We are delighted to share the seventh edition of our annual top trends analysis: International Arbitration in 2022: top trends
In this year’s report, we explore the following key themes that our global arbitration specialists predict will shape the international arbitration landscape for our clients and the arbitration community in the year ahead.
1. The rising significance of ESG and the role of international arbitration. Environmental, social and governance (ESG) issues continue to dominate legal, political and business agendas and companies are having to re-think the way they do business. Arbitration is well-suited to resolve ESG-related disputes and we expect there to be an increase in both contractual and investor-state disputes involving ESG issues as companies strive to implement and adapt to meet net zero and energy transition goals.
2. How COVID-19 has and will continue to shape the arbitration landscape. Despite widespread vaccination programmes, the pandemic and resulting economic disruption continue to impact businesses across the globe. Substantively, the pandemic continues to give rise to new disputes, ranging from the consequences of business interruption across a wide range of sectors to the impact of COVID-19-related measures implemented by States on investors. Procedurally, virtual hearings have continued to flourish during the pandemic and are expected to remain a more permanent fixture of the arbitration landscape in 2022 and beyond.
3. Third-party funding: easing into the mainstream. Third-party funding is now a regular feature of international arbitration. We predict usage will increase in the wake of the pandemic with businesses looking to recoup losses while simultaneously freeing up capital, taking cost liability off their balance sheets and managing risk. While arbitral rules differ on mandatory disclosure, the position with respect to security for costs and the impact of funding on awards for costs have received welcome clarification in recent years.
4. Investment protection within the EU. 2021 saw further decisions from the ECJ seeking to prevent intra-EU investment arbitration following the 2018 decision in Achmea. While ICSID arbitration should remain unaffected by these developments, there are now significant hurdles for investors bringing non-ICSID intra-EU arbitrations seated within the EU. Looking ahead, we await the outcome of other reform processes that may clarify alternative options for investors seeking protection, including the adoption of the intra-EU Investment Protection and Facilitation Framework and the ECT modernisation process.
5. Emerging standards for the conduct of international arbitration. The past few years have seen a marked increase in initiatives and cross-border protocols seeking to regulate the procedure and conduct of various aspects of international arbitration, notably ICCA’s Guidelines on Standards of Practice and the Code of Conduct for Adjudicators in International Investment Disputes both published in 2021 aiming to codify professional standards and ethical rules for the arbitration community. Continued efforts to promote different forms of diversity and greener arbitration practices have also multiplied over recent years and are helping to have a positive impact on the practice of arbitration.
6. Drives towards greater efficiency. Making international arbitration cheaper and faster for its users has been a key goal for years and continues to drive recent and ongoing reforms to arbitral procedure. Evidence suggests that procedural tools such as expedited procedures and summary dismissal have improved efficiency in commercial arbitration procedure in recent years. It is hoped that the imminent reforms anticipated for investor-State arbitration, including under ICSID’s revised rules due in 2022, will be similarly beneficial in the investment arbitration context, although it remains to be seen whether such procedural tools will be utilised given the sensitivity involved in resolving investor-State disputes.
7. The future of arbitration in the tech space. Tech companies have largely been traditionalists in the disputes space. That is changing. Tech companies are becoming more aware of investment treaty protection and are also turning to contractual arbitration for new types of technology disputes, including those involving cryptocurrency, blockchain, and artificial intelligence.
8. Financial Institutions and Arbitration. Financial institutions have traditionally favoured court litigation as a means of resolving their contractual disputes. However, there are situations in which financial institutions may want to consider opting for arbitration for certain types of deals, especially in light of recent developments in arbitral procedure designed to make arbitration more attractive to the banking community. In addition, financial institutions are increasingly alive to the protections available under investment treaties in the event of government action that adversely affects their investments.
9. Construction arbitration in the face of energy transition and climate change. The huge expansion of planned renewable and low carbon projects is likely to lead to a rise in novel and ultimately high-stakes disputes being taken to arbitration as these projects progress from planning through to construction and operation, with disputes arising over new technology and a lack of developed industry standards and standard forms. The allocation of the risk from extreme weather events caused by climate change is also expected to be tested in construction-related arbitrations with increased frequency in 2022 and beyond as these events become more commonplace and the parameters of foreseeability in such contexts shift.
10. Consolidating Arbitration Centres in the Middle East. Our final trend focuses on arbitration in the Middle East following the Dubai Decree 34 of 2021, which elevated the Dubai International Arbitration Centre (DIAC) to be the only major arbitral centre in Dubai, abolishing other institutions including the DIFC-LCIA. This has created some temporary uncertainty for arbitration in the region, including in relation to pending cases before the abolished institutions and arbitration clauses providing for arbitration to be administered by such institutions.
You can read more about each of these trends in our full report: International Arbitration in 2022: top trends.
Looking ahead helps our clients to plan for the future and think strategically about where the biggest risks and opportunities lie. We hope you find our analysis useful. Please reach out to me or any of the authors of the trends to discuss how any of these issues might affect you and your business.