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International commercial arbitration was growing again before the COVID-19 pandemic hit, an analysis of 2019 statistics from six major international arbitral bodies shows. James Clanchy of the Lexis®PSL Arbitration team finds that this growth was largely in arbitrations before a sole arbitrator and in lower value cases.

The 2019 statistics show that London continues to dominate, not only as a seat but also as a hub for arbitration and as a source for arbitrators. Singapore has fallen behind in terms of the numbers of arbitrators appointed there. Ad hoc arbitration remains as strong as ever, and first choice in London, according to the data that is available for it. Overall, international arbitration, in its diverse forms, appears to be well-placed to absorb a surge of new disputes in the wake of the pandemic. 

 What are the practical implications of the 2019 statistics?

The 2019 statistics have implications for the conduct of arbitrations in the post-crisis economic landscape, for London in the post-Brexit environment, for institutions looking to grow their caseloads, and for arbitration practitioners and arbitrators hunting for new cases. These include the following:

• with a growth in cases going to sole arbitrators and being conducted on a documents-only, sometimes fast-track, basis, arbitration lawyers, arbitrators, conference and webinar organisers, university law schools, arbitrator training courses, directories and data analytics tools will have to catch up with this trend, and participants will have to hone their skills to handle such proceedings with the efficiency that they demand  

• four years after the Brexit referendum vote, London has shown itself to be resilient as an arbitral hub and to be the true ‘home of arbitration’. Singapore has been taking steps to compete, consulting on allowing appeals on points of law, for example, and reforming its ad hoc offering in the Singapore Chamber of Maritime Arbitration (SCMA).  Other centres may follow suit.  London is at the top of its game but must guard against complacency. Initiatives such as London International Disputes Week (LIDW) demonstrate that the international arbitration community in London is raising its profile  

• institutions are increasingly attracting repeat business from particular sectors.  For example, the London Court of International Arbitration (LCIA) saw 32% of its 2019 caseload from banking and finance with 30% of the contracts in dispute in LCIA arbitrations being loan or other facility agreements.  In its report, it noted that cases in this sector included a ‘suite of 41 low value arbitrations’ but that the sector would remain dominant ‘even without counting these cases’.  As demonstrated by the long-established and continued success of arbitration in the shipping, commodities and insurance sectors, with each having their own arbitral organisations in London, growth depends on being able to cater for the smaller disputes alongside the large ones.  After all, businesses involved in international commerce have both  

• while international commercial arbitration was on the rise in 2019, investment arbitration saw a sharp decline.  According to UNCTAD, 55 publicly known ISDS cases were initiated in 2019, which compares to 84 in 2018.  The International Centre for Settlement of Investment Disputes (ICSID) saw 39 new cases filed in 2019, its lowest number since 2014 and a 30% fall from 2018 (56).  The fear, in some quarters, that third-party funding would lead to a huge increase in claims by investors has not been realised.  On the contrary, the involvement of funders may have helped to weed out hopeless and frivolous claims.  See our October 2019 post: Whatever happened to third-party funding in international arbitration?  

• unless states’ responses to the COVID-19 crisis generate new ISDS cases, specialist practitioners may be tempted to transfer their skills to commercial arbitration.  If they do so, they will find that it is already well populated: on LinkedIn, the Chartered Institute of Arbitrators has more than 35k followers and Careers in Arbitration has more than 23k.  If international commercial arbitration is to meet the expectations of its stakeholders and of new entrants, it will have to broaden its horizons, catering for more and lower value cases.  The post-COVID-19 economic environment could present opportunities for this sort of diversification
  

What do the numbers show?

Modest overall growth since 2016

When we published the first of our annual analyses of statistics in 2018, we noted that, contrary to assumptions at the time, there had been a year-on-year decline between 2016 and 2017 in the total number of arbitrations commenced with six major arbitral bodies whose reported caseloads we studied. See our July 2018 post: Arbitration statistics: a reality check

In 2019, we found that the 2018 caseloads stabilised, the total being just one below 2017’s total. See our June 2019 post: Arbitration statistics 2018: London bucks downward trends

The 2019 statistics present a more encouraging picture: the total number of cases has increased by 443 (12.5%) since 2018 or 189 (5%) since 2016. 

The increase in the appointments of arbitrators is almost the same in absolute numbers (i.e. very nearly one arbitrator per case) but smaller in percentage terms: 474 (9%) since 2018, 203 (4%) since 2016. 

The figures for the four years 2016 to 2019 are illustrated in the graphs below.

SIAC’s decline in appointments

Only one of the six organisations saw a decline in the number of appointments of arbitrators between 2018 and 2019 and between 2016 and 2019: the Singapore International Arbitration Centre (SIAC). At SIAC, the number of appointments of arbitrators is consistently below the number of new cases filed. In 2019, 182 fewer appointments were made than arbitrations registered. Early settlements and consolidation of cases will provide partial explanations but SIAC’s annual report also shows that sole arbitrators are overwhelmingly more popular in its arbitrations than three-member tribunals. 

In 2019, SIAC made 159 individual appointments of arbitrators, 145 of which were to sole arbitrator tribunals.  It also confirmed 138 arbitrators chosen by parties and co-arbitrators.  Even if three-member tribunals absorbed all of those appointments (SIAC’s report does not contain a breakdown), sole arbitrators would still outnumber them by three to one. 

Ad hoc arbitration remains strong

The six organisations chosen for our annual analyses correspond to the five institutions which were the most popular among respondents to the 2018 Queen Mary University of London White & Case international arbitration survey with the addition of the London Maritime Arbitrators Association (LMAA), whose Terms are probably the most widely used rules for ad hoc international commercial arbitrations.  In 2019, the LMAA had 44% of the cases across the six organisations and 51% of the appointments of arbitrators.

