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Where will the current drive for transparency in international commercial arbitration end?

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Summary: In investment treaty arbitration there is a perceived public interest due to the involvement of states and state entities, so openness is the norm. In this arena, the very fact of the dispute itself and the outcome are confidential. Notwithstanding this, users of commercial arbitration increasingly want more information about certain elements of the arbitral process, citing reasons of predictability and certainty.

What end-users want

Users of commercial arbitration typically want to know more about:

  • The process (including the use of arbitral secretaries).
  • How much it will cost.
  • How long it will take.
  • How decisions will be reached.
  • Their chances of success in applications, particularly in relation to challenges to arbitrator appointments.

Respondents to the Queen Mary (University of London) (QMUL) 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration said that they would welcome increased transparency in institutional decision-making on arbitrator appointments and challenges.  They also considered that arbitral institutions could contribute to the improvement of international arbitration by publishing data on the average length of their cases and time taken by arbitrators to issue awards. In addition, 78% of respondents to BLP’s Survey on the Use of Tribunal Secretaries in International Commercial Arbitration said that there should be complete transparency about how the arbitral secretary spends his or her time.

What has happened

This pressure from parties has seen a number of arbitral institutions implementing measures to increase transparency and certainty (and of course to remain competitive and attract more users) in the past few months.

In November last year, the LCIA released Costs and Duration Data for arbitrations conducted under its auspices. The LCIA cited QMUL’s survey and explained that publication of data regarding average costs of LCIA arbitrations was necessary given that it assesses fees on an hourly basis, so it is not possible for users to rely on cost calculators to provide an estimate, unlike for other institutions operating on an ad valorem basis (such as the Singapore International Arbitration Centre (SIAC) or the International Chamber of Commerce (ICC)).

The ICC has announced that it will publish the names of arbitrators sitting in ICC arbitrations for cases commencing on 1 January 2016 onwards. This will help parties to assess how busy a particular arbitrator is and likely their availability. Although no case details will be published, parties can-opt out of this publication.

In the same announcement, the ICC set out the potential cost consequences for arbitrators for unjustified delays in submitting draft awards. In cases with a three-person tribunal, the ICC expects tribunals to submit draft awards within three months of the last substantive hearing or the filing of the last written submissions; or within two months if there is a sole arbitrator. If these timescales are not met, the ICC may exercise its discretion to reduce the arbitrators’ fees by between 5% and 20% (or more) depending on the length of the delay, unless the delay was justifiable.

Of particular interest is the ICC’s announcement that it will issue reasons to the parties (as of October 2015) for certain procedural decisions, including challenges to arbitrators (echoing the responses to the QMUL survey), prima facie decisions on jurisdiction and decisions on the consolidation of proceedings. The parties must agree and submit a request for reasons in advance of the decision being made. Previously, the ICC was criticised for not providing reasons, particularly in relation to challenges to arbitrators. The rationale behind withholding reasons was to avoid debate between the parties and the ICC Secretariat. However, providing reasons should increase user confidence in the ICC Court’s decision-making process.

Other institutions have been providing reasons for certain decisions for a while.

The Hong Kong International Arbitration Centre (HKIAC) is not obliged to give reasoned decisions on arbitrator challenges, but can do so in its sole discretion and in practice it often does.
Article 29.1 of the LCIA Rules 2014 requires the LCIA Court to provide reasoned decisions on challenges to arbitrators. However, the LCIA has in fact been providing reasons to the parties for many years, despite not being obliged to. In addition, in 2010 the LCIA published a digest of its decisions on arbitrator challenges between 2006 and 2010 in an anonymised format. The digest is a helpful tool for practitioners and users alike – it helps parties to assess whether particular circumstances may result in the disqualification of an arbitrator. It also helps a party to decide whether or not it is worth challenging an opponent’s nominated arbitrator. It is not known whether the LCIA will publish another digest of more recent decisions, but it would be welcomed if it did.

The ICC publishes extracts from procedural decisions made by tribunals, on topics such as security for costs and evidence. The ICC also publishes anonymised extracts from arbitral awards, providing examples of arbitrator decisions on a variety of subject areas, such as multi-tier dispute resolution and corruption.

The future: is there a tension between transparency and privacy?

Confidentiality naturally remains a key feature for parties choosing to arbitrate, but it is not the sole reason and parties do expect a degree of transparency so that they have confidence in the process and clarity as to how aspects of their cases are likely to be managed and decided. The question is: to what degree? At what point will a tipping point be reached at which users will say the process has become too open? It seems that we are not there quite yet.

Providing reasoned decisions to the parties (and in an anonymised form to the public) affords greater transparency of the arbitral process and the basis on which decisions are reached, which promotes users’ confidence and enhances certainty as to the likely outcome of an arbitrator challenge.

Furthermore, there is a distinction to be made between transparency as to process, the management of the proceedings and how institutions and arbitrators make procedural decisions on the one hand, and decisions on the merits on the other. There certainly appears to be appetite and scope for greater transparency on the former, however it is unlikely that this appetite for transparency will extend to the publication of decisions on the merits.

This blog post first appeared on Practical Law Arbitration Blog on 1 March 2016.

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