In recent years, there has been a rapid increase in the emergence of regional arbitration centers around the globe, and this may in some ways compete with the major arbitration centers such as the LCIA and the ICC among others.
This development shows no signs of stopping anytime soon as more regional centers are constantly being founded.
With the rapid pace of globalization, this development does not come as a surprise. Historic dominance by only a few top arbitration centers gets in the way of meeting the needs of the ever-increasing market for international arbitration.
This article aims to highlight some of the benefits that the regionalization of arbitration centers brings to the arbitration community as well as its benefits for these regions.
Benefits of the Regionalization of Arbitration Centers
Some of the benefits of the regionalization of arbitral centers include:
An efficient means for the resolution of disputes
With an increase in the establishment of global markets characterized by cross border partnerships and collaborations, the need for an effective and efficient method for resolving disputes have similarly increased.
But, it is ironic that countries or regions which generate the bulk of these ensuing disputes participate on a low scale in the arbitral resolution of these disputes. As key players and stakeholders in these regions realize the importance of participating in the resolution of disputes that either concerns them or their region, there is a corresponding need to reduce or stop the outsourcing of cases to other regions to be resolved. This achieved can serve to heighten investors’ confidence in the region and prevent delocalization of disputes.
There are also advantages in terms of cost, associated with this development. One of which is a reduction in the cost of transporting witnesses and documents to the venue of the arbitration which may trump the value of the issue being disputed.
Having a regional arbitration center in a region serves to provide the needed resources and infrastructure for an effective arbitration process, and also accrues benefits such as accreditation, training and capacity building for that region.
They also provide an avenue for local practitioners who would have taken their services elsewhere to bring their skills to bear for the benefit of the local region. This, itself will help raise awareness of international arbitration in the zone and promotes its use at both local and state levels.
Availability of region-specific and tailored arbitration
Regionalization of arbitration centers can provide an opportunity for regional practitioners to offer services based on that particular jurisdiction in which they are based, as well as areas in which they specialize. This benefit can increase the bargaining power of local parties, some of who follow these regional institutions. Also, some states and state-owned entities would only opt for relations with these institutions and no other.
The success of these regional institutions in terms of establishment and renown as compared to the already established top arbitration institutions varies.
Regional institutions such as the HKIAC, and the SIAC, have done relatively well in this light. But this should not be used as a yardstick for all others, because on the whole, only a few other regional arbitration centers in the Middle East as well as in Africa has achieved this same level of success.
What then determines the level of success of these institutions?
One major factor is the openness of that particular jurisdiction to the idea of arbitration. For regional arbitration centers to be successful, it needs the government’s support, that of the arbitration community and as well as the support of the judiciary.
On the other hand, the specialization and expertise of the arbitration community in the region play an important role in this. But, expertise is born of experience, and this experience can only be gotten when disputing parties together with their legal counsel, decide to make use of local institutions.
There have been concerns that the rate at which these regional arbitration centers are being used do not tally with the rate at which new ones are springing up.
Hence, this could bring a halt to arbitration activities in the regions, as experience and expertise would not be able to be developed which in turn is not good for the business of arbitration.
The regionalization of arbitration centers is steadily rising. Also, the number of cases being handled by these institutions are constantly increasing.
Take for example; the HKIAC had their caseload for arbitration cases increased by more than 30% between the years 2013 and 2014. Similarly, the SIAC has had its number of new cases multiplied three times over in the last several years. The same thing holds for other rising regional arbitration centers one of which is the KIAC, which has had 28 cases handled within 3 years of it being commissioned.
But there are exceptions to this development. One of which is the closure of the LCIA in India.
With an increase in the regionalization of arbitration centers, there is optimism on what the future holds. But still, it is not known with absolute certainty.
Competition with key players in the industry
Prominent players in the international arbitration community such as the LCIA would still assert their dominance when it comes to the establishment of international arbitration centers. They would still be preferred over others due to their reputation and long-standing experience.
Regions like Africa may experience greater competition with these top institutions. But in areas like Asia, they might be given a run for their money as the HKIAC and the SIAC are recording new highs in terms of new cases being handled. But notwithstanding, the key players are doing well themselves, and are not at all affected.
Competition is good, so goes the saying, therefore, the presence of competition or not, regionalization of arbitration centers is a development that has come to stay.
The benefits of the regionalization of arbitration centers remain that of an efficient and cost-effective arbitration procedure tailored to solve region-specific disputes, which is in contrast with the major international arbitration centers.
This, however, does not seek to negate the roles that these top arbitral institutions play. With globalization on the rise and the correlating increase in cross-border disputes (due to its associate trades), opportunities abound for all.
Infect affiliations between these top institutions and the regional arbitration centers such as the ICC-Ghana or LCIA-MIAC proves highly beneficial to both parties.
Caution should be exhibited, however, in ensuring that the market is not over saturated with the influx of new sets of regional arbitration centers.
However, the regionalization of arbitration centers is a concept that has come to stay in the world of arbitrations regardless of the challenges or benefits.
Regionalization of international arbitration centers is a concept that holds several benefits for the regions as well as the arbitration community as a whole.
This article sought out to highlight these benefits as well as point out some challenges faced in the regionalization of arbitration centers and proffer some solutions. Therefore we can see why this concept is important and why it has come to stay.
Rattsakuten offers a range of services that assists region particularly to Europe and Asia in the resolution of disputes. Need our legal expertise in any such cases needing arbitration? Do not hesitate to contact us right away for an initial consultation or enquiry.
Rattsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC and several other Arbitration tribunals.