Freshfields' Constantine Partasides and Patrick Taylor argue arbitration must evolve if it is to fulfil its promise as the first choice to resolve global business disputes

Over the last 20 years, international arbitration has been an extraordinary success story. Transforming itself from a procedural exoticism into a mainstream method for resolving international commercial disputes, it is no exaggeration to say that we now live in the age of arbitration. Indeed, not only is arbitration capturing an ever-increasing share of the disputes market, but for those participants in the international economy who are looking for neutrality and international enforceability, it has been said that it is the only game in town.

But these inherent competitive advantages, and the success that they bring, should not obscure the challenge that arbitration faces in realising users' expectations. For commercial users also look to international arbitration to provide a business-like method of dispute resolution in a commercially-relevant schedule and at an efficient cost. That has always been the 'promise' of international arbitration, and the question every new generation of arbitration practitioner must ask is the following: is this promise being realised? The answer now coming back from some commercial users is: not always, and not enough!

Often procedurally heavier, lengthier and costlier than many users expect, a growing number of those users are telling us that something is being lost of the promise of arbitration. So what are the causes of this lost promise and how can it be rediscovered?

Causes

In some ways, arbitration is a victim of its own success. That success has welcomed larger cases involving parties less used to international arbitration and counsel less experienced in international arbitration.

Those new counsel participants – often very experienced state court litigators – are importing into the process their litigation practices in the belief that these are consistent with the best possible defence of their clients' interests.

And their clients, often themselves in-house counsel with greater experience of national court litigation, are often ready to accept those practices without question or challenge as being necessary or inevitable.

Although arbitral tribunals are imbued with the procedural power to resist procedures that are excessive, they tend not to push back too hard against counsel-initiated, client-supported procedural initiatives in an effort to protect the legitimacy of their process and the enforceability of its end product (the award).

So in this way the individual motivations behind what has been called the 'rising tide of judicialisation' in international arbitration are understandable (indeed, arguably respectable). But the overall combined effect is sometimes the very opposite of the business-friendly dispute resolution mechanism that arbitration was intended to be.

So how is the procedural promise of arbitration to be rediscovered?

Rediscovery

Many institutions, professional bodies and individual practitioners are spending an increasing amount of time devising rules and guidelines that are designed to improve arbitration's time and cost efficiency. However, the solution lies innate within the arbitration process. For in every arbitration, the parties and the tribunal have the freedom and the power respectively to select tailored procedures that are suited for the most effective and efficient resolution of the dispute in question.

That procedural flexibility is advertised in the abstract, but how often is it exercised in practice? In truth, not very often. A standardised arbitration process is now typically proposed as a matter of habit by counsel, and accepted as a matter of course by the arbitral tribunal. These procedural non-choices come about as follows.

The tribunal will at an early stage send out a standard form, Procedural Order No 1, inviting the parties to agree as much of the procedure and schedule between themselves as possible without any meaningful involvement of the tribunal. Procedural hearings will then be used only to determine the few remaining unagreed procedural issues in a way that is as accommodating as possible to both parties: a lowest common denominator procedure usually resulting in a process in which the tribunal is entirely passive until a much later stage in the arbitration.

But an alternative way of doing things exists, and it involves the more active early case-management by the tribunal itself. That type of case management, now a feature of High Court litigation in England, will likely involve earlier engagement in the merits of the dispute, which may not always be popular with counsel (who often spend the early stages of the procedure still learning the dispute) or arbitrators (who rarely wish to show their hand too early). But the effect on the efficiency of the process could be dramatic. Indeed, it is precisely this idea that inspired one of the recent changes to the International Chamber of Commerce (ICC) Rules of Arbitration (applicable to ICC arbitrations commenced after 1 January 2012), which gives greater emphasis to the case management hearing that is required to take place when the tribunal is first constituted at the terms of reference phase.

However, a change in rules is not enough; a change in the mindsets of participants in the process – arbitrators, counsel and their clients – will be required.

Conclusion

Someone once said, "every international arbitration is a microcosm of potential procedural reform". These words convey a powerful idea; the idea that every international arbitration retains the potential to be the perfect procedural organism, accommodating refinements and suppressing mutations.

But in truth the arbitration organism may need some external help to reform. And that help can come from commercial users themselves. In a recent development that deserves attention, commercial users – our clients – are increasingly getting involved in the process of procedural reform. Groups such as the Corporate Counsel International Arbitration Group are playing a growing role in reform initiatives, and the world of arbitration is listening to them (see http://www.cciag.com and an equivalent group recently launched by the ICC).

This development is to be greatly welcomed and, above all, gives reasons to be optimistic that arbitration's promise can indeed be rediscovered.

Constantine Partasides is a partner and head of international arbitration and Patrick Taylor is a senior associate at Freshfields Bruckhaus Deringer in London.