With its 2019 report, the LCIA published, for the first time, breakdowns of appointments of arbitrators in ad hoc arbitrations in which it provided various services.  While the LCIA was called upon to make only six appointments in UNCITRAL Rules arbitrations in 2019 (included in the figures above), in ad hoc arbitrations in which it provided fundholding services, the parties themselves had made 78 appointments of arbitrators (not included above).

Meanwhile the Hong Kong International Arbitration Centre (HKIAC) reported that, of its 308 new arbitrations in 2019, 173 were administered under its own rules or under other rules, including the UNCITRAL Arbitration Rules.  Of the 122 appointments which the HKIAC made itself, 69.7% were sole arbitrators, 19 (15.6%) were in UNCITRAL Rules cases which it administered and a further 36 (29.5%) were in other ad hoc arbitrations. 

Noting then that the five institutions’ figures include ad hoc arbitrations, in which they provide various services, but that most ad hoc arbitrations don’t pass through institutions, it is evident that the strength and popularity of ad hoc arbitration, particularly in London, have not been eroded.

SIDRA survey consistent with Queen Mary on institutions

This year has seen the publication of the Singapore International Dispute Resolution Academy (SIDRA) international dispute resolution survey. That survey did not look at ad hoc commercial arbitrations, even though SIAC noted on the front page of its statistical report that it had made 25 appointments in ad hoc arbitrations in 2019.  SIDRA asked about choices of arbitration institution and found that the five most popular were identical to the five chosen in the Queen Mary survey with the China International Economic Trade Arbitration Commission (CIETAC) being substituted for the Stockholm Chamber of Commerce (SCC). 

Historically, CIETAC has not been regarded as a truly international institution but in 2019 it had 617 foreign-related cases, of which 66 were cases where both parties were non-Chinese, representing an 18.2% year-on-year increase.  In this regard, it is interesting to note that the SCC had only one third more international cases in 2019 (88) and that 25% of the International Chamber of Commerce’s (ICC) 2019 cases were between parties of the same nationality.
 

Growing popularity of sole arbitrators

SIAC was the most popular choice for respondents to the SIDRA survey.  As the data shows that the majority of SIAC tribunals comprise a sole arbitrator appointed by the institution, the question arises as to whether these are, in fact, the features that attract its commercial users.  The SIDRA survey does not ask this question and concentrates instead on parties’ choices of arbitrators for appointment to three-member tribunals. 

Other surveys and organisations likewise assume that most arbitrations are put into the hands of three-member tribunals appointed by the parties.  During the COVID-19 crisis, many webinars and blogs have also assumed that most arbitrations go to in-person hearings on the merits.   Not only do the institutions’ statistics, together with those that they don’t always supply (eg numbers of awards), indicate that full-blown proceedings before three-member tribunals are the exception, they also confirm that there has been an increase in the take-up of documents-only and expedited procedures before sole arbitrators for lower value cases. 

For example, the International Chamber of Commerce’s (ICC) Expedited Procedure Provisions, for claims up to $US 2m, applied by direct operation of the ICC Rules in 65 cases and parties opted out of them in just five.  In 2019, 36% of the ICC’s arbitrations concerned claims which did not exceed US$ 2m.  When called upon to choose the number of arbitrators for a tribunal, the ICC Court chose sole arbitrators in 82% of cases.  Overall, 41% of ICC tribunals in 2019 comprised a sole arbitrator. 

Meanwhile at the LCIA, which does not have a separate expedited procedure but where 72% of quantified claims were US$ 5m or less and 43% were US$1 m or less, 46% of tribunals comprised a sole arbitrator.   

In 2019, the LMAA saw a record number of appointments of sole arbitrators under its Small Claims Procedure, which is largely used for claims below US$100k: 218. 

London goes from strength to strength

In 2016, in the wake of the Brexit referendum, it was suggested that London would lose its popularity as a seat for international commercial arbitration.  Attention was drawn to the ICC’s statistics at the time, which indicated that London was already being chosen less often as a seat in ICC arbitrations.

Not only have the LCIA’s and LMAA’s caseloads proved those pessimists wrong (for the time being at least), so has the ICC itself: in 2019, London was the most popular seat for ICC arbitrations, being designated 115 times.  Adding that number to the LCIA’s and LMAA’s caseloads, London-based arbitrations account for 57% of the total number of cases across the six arbitral bodies studied. 

Meanwhile HKIAC reported that British arbitrators had the highest percentage of its arbitral appointments by nationality (24.1%).

Other centres

It is, of course, necessary to keep an eye on the institutions and other organisations which do not feature in the above analyses or so heavily in surveys.  Well-established institutions, such as the Deutsche Institution für Schiedsgerichtsbarkeit e.V.(DIS) in Germany and the Vienna International Arbitral Centre (VIAC) in Austria, continue to prosper but their international caseloads remain relatively low. One institution which has experienced quite substantial growth in the last few years is the DIFC-LCIA Arbitration Centre in Dubai, which saw 80 new cases in 2019, up from 64 in 2018.  Its link with London may be part of the secret of its success.

Conclusion

In our conclusion last year, we noted that the rise of new centres may require that a new set of arbitral bodies be analysed in future years. The continuing dominance of London and the appearance of four of our five institutions in the SIDRA report's ranking suggest that that time has not yet come. The turmoil of 2020 could, though, change the landscape.