International and domestic arbitration predictions

2018 Litigation Forecast

International arbitration has become a popular mechanism for resolving disputes. The benefits of confidentiality, flexibility of procedure, choice of arbitrators and ease of enforceability have proved attractive to commercial parties, particularly in cross-border transactions. This is relevant for New Zealand businesses as they continue to perform in the global economy.

We predict the recent rise of Singapore and Hong Kong as jurisdictions of choice for international arbitrations will continue, with both jurisdictions well positioned geographically, with modern arbitral rules, supportive judiciaries, and now allowing third party funding.  Movements in China also signal more openness to arbitration, brought in part by the needs of the Belt and Road initiative – watch this space.

Closer to home, the 2018 ICCA Congress in Sydney and Queenstown will see arbitration further promoted in Australasia. Both New Zealand and Australia continue to strengthen and modernise their arbitration laws. New Zealand arbitral institutions are updating their rules to reflect international best practice, and provide more options for those looking to arbitrate in New Zealand, whether domestically or with international counterparties.

Gender diversity in arbitrator appointments remains a key challenge – and is likely to remain through 2018 and beyond. It is an issue in the hands of arbitration institutions as well as the parties and lawyers.

International arbitration – Continued growth of Asian regional hubs

While the major arbitration institutions, primarily the Paris-based International Chamber of Commerce (ICC), dominate the international market, regional hubs such as Singapore and Hong Kong have seen a sharp increase in the number of arbitration cases over recent years.

The Singapore International Arbitration Centre (SIAC) alone saw an increase of 26% in the number of new cases registered in 2016. We expect the popularity of Singapore and Hong Kong (including for New Zealand companies engaged in international arbitration) to continue, with both jurisdictions having made major efforts to increase their attractiveness as arbitral seats. Overall, the strength of these regional hubs, and the expertise that brings, is likely to be an advantage to the Asia Pacific region.

Third party funding for arbitration

Singapore and Hong Kong have increased the “attractiveness” of their arbitration regimes by introducing measures allowing for third party funding.

The amendment of the relevant laws allow for more flexibility and funding availability for parties seeking to arbitrate in the Asia Pacific region – all while ensuring the region is competitive with traditional European arbitration centres.

We expect continued growth in arbitration cases in the Asia Pacific region, especially as third party funding is increasingly seen as a lucrative investment opportunity for funders.

More promising signs for arbitration in China

While China is a strong player in the Asia Pacific business scene, arbitration in China as a foreign party or a Chinese counterparty, is not without its challenges.

China-based arbitration proceedings must meet a number of procedural-type requirements, and historically it has been difficult to enforce foreign arbitral awards against a Chinese entity with assets in China. However, there are signs that China is increasingly using arbitration to resolve commercial disputes – and may be becoming more arbitration friendly.

Drivers for this increase in arbitration include greater foreign trade, foreign direct investment and the dispute resolution and enforcement needs arising from the “Belt and Road” trade route initiative.

Given New Zealand’s trade and investment relations with China, these are positive steps.

We predict arbitration involving China will continue to grow during 2018. However, we recommend caution, and suggest parties get appropriate legal advice if contemplating such an arbitration.

Australia making moves

A jurisdiction closer to home to watch in 2018 is Australia. Our closest neighbour bolstered its federal arbitration law in 2015 allowing for greater and easier enforcement of foreign arbitral awards, while ensuring the confidentiality of arbitration proceedings. A second Bill, the Civil Law and Justice Legislation Amendment Bill 2017 (Cth) (the CLJ Bill) received its second reading in the Australian Senate in 2017 and is intended to “help ensure that Australian arbitral law and practice stay on the global cutting edge, so that Australia continues to gain ground as a competitive, arbitration friendly jurisdiction”.

Recent arbitration case law in Australia also shows that it is generally well positioned as a pro-arbitration and pro-enforcement jurisdiction. The coming year will also see Sydney host the 2018 ICCA Congress, a major event on the international arbitration calendar. The ICCA Congress will be an opportunity for Australia – and New Zealand with a spinoff event in Queenstown – to showcase itself as an emerging player with the required infrastructure and expertise to become another regional hub for international arbitration.

Arbitration in New Zealand

New Zealand has recently enhanced its legislative arbitral landscape, with updates to the New Zealand Arbitration Act 1996 during 2017:

  • expanding the definition of ‘arbitral tribunal’ to include an arbitral institution and an emergency arbitrator.
  • making the Arbitrators’ and Mediators Institute of New Zealand Inc (AMINZ) the new default appointing body for arbitral appointments.

There is an additional (private member’s) Bill that should further enhance arbitrations in New Zealand by ensuring (among other things) confidentiality of any proceedings appealed through the New Zealand Court system, and dealing with challenges to a tribunal’s jurisdiction. With the new Government now in place, watch to see if this Bill will be enacted in 2018.

In addition to formal legislative amendments, a key development is the introduction by New Zealand arbitral institutions of new arbitration rules, with AMINZ releasing its updated rules in May 2017, and the New Zealand Dispute Resolution Centre (NZDRC) updated rules.

The NZDRC also has rules catering for expedited 45, 60 and 90 day arbitrations (as well as non-time limited domestic arbitrations). The trend is toward arbitration in the sense known internationally, and away from ‘High Court practice’ but in an arbitral forum.

We expect these rules to be a positive development for arbitration in New Zealand in 2018 and beyond – they provide more options and may re-energise the country’s arbitration practice.

Diversity: a continuing challenge

An area with “room for improvement” in 2018 is gender diversity in the international arbitration scene. One step being taken internationally is the Equal Representation in Arbitration Pledge (the Pledge), which as at November 2017 had 2,175 signatories (including some very high profile individuals and organisations).

A key aspect of the Pledge is, where possible, collating gender statistics for appointments and made publicly available.

Here in New Zealand, AMINZ has expressed a commitment to increasing the number of women appointments to arbitration panels – there is currently an under-representation of women available for appointment on their panel. However, the SCC statistics show that it is not only arbitral institutions with a role – the parties themselves, and their advisers, must work to increase diversity on arbitral panels when nominating and selecting arbitrators. Whether there is any change will be something to watch for in the coming years.

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