Ongoing economic globalisation is seeing an ever-increasing number of companies engaged in cross-border transactions. This in turn is leading to a growth in cross-border disputes and the creation of more methods with which to resolve them. Litigation in foreign jurisdictions can be problematic for companies looking for a swift and cost effective resolution to their dispute. It is mainly for this reason that many companies now include arbitration clauses in their contracts.
Arbitration, however, is not free of pitfalls and requires careful consideration of a number of factors at the contractual stage. One of these factors is the jurisdiction or seat of the arbitration, which can have an important impact on the way it is conducted (for more background on this, see Location, location, location: the choice of seat in international arbitration, www.practicallaw.com/9-200-8226). As a result, companies need to exercise caution when choosing a location for arbitration.
As international arbitration grows in popularity, more jurisdictions are emerging as popular locations in which to arbitrate, and many are now rivalling traditional arbitration venues such as Paris, London and New York.
In this article, we speak to arbitration lawyers about six emerging hotspots for international arbitration (Austria, Belgium, China (and Hong Kong), Singapore, Spain and Sweden) and consider the reasons for their increasing popularity. We also highlight some of the top arbitration lawyers in these jurisdictions (see box International arbitration lawyers in emerging hotspots: the elite, ).
The entry into force of a new Austrian arbitration law on 1 July 2006 has been positively received by the international business and legal community. It substantially reflects the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law) (see www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html) while granting a great degree of independence and autonomy to the arbitral tribunal.
Christian Konrad at Freshfields Bruckhaus Deringer, a senior associate of the team led by esteemed arbitrator Günther Horvath, comments: “Such legislation is important in that it puts Austria on the map as a venue for international arbitration with courts now statutorily bound to assist, where necessary, the smooth running of both arbitration proceedings and to intervene only in limited circumstances”. However, the provisions previously in force are not entirely obsolete as the new act will only apply to proceedings that were commenced on or after 1 July 2006. Konrad’s colleague at Freshfields, Dora Rotar, notes that “arbitration agreements concluded before 1 July 2006 will also fall under the provisions previously in force.”
Renowned arbitrator Anton Baier at Baier Böhm supports the new legislation, stating: “The old arbitration law has now been set on a more modern and commercial footing and provides for issues such as interim measures (for example, injunctive relief) and freedom of parties to set their own rules as regards presentation of evidence for both domestic and international arbitration.”
While Austria was relatively late in updating its arbitration law, Baier echoes the sentiments of the international business community in claiming that “one of the main attractions of Austria [as a venue for international arbitration] lies in its central European location. It is easy to get to and has an excellent infrastructure. Vienna is also a UN city, it is accustomed to dealing with international conferences and forums. Most of the arbitrators are multilingual and, as Austria is a signatory to the New York Convention, parties can be assured that the award will be enforceable.”
Another advantage offered by Austria as a location for international arbitration is its proximity to, and shared language with, Germany. Baier notes that “many German firms regularly choose Austria as a venue for arbitration for precisely these reasons”. In addition, Austria’s cultural and commercial ties with East and West Europe mean that it is recognised as a venue with a mindset and manner compatible with both.
With its central location, neutral image (Austria is not a member of NATO) and international status supported by modern, commercially-oriented laws that restrict interference by local courts, Austria has emerged as an attractive venue for international arbitration − a fact not lost on the international community.
Belgium’s international credentials need little introduction. Centrally located and boasting a capital with infrastructure purpose-built to serve the international community, Belgium has carved out a reputation as one of the preferred European venues for international arbitration.
An arbitration-friendly judiciary and a cluster of internationally esteemed arbitrators distinguish Belgium from other jurisdictions and put it firmly on the same level, regarding status and reputation, as that of its larger European neighbours. “One of Belgium’s assets as a legal seat for international arbitration is the vast experience accumulated both by the judiciary and the arbitrators and, in the case of the latter, their ability to conduct proceedings and draft an award in Dutch, French or English”, states highly acclaimed arbitrator John Bigwood at Simont Braun. He claims that there are “no real downsides [to conducting an arbitration in Belgium]” and that CEPANI (the Belgian Centre for Arbitration and Mediation), one of the most respected arbitration institutes, “offers parties a great amount of freedom to determine the scope and procedural rules of the arbitration.”
