Arbitration in the ‘not so’ age of innocence – a musing
Introduction?
????????????According to the Oxford Dictionary1,?“age of innocence” refers to ‘a time when a person or society exists in a state of childlike simplicity or naivety’. It also happens to be the title of a best-selling book published in 1920 by Edith Wharton, then turned into a romantic movie in the 1990s, ‘pari materia’?the meaning according to the dictionary.?
????????????As a matter of widely accepted observation, how we do business today is a far cry from a century ago, perhaps even as recently as several decades ago. Arguably, life was simpler in the past with people much more ‘innocent’ also because the business community was far more close-knitted then. In doing business, trust is key and this would not come as a surprise since people tend to know each other within the business community. People are inclined to preserve business relationships thus disputes are not what they desire. Of course, this is not suggesting that disputes are uncommon in the past, however, suffice to say, societal values were different in the past, which can affect both actions and reactions.?
A brief history and present day
????????????Maybe two or three decades ago, arbitration was a ‘household name’ within certain specific industries as their key dispute resolution method, where technicalities and facts are pivotal in its processes, such as in the construction and shipping sectors. For example, in the construction industry of yesteryears, a good number of arbitrators were mostly architects, engineers or quantity surveyors but not legally trained professionals. It was said that “the role of the arbitrator is not necessarily a specifically juridical one; credibility, personal integrity and an understanding of commercial and technical issues are more important than legal competence”.2 For instance, also, construction claims specialists tend to represent parties in arbitral proceedings where they were the masters of the science and facts. Lawyers do assist them in arbitral proceedings with legal aspects but they were largely supporting technical experts then, unlike now.?
????????????In the present day, the arbitration industry is dominated by legally trained professionals; many arbitrators are retired judges and legal professionals whereas party representatives are now almost entirely lawyers. Now, engineers, technical specialists and subject domain experts are relegated to assisting lawyers as experts to provide technical knowledge expertise. An acquaintance who had a thriving career as a ‘technical’ arbitrator lamented about the end of their breed in contemporary times. Whilst I do not think that they are coming to an end, it would be more accurate to say that they are becoming redundant due to their limited understanding of and experience in the ‘legal technicalities’ which are the domain of legal professionals. Besides, arbitral tribunals can always appoint technical experts to assist them when necessary. Indeed, the adoption of ‘US-style procedure’ in terms of judicialisation3 of arbitration, also more accurately, the common law litigation approach now all prominent and present in arbitration conduct nowadays.??
????????????Indeed, the arbitral world has changed dramatically and arbitration which has been around for centuries has evolved. In its present form today, it is much more sophisticated and complex than before. It is no longer just an inconsequential, ‘alternative’ method of dispute resolution. When the parties have selected arbitration, they are bound to arbitrate. Arbitration is widely used presently also because of the vast volume of international trade. It has become a?de rigueur?area of practice for many legal professionals today. It is also a rewarding area of practice.?
Present day lawyers and arbitration
????????????Put simply, badly drafted arbitration agreements commonly referred to as “pathological clauses”? are still common. Unfortunately, most commercial contracts are drafted by corporate lawyers thus the question, do they really know about arbitration? Or litigation lawyers who simply ‘brushed off’ arbitration, refusing to accept its prominence in commercial dispute resolution? This is a two-fold inquiry: firstly, corporate lawyers may argue that they are not too proficient with dispute resolution clauses because they are essentially not litigation professionals. Without disrespect, the drafting of a workable and effective dispute resolution clause does not hinge on whether one knows how to conduct dispute resolution. Another popular reason given was that arbitration or dispute resolution clauses are given the least importance thus drafted at the very last minute haphazardly, called a ‘midnight clause’. In reality, arbitration clauses tend to be a cut-and-paste job without too much attention, consideration or perhaps even comprehension. Possibly, myth-busted.?
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????????????Secondly, some lawyers deny arbitration at rather great perils, at times even in the light of the existence of an arbitration clause in the contract. It is baffling why in today’s age, some lawyers attempt to fight an arbitration clause (unless of course if the arbitral clause is defective). Why continue to argue that the world is flat? Some hold the view that they prefer domestic litigation because it is their expertise, thus??‘rice bowl’. Perhaps some are not opposing arbitration but merely adopting a tactical approach. Regardless of the arguments, we need to come to terms with the proliferation and growing importance of arbitration?
Arbitration aberration???
????????????The fact is we cannot deny that the arbitration world is far from being a?Utopia; users have complained about high costs and complexity. Has arbitration grown into an abomination? Why is it so expensive to arbitrate these days? Also, why has arbitration become so cryptic? Whilst the world is dominated by civil law jurisdictions, the common law litigation approach to arbitration is rather prevalent. Just consider terms like “discovery”, “leave” or “injunction”; I recalled a non-English speaking contact from Indonesia who undertook his first international arbitration and was rather distressed because his standard Indonesia-English dictionary provides no helpful explanation as to what those terminologies were!
????????????There appears to be a shift in the practice and conduct of arbitration from what supposed to be a method of dispute resolution alternative to court litigation to seemingly becoming a ‘quasi-court litigation’ process. If so, what has happened to the needs of parties and users? It is their disputes and certainly, they are entitled to some say about how their disputes are to be resolved. For this reason, methods alternative to arbitration such as mediation are fast gaining traction. Understandably, parties have difficulties in seeing the logic of lengthy and costly arbitral proceedings which may not guarantee any outcome even with a victory though on paper only (i.e. arbitral award)??????
Change is inevitable and innovations welcomed
Nevertheless, change is unavoidable. The growth of international commercial arbitration can be squarely attributed to the rise in cross-border trade and investments; we practically do business cross-border these days, for example, planting of fruits in Malaysia and exporting them to China. Modern business practices also dictate that people enter into contracts and become more aware of their legal rights where nothing is left to chance. Not only that, the nature of contracts between parties these days are no longer simplistic; it could involves multiple jurisdictions wherein the execution of the contracts may span across, for instance,??mining of minerals in one countries to be exported to another whereas the contract could be governed by a ‘neutral’ law not connected to the parties. The business world today is no longer that simple and ‘innocent’.?
Thankfully, however, we are also changing with the times. There are now more options for businesspeople to consider in the resolution of their commercial disputes. Innovations in terms of techniques and methods are also evident in the world; we have also utilised digital technology in dispute resolution methods. New regulations and practices are also being introduced in many key jurisdictions. For instance, Third Party Funding is now permissible in major arbitral jurisdictions which will enable a party with legitimate claims but lacking in resources to seek funding financial support in financing their legal costs. Finally, technology will always be a game-changer and can be expected to also transform the dispute resolution sphere. We will certainly be watching this space.?
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