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TMT international dispute resolution survey affirms role of international arbitration

edisclosureThe 2016 International Dispute Resolution Survey, ‘Pre-empting and Resolving Technology, Media and Telecoms Disputes’, indicates a bright future for international arbitration in the resolution of technology, media and telecoms (TMT) disputes.

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The School of International Arbitration, Centre for Commercial Law Studies, Queen Mary University of London (SIA) and Pinsent Masons LLP, a firm recognised internationally for its TMT disputes capability, have published a comprehensive survey report that draws together key statistics and qualitative commentary on pre-empting and resolving TMT disputes.

As Professor Loukas Mistelis, Director of SIA and member of the Lexis®PSL Arbitration Editorial Board, comments in his introduction to the report, the survey is the largest sector-specific empirical study SIA has ever conducted in international arbitration and the first to focus on TMT disputes.

What was the background to the survey report?

A detailed questionnaire released in May 2016 sought the views of a wide range of actors within the international dispute resolution and TMT communities on specific issues relating to the resolution of TMT disputes as well as the use of international arbitration more generally. See: QMUL and Pinsent Masons launch TMT disputes survey, LNB News 19/05/2016 60.

David McIlwaine, partner and chair of the International Arbitration Committee at Pinsent Masons, who also co-ordinated the project on behalf of the firm along with senior associate Stuart Davey, commented to Lexis®PSL:

There is very little information available regarding dispute resolution within the TMT sphere, and particularly how international arbitration is perceived by and used within the sector. Given that the technology, media and telecoms products and services markets operate at an international level, we wanted to gain empirical evidence, on a global scale, to understand attitudes and preferences for how disputes are dealt with when they arise.

QMUL research

The survey is the seventh conducted by SIA, and the publication of the survey results is always a notable event in the arbitration calendar. The sixth survey report, released in October 2015 and produced in collaboration with White & Case LLP, had a broader focus and considered the views of a comprehensive range of stakeholders on improvements and innovations, both past and potential, in international arbitration. For more information, see News Analysis: 2015 International Arbitration Survey published.

Why is the report of interest?

The survey report will be of interest to several groups, including: international arbitration practitioners, TMT disputes lawyers (in-house, private practice lawyers and barristers), as well as TMT suppliers and customers.

As discussed in greater detail below, the survey’s areas of focus provide a unique insight into attitudes towards dispute resolution in the TMT sectors, including the suitability of international arbitration for the resolution of TMT disputes.

David McIlwaine commented:

Within Pinsent Masons, we have seen an increase in the use of international arbitration to resolve TMT disputes. We wanted to understand if our experiences were unique or whether there was an evolving trend within the sector towards this form of dispute resolution. Overall, the survey confirms that international arbitration is a key method of dispute resolution within the sector, although attitudes and preferences vary starkly between suppliers and customers.

It will be interesting to see whether SIA follows up this survey with further studies on the use of international arbitration/dispute resolution in other sectors, including, for example, the energy sector. The timing of SIA’s seventh survey also coincides with the publication of a report on financial institutions and international arbitration by the International Chamber of Commerce (ICC) Commission on Arbitration and ADR’s Task Force on Financial Institutions and International Arbitration—see: ICC publishes report on financial institutions and arbitration, LNB News 09/11/2016 115.

What are the survey’s key findings?

Please note that for the purpose of this article, we have focused on those aspects of the report most relevant to arbitration practitioners.

The suitability of international arbitration (section 4 of the report)

The headline statistic is that 92% of respondents agreed that international arbitration is well suited for TMT disputes, and 82% also predicted a general increase in the use of international arbitration to resolve TMT disputes. These figures are encouraging news for the arbitration community, provided some of the challenges of arbitrating TMT disputes can be addressed (more about which below). Also, in section 2 of the report (in-house policies and preferences), 43% of respondents indicated a preference for arbitration, significantly more than the 15% preferring litigation.

Respondents also indicated why they considered international arbitration suitable. The top three factors were:

  • enforceability of awards (68%—very important)
  • avoiding the alternative of litigating in a foreign jurisdiction (65%—very important)
  • confidentiality (60%—very important)

The top two most popular factors mirror the two most valuable characteristics identified in the 2015 survey—flexibility the third most valuable according to that group of respondents.

Despite this avowed suitability of international arbitration, section 3 of the report (which considers dispute resolution mechanisms in practice) reveals that whereas arbitration is used in 35% of cases not resolved amicably, 44% of cases are litigated. Accordingly, preference, currently, gives way to actual use. As the commentary in the report suggests, there are a number of reasons why this may be the case, including:

  • the more recent growth in popularity of international arbitration, which means that disputes arising under older contracts may not be capable of being resolved by arbitration due to the existence of an alternative express dispute resolution mechanism (such as exclusive or non-exclusive court jurisdiction)
  • the difficulty of including an arbitration clause during contract negotiations due to a pro-litigation bias of suppliers—elsewhere in the survey (section 2), the responses indicated, for both the telecoms and IT sectors, that litigation was more encouraged as a form of dispute resolution than arbitration. As the survey picks up, this is in contrast to the negotiation position of some customers. For example, the UK Crown Commercial Services’ model terms and conditions for major services contracts includes a dispute resolution clause which reserves for the government the right to insist on arbitration under the London Court of International Arbitration (LCIA) arbitration rules (see News Analysis: International arbitration and technology disputes)
  • insufficient attention being paid to the substance of dispute resolution clauses at the procurement stage when terms are being negotiated due to time constraints and parties not wishing to focus on the potential for future disputes (unfortunately, a mindset that many parties later regret)