The Belgian courts’ hands-off attitude to arbitration is highlighted as an advantage by another prominent arbitrator, Pascal Hollander, a partner at Hanotiau & van den Berg, which is home to arbitration luminaries Bernard Hanotiau and Albert Jan van den Berg. He explains that as far as finality of an arbitration award is concerned, “parties can contractually exclude at any time any action to set aside the award when none of them is a Belgian resident or national”.
In general, Hollander notes that the approach of the courts to arbitration is very clear, with recent case law suggesting that their support for arbitration is firming rather than eroding. He further points out that an additional advantage of arbitrating in Belgium is the lower cost of the main Belgian arbitral institution (with regard to arbitrators fees and administrative expenses), as compared with the other main international arbitral bodies.
For all of the above reasons, Belgium stands out as an attractive and value-for-money venue for international arbitration.
Although not formulated to precisely conform to the UNCITRAL Model Law, Chinese arbitration law has gone through a raft of changes in an attempt to place it on an equal footing with expected international standards. The latest significant amendments to the China International Economic and Trade Arbitration Commission (CIETAC) arbitration rules came into force in May 2005.
The annual volume of international arbitration awards passed by CIETAC is one of the highest in the world, and testament to the popularity of this form of dispute resolution in the People’s Republic of China.
Zhang Shouzhi, a partner at King & Wood and a member of the firm’s respected arbitration team led by highly regarded arbitrator Ariel Ye, confirms the international standing of CIETAC, with the parties enjoying the freedom and flexibility to “conduct CIETAC arbitrations out of the PRC and adopt the arbitration rules of other arbitration institutions.”
One point to note in relation to arbitrating in China is the selection of arbitrators. Jingzhou Tao, a partner at DLA Piper, states: “For foreign related arbitrations, there is no requirement that one of the arbitrators must be a Chinese national. Most domestic arbitrations will have a panel of three Chinese arbitrators since all Chinese arbitration institutions keep two separate lists of panellists for foreign-related and domestic arbitrations. The domestic list contains only Chinese nationals.”
Martin Rogers, head of Clifford Chance’s Asian dispute resolution and arbitration practice, raises the issue that China’s Civil Procedure Law empowers the Peoples’ Court to decline enforcement of a foreign related award on a number of grounds, the most notable being on the ground that it is contrary to public interest, which can be interpreted widely. On the positive side, Rogers acknowledges the shift in attitude by the Chinese government in trying to ensure that foreign companies are granted a fair and impartial hearing in the courts.
This shift in the government’s attitude, coupled with its determined drive to weed out corruption, has in turn affected the courts’ attitude to arbitration. The government is also recognising that a Chinese arbitration institution that conforms to international standards is not only convenient for the parties concerned, but paramount for the economic development and growing international status of the country.
It is fair to say that arbitration in China has become more efficient and streamlined in recent years, with the latest amendments going some way towards allaying the concerns of (and risks for) foreign parties. If the government follows through on its initiative to boost the country’s profile as a venue for international arbitration, China (and in particular Shanghai and Beijing, which boast world-class facilities), could well develop into one of the go-to places for international arbitration.
Hong Kong, as a Special Administrative Region of China, is largely governed by its own laws (based closely on English law). It adopted the UNCITRAL Model Law in 1990 and is, as Rogers notes, a very attractive venue for international arbitration.
A number of factors contribute to Hong Kong’s appeal. It is a global financial hub with modern infrastructure, and it blends Eastern and Western cultures with ease. The Hong Kong International Arbitration Centre can draw on the specialist expertise of domestic and foreign lawyers, as well as experts from a wide range of industries and professions.
The new institutional rules of the main arbitral institution in Singapore, the Singapore International Arbitration Centre (SIAC), came into effect on 1 July 2007. The SIAC Rules 2007 aim to improve the efficiency of resolving international commercial disputes via arbitration conducted by the SIAC, by adopting the best practices in institutional arbitration, in particular, those of the International Chamber of Commerce (ICC) Rules of Arbitration 1998. According to regional arbitration expert Michael Hwang SC of Michael Hwang Partnership, this will be an important factor contributing to Singapore becoming one of the pre-eminent Asian venues for international arbitration.
