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The Rise of Arbitration in Asia – A Snapshot

By Vernon Daniel Co, ExpertsDirect.

In the past two decades, Asia has witnessed an increase in the use of arbitration. This coincides with the immense growth of international trade and the increasingly globalised businesses and investments in the region.

As the movement of capital and commerce in Asia increases, so too does the likelihood of business disputes. Increasingly, businesses face the risk of being sued in foreign jurisdictions with unfamiliar laws and procedural rules. For many businesses, arbitration is the method of choice to mitigate this risk and settle the dispute in a neutral forum.

This article intends to provide a picture of the arbitral landscape of Asia today, with a survey of the key arbitral institutions in Asia, their caseloads, and the most common types of disputes found in commercial arbitration.

Why Arbitration?

International arbitration has become the preferred method for resolving cross-border disputes.[1] This can be attributed to several perceived advantages of arbitration over litigation. These advantages include technical expertise in the decision-maker, privacy,[2] and procedural flexibility.[3] Disputes are resolved in a neutral country based on well-established arbitration laws, with the parties in dispute able to choose the decision maker.

The enforceability of arbitral awards has also become an essential part of arbitration, following The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which entered into force on 7 June 1959.[4]

Arbitral Institutions in Asia

International arbitration continues to increase in popularity throughout Asia. This increased popularity is evident in the many nascent arbitral institutions, which have also seen an increase in caseloads alongside the major arbitral institutions.

There are a number of arbitral institutions actively managing arbitration in Asia.[5]

  • The major global arbitral institutions: the International Chamber of Commerce (ICC), and the London Court of International Arbitration (LCIA).
  • The two key regional players: the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC).
  • The dominant institution in the People’s Republic of China: the China International Economic and Trade Arbitration Commission (CIETAC).
  • A group of arbitral institutions with a smaller geographical reach but serving an important service in their region: the Japan Commercial Arbitration Association (JCAA), the Korean Commercial Arbitration Board (KCAB), the Asian International Arbitration Centre (AIAC), Vietnam International Arbitration Centre (VIAC), and a few others.

This article will be focusing on the caseloads of the major arbitral institutions – ICC, SIAC, HKIAC, and CIETAC – in the last five years, leading up to 2020.

International Chamber of Commerce (ICC) International Court of Arbitration

Established in 1923, ICC rules arbitration has become one of the most widely used forms of dispute resolution for international commercial disputes. This may be due to ICC being one of the most established courts administering arbitration and developing arbitral rules. The ICC Court is also well-known for the scrutiny of if its draft final awards, a service not offered by every arbitral institution.[6]

In 2016, 966 new arbitrations were filed with the ICC. [7] With respect to parties, ICC reported that the parties coming from Asia-Pacific were up 22%.[8] In 2017, ICC received 810 arbitration cases, with 23.5% of cases coming from Asia-Pacific;[9] In 2018, 842 arbitration cases, with 25.6% of cases coming from Asia-Pacific;[10] and in 2019, 869 cases, with 30% of cases coming from Asia-Pacific.[11] In 2020, the ICC reported their highest number of cases since 2016, with 946 new arbitration cases.[12] [13]

Hong Kong International Arbitration Centre (HKIAC)

The HKIAC commenced operations in 1985.[14]

In 2016, a total of 262 new arbitration cases were filed with the HKIAC, with 87.2% of the cases being categorised as “international”. Approximately 36% of the arbitrations were administered under the HKIAC Administered Arbitration Rules or the UNCITRAL Rules.[15]  In 2017, the HKIAC recorded 297 arbitration cases; in 2018, 265 cases; and in 2019, 308 new cases.

In 2020, the HKIAC reported that its arbitration caseload totalled 318 new cases – the highest number in a decade.[16]

Singapore International Arbitration Centre (SIAC)

The SIAC was established in 1991.[17]

In 2016, a total of 343 new arbitration cases were filed with the SIAC. 80% of the cases filed in 2016, were described as “international in nature”. In terms of parties, 42% of cases did not involve Singaporean parties.[18] One of the top foreign parties was the United States. The Netherlands and the United Kingdom were also recorded.

