REUTERS | Yuriko Nakao

International arbitration: East or West of Java?

Regular users of international arbitration know that choice of seat is important, but what factors influence parties for or against a particular venue? Are certain venues considered better or worse than others and are there any emerging trends for regional choices? Earlier this year, Berwin Leighton Paisner’s fourth annual arbitration survey asked arbitration users these questions.

Here’s what we found

Traditional seats of arbitration were looked on favourably. On a scale of 1 to 5 ranging from “very bad” to “very good”, 70% of respondents rated London, Paris, Singapore, Stockholm, Vienna and Zurich 4 out of 5.

However, perceptions may be about to change. 60% of respondents felt that arbitration venues in South East Asia would grow in popularity. A large number of respondents felt the same about South America (52%), Eastern Europe (46%) and the Middle East (47%).

Singapore scored strongly across a range of factors. 42% of respondents said that they were more likely to consider Singapore as a seat of arbitration now than they had been five years ago.

Reasons for respondents’ choice of a seat included obvious factors relating to rights of appeal in the local courts. 77% of respondents said that they would be less likely to choose a seat if the local law contained a mandatory right of appeal. Yes these were not the only factors. 74% of respondents considered access to a pool of good and experienced arbitrators an important factor. 37% felt that the presence of good local lawyers was relevant to choice. Ease of travel to the venue, the standard of arbitration facilities, and the quality of hotel and leisure facilities were not ranked highly as determining factors.

We were surprised by the fact that 75% of respondents felt that a personal connection with the city under consideration was important. The percentage of lawyers from Eastern Europe and North America who took this view was higher than the overall average (85% and 89% respectively). Only 2% of respondents felt that it was of no importance.

Regardless of seat, experienced international arbitrators have no difficulty working under any of the popular arbitration rules, or applying whatever governing law the parties select. Despite this, there was a strong correlation between the choice of seat and selected arbitration rules or governing law. Nearly half of all respondents indicated a tendency towards selection of a seat in the jurisdiction where the chosen arbitral institution is based, or whose law governs the parties’ contract.

A surprisingly large number of respondents (51%) said that they had regretted a choice of seat. One reason identified was the involvement of the local court, but views on this issue were mixed. While 28% of respondents said that there had been too much local court intervention, 20% of respondents felt that the local court had not provided enough support.

Where does this leave us?

The centre of gravity for high value international arbitration may be moving away from Western Europe. Traditional centres for arbitration should not become complacent. Singapore is developing as a “go to” centre for international arbitration, as is the South East Asia region generally. In a market where construction, engineering and infrastructure growth is more buoyant outside Central Europe, the gravitational pull towards these emerging centres may become even stronger. Where one or more of the parties to the dispute is from this region the personal connection factor may also play an important part. Arbitral institutions and arbitrators working in traditional centres will need to focus on making every experience a positive one.

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