Says Hwang: “The latest amendments to the SIAC Rules have brought the method of assessing arbitrators’ fees in line with the approach taken by the ICC in ICC arbitrations, that is, the ad valorem method, which entails assessing the arbitrator’s fees as a percentage of the total amount in dispute (although the arbitrators’ fees would generally be less on the SIAC scale). This is in contrast to the time-based assessment of the arbitrator’s fees in the old SIAC rules.”
Other changes, he adds, are “a greater degree of institutional involvement in the arbitral process to support the progress in the arbitration and the enforcement of arbitral awards, including the scrutiny of draft awards by the SIAC to ensure that arbitrators are delivering awards of consistently high quality. There is also the introduction of a memorandum of issues setting out the issues that the tribunal has to eventually decide, which might loosely be termed a ‘mini-terms of reference’ under the ICC Rules.”
The SIAC itself has an excellent reputation for providing state-of-the-art facilities and efficient case management and boasts an enviable panel of both regional and international arbitrators.
One of the major benefits of arbitrating in Singapore is the low level of corruption within the public sector and judiciary, offering Asian parties a neutral forum in a convenient location. John Savage, head of Shearman & Sterling’s Asian arbitration practice, has been quoted as saying that “neutrality is a key attraction for international parties choosing Singapore as a venue for international arbitration” (see the SIAC website at www.siac.org.sg).
While local courts offer parties support on mandatory issues (such as on applications by a party to set aside an award), they are reluctant to intervene in arbitrations. Acclaimed arbitrator Meng Meng Wong of WongPartnership confirms: “Singapore courts have a largely hands-off approach to intervention in the arbitral process.”
The above advantages, together with Singapore’s longstanding reputation as a bridge between the commercial worlds of East and West, mean that it can rightfully lay claim to being a regional centre for international arbitration.
The last five years have seen wider reform of the Spanish judicial system. Key among these developments was the enactment of the Arbitration Law in 2003 (which came into force in March 2004). The Arbitration Law, based on the UNCITRAL Model Law, brought Spanish arbitration law in line with international standards.
While the Spanish Court of Arbitration holds itself out as the country’s main arbitration institution, the true situation is that Spain, unlike other major European arbitration venues, has a multitude of smaller arbitration centres, each serving a region, group or specific industry sector. Juan Fernández-Armesto, a leading independent arbitrator, acknowledges that “there are clear advantages if there is one single arbitration centre”, although he adds that an emerging trend of consolidation between various arbitration institutions in Spain is “a step in the right direction.”
Miguel Virgós, a prominent arbitrator at Uría Menéndez, stresses the need for Spanish arbitration institutions not only to consolidate, but to develop a more international approach. He explains: “Most arbitration institutions in Spain are oriented towards domestic matters, although they are perfectly capable of attracting and serving foreign parties. This is evidenced by the fact that we are seeing an increasing number of foreign parties conduct arbitrations in Spain, but most choose to follow the rules of non-Spanish arbitration institutions such as the ICC or LCIA.” He adds, however, that this in itself is not necessarily a disadvantage and may have little impact on parties choosing Spain as a venue.
Virgós does voice concerns about one aspect of the legal system − the diminished jurisdiction of the Spanish Supreme Court and the consequent lack of national precedents in case law: “What we have now is a legal system that provides no guarantee that a decision in one region of the country will set a binding precedent in another region.” Such ambiguity may provide a degree of uncertainty as to the courts’ approach to upholding or quashing an arbitration award, but should be seen in the context of a judicial approach to arbitration that is, on the whole, positive and supportive.
One recent noteworthy development has been the formation, in 2005, of the Spanish Club of Arbitrators (Club Español del Arbitraje), an independent body comprised of the main Spanish law firms and independent practitioners. The Club has achieved substantial success in fostering co-operation and understanding between businesses, lawyers and judges about the potential of Spain as a venue for international arbitration.