In 2017 and 2018, SIAC reported 452 and 402 cases, respectively.[19]

In 2019, SIAC set a new record with 479 new case filings,[20] which was subsequently broken in 2020, with 1,080 new case filings. Of the 1,080 cases, 1,063 (98%) were administered by SIAC, which was also an all-time high.[21]

China International Economic and Trade Arbitration Commission (CIETAC)

Established in 1956, CIETAC is the most dominant arbitral institution in the People’s Republic of China.[22] Since the New York Convention did not enter into force in the People’s Republic of China until 22 April 1987, [23] CIETAC operated for over thirty years without award enforcement in place.

Since then, China’s caseload has grown immensely, and when the New York Convention entered into force, this allowed CIETAC to take on “foreign-related” arbitrations. In 2016, they had taken on 2,181 foreign-related and domestic arbitrations.[24] By caseload alone, CIETAC is one of the largest arbitral institutions in the world.

The years 2017, 2018, and 2019 saw further growth, with CIETAC taking on 2,298; 2,962; and 3,333 cases, respectively.[25]

In 2020, CIETAC saw further growth in its caseload, with a total of 3,615 cases registered.[26] They also recorded a growth in “international” cases, where at least one party was foreign. 739 cases were “foreign-related cases,” compared to 617 in 2019. Out of these, 67 involved cases where both parties were “foreign,” which was a record high.

What Type of Cases Are Most Prevalent?

Although arbitration in the Asia-Pacific region is diverse, the types of disputes requiring arbitration are highly similar across arbitration bodies.

  • In the HKIAC, the most common registered cases in 2020 include international trade and sales of goods (27%), maritime (18.6%), corporate (18.3%), banking & finance (13.5%) and construction (10.7%).[27]
  • In the SIAC, the most common registered cases in 2020 include trade (64%), commercial (8%), corporate (7%), maritime and shipping (6%) and construction/engineering (4%).[28]
  • CIETAC noted that there were 21 different types of cases which they have taken on in 2020. In addition to their most common disputes – including sales of goods, electromechanical equipment and electronics, share investment and transfer, joint ventures, and industrial raw materials[29] – they noted growth in new types of cases such as equity investment, equity transfer, financial innovation, and various service contract disputes. Their caseload also included 143 domain name disputes.[30]
  • Finally, ICC’s most common categories were construction, engineering, and energy.[31]

 

 

Summary and Further Discussion

Figure 1 provides a summary of the growth of arbitration in Asia by caseload, using the biggest arbitral institutions in Asia as a benchmark. Other than the ICC, which has plateaued, there is a noticeable positive trend in the caseloads.

Figure 1. Caseloads for each of the arbitral institutions. CIETAC (blue), ICC (orange), SIAC (grey), HKIAC (yellow).

In the 2021 Queen Mary and White & Case International Arbitration Survey, respondents selected Singapore (along with London) as the most preferred place for arbitration, with Hong Kong following closely behind.[32]

The ICC has also recently confirmed that Singapore is the number one seat of ICC arbitration in Asia,[33] and Singapore has now risen as the top arbitration seat globally.

Another notable development in 2020 is the increased use of virtual hearings. The ongoing global pandemic has forced arbitral institutions to adapt to parties being unable to settle disputes in person. The provisions that the arbitration institutions have put into place are summarised below.

  • The ICC updated their Rules of Arbitration to include rules of conduct in virtual hearings and allowed for greater flexibility for the parties in their dispute procedures. [34]
  • CIETAC established new virtual hearing centres and handled 819 virtual hearings – an increase of 628 cases heard virtually from the previous year. [35]
  • The HKIAC offered numerous virtual hearing services, and also issued guidelines for conducting virtual hearings. In 2020, 80 out of 117 HKIAC hearings were fully or partially held as virtual hearings.[36]
  • Similarly, SIAC has allowed for virtual hearings and alternative arrangements.[37]

Takeaways

Asia has recently become a hotspot not only for parties undertaking arbitration, but also as seats for arbitrating disputes. In particular, Singapore and Hong Kong have grown as preferred seats for arbitrations.

