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Challenges and Viable Solutions to the “Legitimacy Crisis” in International Arbitration

Sumayyah Tariq
CGSS-LAW Intern at Center for Global & Strategic Studies (CGSS), Islamabad

“International Arbitration may be defined as the substitution of many burning questions for smoldering one”

International arbitration is boomed since 1945, as nations started to trade again and even more since the end of the 1980s. When the world entered a new era of globalization. The application of the process of Arbitration can be found in any country and any sector that involves bilateral or multilateral dealings be it economy, construction, hotel industry, entertainment, sports, oil and gas, and in the healthcare sector. All major and international brands and even small and mid-size businesses use arbitration. An example of international arbitration would be: If there is a dispute between two parties they cannot agree on terms and conditions then they allow a third party to come and help them. International Arbitration is geographically flexible, meaning that parties wherever they are based, can agree on the place of arbitration and the governing law most suitable to them. Another meaning is that resolving disputes by appointing a suitable third party to provide a legally binding decision. Rather than appear before a court, parties proceed in front of tribunals in a process that’s been described as private sector dispute resolution.

Challenges and Viable Solutions

“Face the challenges
rather than dodging them”

International Arbitration has been facing many challenges. It offers real flexibility in choice picking the decision-makers, the law, the venue, and the rules of engagement. Tailoring the disputes of parties’ needs rather than having parties accept inflexible rules. It is also confidential this means that International Arbitration disputes are dealt with behind doors meaning that sensitive information like commercial information is not in the public domain. Unlike litigation arbitral awards are generally not subject to appeal, this offers the parties finality & certainty with the confidence that they can obtain a final binding decision that allows them to move forward with their business without the risk of being tied up in appeals for years. The most important part is that arbitral awards are generally easier to enforce internationally, than a national court judgment.
International arbitration is a preferred form of commercial dispute resolution, but despite its popularity, critics argue that arbitration has ready to a process as costly and as time-consuming as traditional litigation. As arbitration spreads to new regions, it becomes even more important to address emerging weaknesses. To improve arbitration from arbitrators, arbitral institutions, private practitioners and in-house counsel would arbitration’s strengths of cost efficiency, and speed. It does not only fix broken parts but also better for the future growth of arbitration.
In International Arbitration it is the right of the parties to choose the decision-maker. If this is an advantage to choose decision-makers by the parties then it also rises to criticism. Party appointed arbitrators to play an important role to ensure that the tribunal considers the evidence and arguments presented by the parties that appointed them. It enhances that the losing party will accept the award and comply with it. It is necessary and binding on the losing party. It was noted that this reflects the view not only of private parties but also of many states. The arbitration community has drafted many guidelines to address today’s increasingly complex arbitrator conflicts, but parties, tribunals, institutions, and courts often treat them differently. It is necessary to adopt and enforce strong conflict rules, procedural controls on appointments so that the parties do not abuse the right to nominate arbitrators and rules of ethics to ensure that arbitrators act impartially. But firstly, if parties were to agree on the President of the tribunal and then nominate the other two arbitrators with her/his input.
Another biggest challenge is Cyber fraud in International Arbitration. Unfortunately, even after COVID-19, cyber fraud increasing day by day. Parties and their lawyers should take some strong steps to protect arbitration proceedings. For Instance: In July 2015, the website of the Permanent Court of Arbitration in the Hague was hacked during a hearing of a sensitive maritime border dispute between China and the Philippines. It is a violation of the legitimacy of International Arbitration. It means that hackers have an eye on confidential documents and important matters which under the International arbitration. So, cybersecurity is important than anything else to protect sensitive and confidential information.
Counsel play a fundamental role in international arbitration. There is a need to regulate and sanction counsel for unethical conduct. The standards should focus on objective issues for example arbitrator conflicts caused by the appointment of new counsel during the proceedings. This is also adopted by the two most well-known guidelines, the IBA Guidelines on Party Representation in International Arbitration and the LCIA’s General Guidelines for the Parties’ Legal Representatives. We should give preference to arbitral institutions to take the role of adopting standards. This is a reasonable approach, as it would allow for greater experimentation and refinement of the standards over time. The LCIA has pioneered this route with the adoption of its Guidelines in 2014.
Another biggest challenge for International arbitration is being costly and slow. According to the survey, the cost (68%), lack of insight into arbitrators’ efficiency (39%), and lack of speed (36%) were among the worst characteristics of international arbitration. One option that was considered was the use of partition and motions for summary judgment. There’s an early resolution that can dispose of the case. When issues are connected with other aspects of the case, bifurcation and motions for summary judgment might lead to inefficiencies such as repeat presentation of the same evidence, etc. The most important aspect to ensure that bifurcation and motions increase efficiency.

Conclusion

International Arbitration is very important because it resolves the cross border disputes. But on the other hand, International arbitration has been facing different challenges. We must not be disheartened. We have to overcome the challenges rather than dodging them. For more than two hundred years that the current criticisms of international arbitration are not new. Even now, international arbitration exists and has become more widespread. There have been many disputes arises. Apart from that, we kept in mind that there are inequalities between contesting parties from different parts of the world. In our globalizing times, it would be essential for commercial arbitration to take national socio-economic pro?les into account while dealing with disputes. Also, If we talk about specifically for cybersecurity, under most rules and legal systems, arbitrators and tribunals have the power to make necessary orders and take necessary steps for the protection of confidential information and documents. If we don’t follow any order and step related to cybersecurity, it should be harmful to the legal system, International arbitration, arbitrators, and tribunals as well.
“Injustice anywhere is a
threat to justice everywhere”

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