The courts are clearly aware of the value of international arbitration. Fernández-Armesto states: “They [the courts] are extremely supportive. In Spain, arbitration is equated with democracy. Courts see arbitration as an expression of individual liberty enabling companies and individuals to freely choose to settle their dispute by non-judicial means. Courts respect the choice, reject litigation when there is a valid arbitration clause and routinely enforce arbitration awards.” And, although parties can appeal to the national courts, he emphasises that “courts make scarce use of their right to set aside awards.”
In addition to Spain’s arbitration law being on par with the other main arbitration jurisdictions, it offers modern infrastructure and excellent ancillary services (administration and case management, translation, transcripts, hearing rooms and so on) at a comparatively lower cost than the UK, France and Switzerland, and boasts the distinction of being Europe’s gateway to the South American market. These advantages make Spain a highly attractive venue for international arbitration.
Sweden has long been a popular venue for international arbitration. However, in the past, it has not quite rivalled its Western European counterparts such as France and the UK, in part due to the impression among the corporate world that “bigger is better”. This, according to Olof Rågmark at White & Case, is a misconception. He argues: “Sweden has a long history as a venue for international arbitration and has a wide pool of expert arbitrators which parties can draw from if they so desire.”
In terms of finality of an arbitration award in Sweden, Bo G H Nilsson, a partner at RydinCarlsten, notes that international parties (not domestic) can contractually agree to exclude recourse to the courts to challenge an award.
While it may be true that Sweden is best known in the international arbitration community as the place to resolve disputes involving parties from Eastern Europe (particularly the Commonwealth of Independent States), Rågmark suggests that one of the reasons for this lies in a closer historical affinity with some of those countries. He remarks: “Eastern European companies have historically felt more comfortable arbitrating in Sweden than anywhere else in Europe. A major factor could be that the approach and manner in which they present and debate arguments is more easily recognised in Scandinavia than, for instance, by the more formal Anglo-Saxons.”
It should not be assumed, however, that Sweden only caters to a specific segment of Europe as a seat for international arbitration. Its stature has grown in recent years, with many Western European companies drawn to its convenient location and a robust but neutral legal framework (underpinned by the Arbitration Act of 1999).
The above factors, together with Sweden’s reputation for professionalism, efficiency and value for money, and its commercially oriented culture, explain the country’s enduring popularity as an arbitration location.
The number of jurisdictions that are emerging as popular international arbitration venues does of course extend beyond the six jurisdictions examined above. The United Arab Emirates (and Dubai in particular) is one of these, and has responded to its increasing popularity as a venue for international arbitration by acceding (in 2006) to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention).
Other emerging venues include India, where arbitrations are conducted under the Arbitration and Conciliation Act 1996, and South Korea, with proceedings governed by its Arbitration Act (amended in 1999) − both are based substantially on the UNCITRAL Model Law. These two countries are signatories to the New York Convention with local courts supportive of arbitration proceedings, and offer modern facilities and effective (and relatively inexpensive) administration services. South Korea, in particular, has seen a marked uptake in the volume of international arbitrations in recent years.
As the popularity of international arbitration as a dispute resolution mechanism continues to surge, an increasing number of venues such as the above are likely to emerge as hotspots.
The following lists highlight top arbitration experts based in the legal markets of Austria, Belgium, China/Hong Kong, Singapore, Spain and Sweden. They were compiled on the basis of research undertaken for the PLC Cross-border Dispute Resolution Handbook 2007/08 (www.practicallaw.com/disputehandbook) and PLC Which lawyer? (see www.whichlawyer.com). For the purpose of this article, additional research was conducted for each of the jurisdictions below.
To be eligible for inclusion in the list, a lawyer must be identified by our research as either "Leading" or "Highly recommended" in the relevant jurisdiction. While some jurisdictions may have other lawyers ranked as "Leading", their omission from the list may be due to their focus on other forms of dispute resolution (such as litigation or mediation). This research is up-to-date as at 30 August 2007.
PLC Which lawyer? is added to and updated continuously online. For a full explanation of the research and practice areas/subcategories covered, please visit www.whichlawyer.com.