With the movement of commerce and labour across international borders, the most common arbitrated cases involve issues relating to trade and sales of goods, maritime and shipping, and construction.

With the advent of virtual hearings and the increased economic growth of the Asian region, the use of arbitration as a dispute resolution method will likely continue to ris

Note: All references have been accessed on July 2021

[1] A recent international survey found that 90% of respondents preferred using international arbitration for resolving cross-border disputes, either as a standalone method (31%) or in conjunction with Alternative Dispute Resolution (ADR) (59%). The study from QMUL is available at: http://www.arbitration.qmul.ac.uk/media/arbitration/docs/LON0320037-QMUL-International-Arbitration-Survey-2021_19_WEB.pdf

[2] Arbitration v Litigation, David Palser, Available at: http://classic.austlii.edu.au/au/journals/AUConstrLawNlr/1996/16.pdf

[3] Global Arbitration Review (GAR). Andreah Yeap Available at: https://globalarbitrationreview.com/edition/1001508/the-asia-pacific-arbitration-review-2021

[4] The New York Convention Website. Available at: https://www.newyorkconvention.org/

[5] This paragraph is based on the breakdown of arbitral institution in the following article, which splits arbitration institutions based on geographical regions. THE DEVELOPMENT OF ARBITRAL INSTITUTIONS IN ASIA Christopher K. Tahbaz and Justin R. Rassi*. Available at: https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1036&context=alr

[6] ICC Court of Arbitration Procedure, INTERNATIONAL CHAMBER OF COMMERCE. Available at: https://iccwbo.org/dispute-resolution-services/arbitration/procedure/ [https://perma.cc/T32E-R9RG] (“Scrutiny is a distinctive feature of ICC Arbitration. No arbitral award is issued without the Court’s approval.”).

[7] 2016 ICC Dispute Resolution Statistics, ICC DISPUTE RESOLUTION BULLETIN— ISSUE 2, 2017, at 106.

[8] ICC reveals record number of new Arbitration cases filed in 2016, ICC France. Available at: https://iccwbo.org/media-wall/news-speeches/icc-reveals-record-number-new-arbitration-cases-filed-2016/

[9] 2017 ICC Dispute Resolution Statistics, ICC DISPUTE RESOLUTION BULLETIN. Available at: https://iccwbo.org/content/uploads/sites/3/2018/07/2017-icc-dispute-resolution-statistics.pdf

[10] 2018 ICC Dispute Resolution Statistics, ICC DISPUTE RESOLUTION BULLETIN. Available at: https://library.iccwbo.org/content/dr/pdfs/2018statistics_iccdisputeresolution_898.pdf

[11] ICC 2019 Dispute Resolution Statistics. Paris. Available at: https://iccwbo.org/media-wall/news-speeches/icc-releases-2019-dispute-resolution-statistics/

[12] ‘Rise in arbitration cases in 2020 despite reduced Volume of in person hearings due to coronavirus pandemic’, Herbert Smith Freehills. Available at: https://www.lexology.com/library/detail.aspx?g=caa661ab-434a-4856-8783-84f349e06036;%20

[13] ‘ICC announces record 2020 caseloads in Arbitration and ADR ‘, ICC. Available at: https://iccwbo.org/media-wall/news-speeches/icc-announces-record-2020-caseloads-in-arbitration-and-adr/

[14] About HKIAC, HONG KONG INTERNATIONAL ARBITRATION CENTRE, Available at: http://www.hkiac.org/about-us [https://perma.cc/Q2LF-ZWQR]

[15] HONG KONG INTERNATIONAL ARBITRATION CENTRE, ANNUAL REPORT, 10 (2016)

[16] ‘The International Arbitration Statistics Report’, The Disputes Register. Available at: https://www.disputesregister.org/advice/international-arbitration-statistics-report

[17] About Us, SINGAPORE INTERNATIONAL ARBITRATION CENTRE,

http://www.siac.org.sg/2014-11-03-13-33-43/about-us [https://perma.cc/CS4DT54N].

