Competition for commercial disputes around the world

John MacKenziePosted by

At the moment the political and legal commentators in the UK are fixated on Brexit. And no wonder. In only a few weeks the UK could see the biggest political and legal in generations. In the midst of that change, many have questioned the future role for London as a hub for international disputes.

However the development of competing hubs for commercial disputes predates Brexit, with Dubai, Qatar, Singapore all opening specialised courts focusing on international commercial disputes. Why are these centres being created and what benefits do they offer?

Differences between arbitration and litigation

One preliminary question is the difference between a jurisdiction as a centre for litigation (so state endorsed dispute resolution) and as a centre for arbitration. Typically these are seen as very different creatures. So:

  • Arbitration is seen as quick, whereas litigation is not;
  • Arbitration is confidential, whereas litigation is not;
  • Arbitration is flexible, whereas litigation is not;
  • Arbitration is inexpensive, whereas litigation is not
  • Arbitration allows you to choose your decision maker, with litigation you cannot.
  • Arbitration awards can be enforced internationally, where with litigation this can be more difficult.

In reality, these distinguishing features have become blurred. An arbitration involving an international commercial dispute can be time consuming, follow court like procedures and be very expensive. Courts, in contrast, are keen to point to the flexibility of their procedures, and their focus on resolving disputes in way that is “proportionate” to the nature or value of the dispute.

The English courts have clear rules on proportionality of costs. In accordance with CPR 44.3(2), the court will only allow costs which are proportionate to the matters in issue and will disallow costs which are disproportionate in amount even if they were reasonably or necessarily incurred. Any doubt as to whether costs were proportionately incurred, or are proportionate in amount, will be resolved in favour of the Claimant as paying party. In Arjomandkhah v Nasrouallahi [2018] EWHC B11 (Costs) the judge was clear that he had have regard to all the circumstances in deciding whether costs were proportionately incurred and proportionate in amount, not just the value of the claim.

London, for decades, has been a hub for international disputes, along with New York. The London Commercial Court was set up in 1895 and developed a reputation for excellent judges, sophisticated business knowledge, independence and respect for the rule of law. While some will point to the attraction of robust disclosure obligations, others will be highlight the significant cost that this generates. The working language is also attractive as it is, for now, one of the most common languages in global business.

International litigation hubs

Look at the new international hubs being opened, and an obvious feature is that the cases can be conducted in English. The flexibility of procedures is highlighted. And increasingly the dispute resolution hubs are seeking to increase their attractiveness by building state of the art technology centres so that costs can be driven down and speed of process increased.

These features all seem to reflect an approach that if they are to compete with established hubs such as London or New York then they need to be as good as, if not better than, London and New York when it comes to such things as the quality of judges, independence, efficiency and cost.

Pamela Bookman, in her detailed paper entitled “The Adjudication Business” points out that some see this not as a competition between courts, but rather a competition between countries. To compete globally for investment, countries need an effective system for resolving commercial disputes. The rationale is that companies investing into a country need to be comfortable that their investment will be protected by the rule of law, and problems will be resolved fairly.

On one view the creation of these commercial courts is part of the ebb and flow between arbitration and litigation. As arbitration increases in popularity and adopts new processes and technology, so courts respond and do the same. National courts then seek to sell their new streamlined processes, and lure parties away from arbitration.

At a policy level however, there should be a continual focus on improving the national court structure in any jurisdiction, if for no other reason than the courts are the only forum that will publicly state what the law is and how it applies in any given situation. That that public statement allows the lawyers and clients to learn and adapt when conducting their business.

Share our insights

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.