African Development Community (SADC).

Third party funding continues to be an area of interest in Africa, and some arbitral institutions such as the Cairo Regional Centre for International Commercial Arbitration have adjusted their rules to allow for and encourage it. Nigeria has introduced legislation to permit it.

Singapore

The Singapore International Arbitration Centre (SIAC) has gone through several changes and is in the process of finalising the seventh edition of its Rules. The Rules are particularly popular among Indian parties. One notable amendment introduces a streamlined procedure for low value disputes, which enables awards to be rendered within three months based on a document-only process.

Singapore more generally has seen several recent arbitration-related cases which cover issues including deliberate secrecy and the law determining arbitrability.

India

Use of international arbitration as a dispute resolution mechanism, seated both in and outside of the country, is soaring in India, driven by growing recognition of the form in commercial contracts and the increasing sophistication of business users of arbitration, especially for cross-border activities. Demand has spurred on the institutionalisation of Indian arbitral centres: the International Arbitration and Mediation Centre (IAMC) was established in Hyderabad in 2019, while the India International Maritime Arbitration Centre will open in Mumbai this year.

At the same time, several landmark recent Supreme Court judgments – touching on third party funding, ‘stamping’ and the ‘group of companies’ doctrine – will boost India’s arbitration ecosystem even further.

China

In China, the start of 2024 brought the introduction of new rules for both the China International Economic and Trade Arbitration Commission (CIETAC) and the Shanghai International Arbitration Centre (SHIAC). A Beijing court has also legitimised the use of third party funding in arbitration, and set out guidance on challenges to arbitral awards relating to such arrangements.

In the Hong Kong Special Administrative Region (SAR), the Hong Kong International Arbitration Centre (HKIAC) continues to build its user portfolio for cross-border disputes and has recently taken measures to promote collaboration through its joint administration mechanism with the Tashkent International Arbitration Centre (TIAC). The TIAC-HKIAC Rules enable the two centres to jointly administer cases, combining HKIAC’s experience with TIAC’s cost efficient service and regional expertise.

UK

A major development in the UK is the Arbitration Bill, which progressed to committee stage following the second reading held on 17 January. The Bill implements changes to the existing 1996 Arbitration Act recommended by the Law Commission of England and Wales. It addresses the law governing arbitration agreements, strengthens the court’s powers and facilitates faster dispute resolution.

France

Recent rulings in the French courts have demonstrated the scrutiny arbitrators can come under over perceived conflicts of interest; the challenges successful parties in arbitration can face in enforcing arbitral awards that give rise to issues of international public policy; and how French arbitration law can still be considered the governing law of an arbitration agreement even when parties have selected another country’s law to govern their contract.

Spain

The Madrid International Arbitration Centre (CIAM) has introduced new rules which came into effect on 1 January. They introduce changes which streamline arbitration procedures, including a highly expedited procedure which enables an award to be rendered in three months.

Energy-related investor-state disputes continue to dominate the arbitration market in Spain, and Spain has recently initiated the process of withdrawing from the Energy Charter Treaty (ECT) which protects investors in energy projects. The consequences of the ECT for Spain have been significant, including an Australian court holding in April 2023 that Spain had waived its foreign state immunity in Australia by ratifying the ICSID Convention. English courts subsequently recognised the same.

Germany

Following the German Ministry of Justice’s release of its consultation paper in April 2023 identifying areas which will be considered in the Bill which reforms Germany arbitration law, the draft bill was published in February. The Bill includes topics such as emergency arbitrators; dissenting opinions; and the formation of joint arbitration senates and the Higher Regional Court across federal state borders.

The German Arbitration Institute (DIS) has pushed ahead with a number of initiatives that have been proposed for reform. As part of the institution’s own digital transformation, it rolled out its ‘DIS eFile’ online platform from September 2023.

The German courts have also recently released a series of important cases, including one by the Federal Court of Justice in March 2023 which confirmed that annulment proceedings in the state of origin of the arbitral award have no binding effect on the declaration of enforceability proceedings in Germany.

Anticipated arbitration developments

Increase in life sciences arbitration

Recent data from major arbitral institutions suggests that the proportion of disputes in the life sciences sector being resolved in arbitration, rather than through the courts, is rising.

The trend appears to reflect the innovative and dynamic nature of the industry, as well as the advantages that arbitration can provide life sciences companies in dispute – including confidentiality, adaptability, commercial certainty and cross-border enforcement capabilities.

Mass arbitration

Against the backdrop of a global rise in class action-style claims being raised by groups of affected individuals, businesses may be keen to explore whether arbitration, instead of litigation, offers a viable way of dealing with some of these large-scale disputes.

The concept of mass arbitration is well-established in the US, where ‘class action waivers’ requiring this type of dispute to be resolved through arbitration are now beginning to be used by some businesses – and the American Arbitration Association (AAA) has issued procedural rules governing the conduct of these. Further institutions could follow suit as mass actions risk outside the US continues to grow.

Climate change and investment treaty arbitration

Avoiding and mitigating climate change is the biggest challenge of our times, and one that requires investment – including foreign investment – to address. States genuinely motivated to encourage clean energy transition and climate change mitigation should arguably support investment protection, including through the use of bilateral and multilateral investment treaties (BITs and MITs) to provide foreign investors with the security necessary to encourage their investment.

Perhaps the best-known MIT, the Energy Charter Treaty (ECT), is at a crossroads – the UK and some EU member states have decided to withdraw from the treaty, while others continue to support its modernisation. However, regardless of the final outcome, climate change arbitration is expected to increase, and counterclaims could increasingly be used by states as an opportunity to raise climate change-related claims in investor-state arbitrations.

Arbitration involving crypto assets

Arbitration involving crypto assets is also on the increase, as many crypto businesses include arbitration agreements in their contracts.

However, parties involved in these types of cases can expect to encounter various challenges. While the topics in dispute – fraud and mis-selling claims, breaches of contract and supply of services agreements – are not novel, new legal issues are likely to be considered and tested.

Third party funding

The use of third party funding (TPF) to pursue arbitral claims has become more widespread in the last five years while monetisation of awards – where a finance provider advances capital to the award creditor in return for a portion or assignment of the award – is also a growing phenomenon.

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 EU, Nigeria and India illustrate the varied stages of market development, and the unique challenges parties and funders may face in different jurisdictions.

Post-M&A disputes

Disputes post-mergers and acquisitions (M&A) continue to be on the rise driven by unpredictable market conditions, geopolitical instability and the lingering impacts of the Covid-19 pandemic.

These disputes are increasingly being referred to arbitration, as recent statistics published by several major arbitral institutions show. Depending on the technicalities of the transaction and the remedies sought, arbitration is often the most appropriate forum for resolution of these kinds of disputes.

Geopolitical impact on energy and infrastructure disputes

Finally, there is no denying the impact of unprecedented geopolitical factors – war, pandemic, oil price volatility, climate risk and spikes in inflation – on global markets. Market turbulence has a knock-on impact on many aspects of infrastructure and energy projects, as well as the global mining and commodities markets, with an increase in disputes likely to follow.