[18] SINGAPORE INTERNATIONAL ARBITRATION CENTRE, ANNUAL REPORT, 14 (2016).

[19] ‘Arbitration Statistics 2019 – How did arbitration institutions fare in 2019?’, Global Arbitration News. Available at: https://globalarbitrationnews.com/how-did-arbitration-institutions-fare-in-2019/

[20] ‘SIAC Sets a New Record in 2019’, SINGAPORE INTERNATIONAL ARBITRATION CENTRE. Available at: https://www.siac.org.sg/69-siac-news/655-siac-sets-a-new-record-in-2019

[21] ‘SIAC Sets a New Record in 2020’, SINGAPORE INTERNATIONAL ARBITRATION CENTRE. Available at: https://www.siac.org.sg/69-siac-news/699-siac-sets-a-new-record-in-2020

[22] Introduction, China International Economic and Trade Arbitration Commission. Available at: http://www.cietac.org/index.php?m=Page&a=index&id=34&l=en [https://perma.cc/TU5X-H6L9].

[23] UNCITRAL, Status of Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958). Available at: http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_statu s.html [https://perma.cc/N6ZP-FSVF].

[24] CIETAC Annual Caseload (Foreign-Related and Domestic), China International Economic and Trade Arbitration Commission. Available at: http://www.cietac.org/index.php?m=Page&a=index&id=40&l=en [https://perma.cc/54S4-LHCU].

[25], Ibid

[26] CIETAC Committee’s work summary for 2020 and work plan for 2021 (text version), China International Economic and Trade Arbitration Commission. Available at: http://www.cietac.org/index.php?m=Article&a=show&id=17427

[27] About Us (2020 Statistics). Hong Kong International Arbitration Centre. Available at: https://www.hkiac.org/about-us/statistics

[28] SIAC Annual Report 2020, SINGAPORE INTERNATIONAL ARBITRATION CENTRE, Available at: https://www.siac.org.sg/images/stories/articles/annual_report/SIAC_Annual_Report_2020.pdf

[29] Asia-Pacific Arbitration Report (2019), Coventus Law. Available at: https://www.conventuslaw.com/arbitrationreport/2019/

[30] CIETAC Committee’s work summary for 2020 and work plan for 2021 (text version), China International Economic and Trade Arbitration Commission. Available at: http://www.cietac.org/index.php?m=Article&a=show&id=17427

[31] ICC 2019 Dispute Resolution Statistics. ICC Paris. Available at: https://iccwbo.org/media-wall/news-speeches/icc-releases-2019-dispute-resolution-statistics/

[32] ‘2021 International Arbitration Survey: Adapting arbitration to a changing world’, Queen Mary University of London and White & Case International. Available at: http://www.arbitration.qmul.ac.uk/media/arbitration/docs/LON0320037-QMUL-International-Arbitration-Survey-2021_19_WEB.pdf

[33] ICC report confirms Singapore as a leading Asia arbitration hub, ICC France. Available at: https://iccwbo.org/media-wall/news-speeches/icc-report-confirms-singapore-as-a-leading-asia-arbitration-hub/

[34] 2021 Trends in International Arbitration, JD Supra. Available at: https://www.jdsupra.com/legalnews/2021-trends-in-international-arbitration-6311785/#_ftn2

[35] ‘Rise In Arbitration Cases In 2020 Despite Reduced Volume Of In Person Hearings Due To Coronavirus Pandemic’, Coventus Law. Available at: https://www.conventuslaw.com/report/rise-in-arbitration-cases-in-2020-despite-reduced/

[36] Latest HKIAC Statistics Reveal That Arbitration Continues to Thrive in Hong Kong Despite COVID-19, Morrison Foerster. Available at: https://www.mofo.com/resources/insights/210216-latest-hkiac-statistics.html#:~:text=Several%20of%20HKIAC’s%20latest%20statistics,the%20highest%20number%20on%20record

[37] https://siac.org.sg/faqs/36-featured-template/advanced-shortcodes/frequently-asked-questions-faq