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Trends in International Arbitration we can Expect in 2023

20 Feb 2023 International Litigation and Arbitration

Advs. Gidon Even-Or and David Knoll from AYR – Amar Reiter Jeanne Shochatovitch & Co.

As international arbitration proceedings have become more prevalent over the course of the last few years, several trends can be observed. Some of which we expect to continue over the course of 2023.

First, in recent years there has been a constant rise in the number of disputes being referred to international arbitral proceedings. Nowadays an arbitration clause is included in commercial contracts as a matter of course, especially if the signatories are of different nationalities, and international arbitration is rapidly turning into the preferred venue for international conflict resolution. This can be demonstrated by a recent figure released by the international chamber of commerce (ICC) according to which in May 2022 it registered its 27,000th case.

The rising popularity of international arbitration is also supported by the expected increase in the number of commercial disputes as a result of the global economic recession and the soaring interest rates which place undue strain on business cooperation and transactions.

The second trend is that the choice of international arbitration for dispute resolution has spread to new sectors. In the past the use of arbitration was confined to contractual disputes, investment agreements and M&A transactions. Recent years saw a surge in the employment of arbitration for the resolution of infrastructure and building related disputes as well as IP disputes. We expect this trend to carry on.

Moreover, international arbitration has broken new ground and entered the sphere of corporate law. Many jurisdictions now allow for the resolution of corporate disputes through arbitration, provided that the bylaws of the company at the centre of the dispute include an arbitration clause.

For example, on January 1st 2023 the new Article 697n of the Swiss Code of Obligations came into force according to which arbitration agreements for corporate disputes can now be included in Swiss companies’ articles of association. This applies to Swiss companies Limited by Shares, Swiss Partnerships Limited by Shares and Swiss Limited Liability Companies. Unless stated otherwise in the articles of association, the statutory arbitration clause is binding on the company, the company’s governing bodies, members of the governing bodies and the shareholders.

Another tendency which can be observed in many jurisdictions (such as Switzerland mentioned above) over the past few years is the promotion of legislation aimed to facilitate the conduct of efficient and convenient arbitral proceedings.

Israel too is in the process of adopting such legislation. The Israeli Ministry of Justice has lately introduced the bill of International Commercial Arbitration. The bill is based on the UNCITRAL Model Law on International Commercial Arbitration, and is expected to better enable efficient international arbitral proceedings in Israel.

This phenomenon of legislation aimed at facilitating efficient arbitral proceedings is not limited in any way to national legislation. Arbitration institutions have also been busy promoting new arbitration rules to allow for cheaper and more efficient arbitration proceedings.

Many institutions already implement an expedited arbitration procedure if the amount in dispute is not high (lower than 3,000,000 UDS according to the ICC rules of arbitration). Expedited procedures have gained huge popularity over the last few years, as they are both cheaper and speedy. In fact many litigants prefer the expedited procedure over the normal procedure even when the sum in dispute is large. ICC statistics tells us that 67% of the procedures according to the expedited arbitration procedure reach a final award within 6 months of their incipience, compared to the 26 months it takes on average to complete an ICC arbitration  procedure according to the normal arbitration rules.

Arbitration institutions also show an increasing tendency to employ summary dismissals, a procedural tool which allows the arbitrator to dismiss a case before a fully-fledged arbitration procedure commences. Summary dismissals have not only been introduced to the rules of several arbitration institutions but they are also employed more often by arbitrators.

Finally, in the wake of the COVID-19 restrictions preventing litigants from meeting face to face or travel from their countries of residence to the arbitration seat, the advantages of video conferencing and electronic submissions (the bread and butter of international arbitration procedure) have become more conspicuous.

Another marked trend which can be observed over the last few years and which we expect to carry on during 2023 is the introduction of new places in the world which can serve as arbitration seats.

The importance of arbitration seat does not derive solely from matters relating to convenience and language. It is the place where the parties can confirm the arbitration award in the local courts or seek the courts’ assistance to facilitate the arbitration process.

In the past international arbitration was centered around a few cities which served as the conventional seats of arbitration. Nowadays on the other hand there is an increasing tendency to conduct arbitral proceedings in various places around the globe.

There is continued effort to brand Israel too as an attractive seat for international arbitrations. This could be beneficial to the Israeli legal practice and the Israeli tourism industry alike.

While that prospect seems far off for now, one can certainly take practical steps to bring it about. For instance, advancing the adoption of the Israeli Bill of International Commercial Arbitration into law would put Israel on par with many other countries which have adopted similar laws to facilitate cheap and efficient arbitration proceedings. In this context we can also note the establishment of the Israeli Forum for International Arbitration (of which Gidon Even-Or is a member), which aims, among other things, to advance Israel as an attractive seat of international arbitrations.

Please feel free to contact us for any matter that might arise.

The stated in this document is general information only and does not constitute a legal opinion or legal advice, and should not be used in any other way.