As for why arbitration may be unsuited to the resolution of TMT disputes, the survey respondents cited the following top three factors: more costly than alternatives (81%) (high costs were also cited as arbitration’s worst feature in the 2015 survey results); better results achievable by alternatives (57%); and, injunctive relief difficult to obtain (57%). In response to the question what would make arbitration more attractive, the top three answers are telling: lower costs (58%); neutral system for accreditation of experts (43%); and, creation of specialized rosters of TMT arbitrators (42%). In respect of the third factor, 87% of respondents thought it likely that there would be increased specialism of TMT arbitrators in the next 10 years, particularly, in our view, as a new generation of arbitrators with greater exposure to technology and associated disputes receive more appointments.

Overall, the results of the survey suggest a significant appetite for the greater use of international arbitration to resolve TMT disputes generally. In order for that appetite to translate into increased actual use of arbitration, it appears, from this survey at least, that arbitrators/institutions (and also parties) need to do more to help lower costs and improve subject matter expertise.

What else does the survey cover?

  • types of disputes encountered and predications for the future (section 1)
  • in-house dispute resolution policies and preferences (section 2)
  • dispute resolution mechanisms in practice (section 3), and
  • choosing ‘the players’, ie counsel, arbitrators and institutions (section 5)

In respect of choosing the players, the key points were summarised as follows:

  • expertise in the arbitral process and technical knowledge of the industry are both important when selecting external counsel and arbitrators
  • geography is a determining factor in selecting an arbitral institution and appointing counsel in the same jurisdiction as the underlying contract’s governing law (note no reference to the seat of the arbitration)
  • the most used institutions for TMT disputes are ICC, WIPO Center (more favoured for IP disputes), LCIA and SIAC

What methodology was adopted?

The research was conducted in two phases:

  • phase 1 (quantitative): an online questionnaire of 55 questions was completed by 343 respondents
  • phase 2 (qualitative): 62 face-to-face or telephone interviews were conducted

As the report’s methodology explains, the information gathered from the interviews was used to supplement the questionnaire data, to contextualise and explain the findings, and to case light on issues raised by the survey.

What was the makeup of the respondent group?

Primary roles:

  • 40% were private practice lawyers
  • 17% were in-house lawyers
  • 10% were arbitrator/counsel

Locality:

  • 22% were from EU and EEA
  • 15% each in respect of Asia, North America and Latin America and the Caribbean
  • 10% were from MENA

Given the survey was launched out of London, it is natural that the survey’s respondent’s would have a European-bias, but it is positive to note almost equal levels of participation from three key TMT geographical locations.

In respect of respondent companies:

  • the majority had a gross annual turnover in excess of $500m
  • 86% had a dedicated legal department
  • whereas 55% had a disputes team or department, 45% did not

The non-negligible percentage of legal teams without disputes expertise is not surprising as many in-house teams simply can’t provide sufficient resource to effectively support complex and/or time-heavy litigation or arbitration, which results frequently in the out-sourcing of this work.

Further reading

Some of the links in the article require a LexisPSL subscription. If you are not a PSL subscriber, click here for a free trial to access if you are not a PSL subscriber.

Brexit implications for the dispute resolution and international trade lawyer

50388749_xlDispute resolution practice faces a mixture of restriction and opportunity in the wake of Brexit, with freedom of movement concerns likely hindering the UK’s need to develop its cadre of international trade lawyers. Laura Rees-Evans of Fietta, a law firm dedicated to public international law and international arbitration, assesses where change will be felt most keenly.

All of our Brexit analysis and guidance can be accessed here. Some guidance requires a subscription to LexisPSL – Click here for a free trial  if you are not a PSL subscriber.

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BLP seeks views on tribunal diversity

Businesswoman typing on laptop at workplace Woman working in home office hand keyboard.Berwin Leighton Paisner LLP (BLP)’s International Arbitration Group has issued its latest survey on arbitration user perceptions on various issues affecting the arbitration process. This year, the survey considers the issue of diversity among appointed arbitrators.

There has been an increased awareness of this issue in recent years, particularly in relation to gender imbalance. However, the diversity debate does not begin and end with gender. Not only are the majority of international arbitrators male, they are also perceived to be predominantly white and from a relatively small number of jurisdictions.

BLP are seeking views on these and other related issues by requesting responses to 16 short questions in a survey. The survey can be found here. All responses will be treated as confidential and a report on the results of the survey will be circulated to all participants.

BLP’s 2015 survey considered the use of arbitral secretaries. Carol Mulcahy discussed the survey’s results in an article for our service—see here.

Source: Press Release: Diversity on arbitral tribunals: your views

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