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This post is authored by Mehak Oberoi, Legal head, APAC, Hydro Power, GE Vernova and Dr. Apoorva Dixit, Assistant Professor-SG, School of Law, GD Goenka University, Gurugram.
1. ABSTRACT
Institutional arbitration is governed by diverse rules and procedures that vary across different arbitral institutions. This diversity can create challenges related to enforceability, arbitrator qualifications, confidentiality, fee structures, and evidentiary standards. This article examines the necessity for harmonisation of institutional arbitration rules, exploring key areas where differences create inefficiencies and inconsistencies. Special emphasis is placed on emerging trends in emergency arbitration, arbitrator disqualifications, third-party funding, and the determination of the seat and venue of arbitration.
2. INTRODUCTION
Institutional arbitration has gained prominence as a preferred method of dispute resolution due to its structured framework and institutional oversight. Historically, the divergent cultural nuances have influenced the framework of rules in various arbitration institutions. However, significant discrepancies in rules among various arbitral institutions pose challenges for parties engaged in cross-border disputes.
3. EMERGENCY ARBITRATION: A CASE FOR UNIFORMITY
One key issue in institutional arbitration is emergency arbitration. While institutions such as the Singapore International Arbitration Centre (SIAC) and the London Court of International Arbitration (LCIA) provide for emergency arbitrators by default, others require parties to explicitly include such provisions in their arbitration agreements. Further, enforceability of emergency arbitration decisions varies, with some jurisdictions readily enforcing them while others lack statutory recognition. India, for example, has recently proposed recognising emergency arbitration; however, implementation challenges, such as a lack of arbitrators with relevant expertise, remain a concern.
The increasing reliance on emergency arbitration in international disputes underscores the necessity for uniform procedures across arbitration institutions. The Hong Kong International Arbitration Centre (HKIAC) has reported a rise in emergency arbitrator applications, so has Singapore International Arbitration Centre (SIAC), bringing the cumulative total to 152 since the procedure's introduction in 2010.
The absence of uniformity in emergency arbitration procedures leads to unpredictability for parties engaged in arbitration. Given that emergency arbitration can be crucial in obtaining interim relief before the constitution of the tribunal, a standardised approach across institutions would facilitate swifter dispute resolution and greater consistency in enforcement. To fully appreciate the impact of standardizing emergency arbitration, it is equally important to examine the procedures governing arbitrator appointment and potential disqualifications, as these factors can significantly influence the efficiency and fairness of interim relief proceedings.
4. ARBITRATOR APPOINTMENT, CHALLENGES, AND DISQUALIFICATIONS
Institutions differ in how they handle arbitrator challenges. Some jurisdictions allow courts to decide on arbitrator disqualifications, while others delegate this authority to the arbitration institution or even the tribunal itself. This inconsistency can affect impartiality and procedural fairness. A standardised approach to arbitrator appointment and challenge mechanisms could enhance predictability and confidence in institutional arbitration. Arbitrator challenges are handled differently across various SIAC mandates that arbitrator challenges be decided internally by its SIAC Court, ensuring institutional oversight and consistency.
However, this approach may raise concerns about transparency and the lack of external review. On the other hand, the London Court of International Arbitration (LCIA) allows the tribunal itself to decide on challenges, which can be problematic as it creates the risk of an arbitrator ruling on their own potential disqualification, thereby compromising neutrality. In contrast, the International Chamber of Commerce (ICC) entrusts its Scrutiny Committee with reviewing arbitrator challenges, adding an additional layer of scrutiny and reducing the risk of bias. However, this process can be time-consuming, potentially delaying proceedings. These varying approaches to arbitrator disqualification illustrate the absence of a unified framework, which can lead to uncertainty for parties involved in institutional arbitration. A standardized mechanism for arbitrator challenges could help enhance confidence in arbitration by ensuring impartiality, procedural fairness, and consistency across institutions.
Arbitration Institution
| Arbitrator Challenge Decision Authority | Key Concern |
SIAC (Singapore International Arbitration Centre) | Decided internally by SIAC Court | Institutional consistency but potential lack of external oversight |
LCIA (London Court of International Arbitration) | Reviewed by the tribunal itself | itself
Risk of bias if challenged arbitrators decide on their own case |
ICC (International Chamber of Commerce) | Scrutiny Committee vets challenges | Provides additional review but can be time-consuming |
5. FEE STRUCTURES: NEED FOR STANDARDISATION
The cost of arbitration varies significantly among institutions. Some institutions, such as the ICC, follow an ad valorem system where fees are based on the dispute value, while others, like the LCIA, use an hourly rate system. These variations can create uncertainty for parties in estimating arbitration costs. A harmonised fee structure, or at least greater transparency in fee schedules, could help mitigate unpredictability.
Arbitration Institution
| Fee Structure
| Estimated Cost for Large Disputes ($10M+ cases) | Key Considerations |
SIAC (Singapore International Arbitration Centre) | Ad valorem model (1%–3% of dispute value) | Highest – 35% more than SIAC/HKIAC | Costs scale with dispute value, making high-value cases expensive |
LCIA (London Court of International Arbitration) | Hourly rate ($450–$750 per hour per arbitrator) | variable – depends on case complexity and arbitrator hours | Can be unpredictable, but offers flexibility |
ICC (International Chamber of Commerce) | Hybrid model (Fixed + value-based fee) | Lower than ICC, more predictable | Balances cost control with scalability |
HKIAC (Hong Kong International Arbitration Centre) | Ad valorem or hourly rate (party’s choice) | Comparable to SIAC | Offers flexibility based on party preference |
This cost disparity highlights the unpredictability parties face when budgeting for arbitration. ICC's ad valorem model can make high-value disputes considerably more expensive, while LCIA's hourly rates introduce uncertainty depending on case duration. SIAC and HKIAC provide more flexible models, balancing cost control with scalability. A standardized approach or greater transparency in fee structures could improve predictability, fairness, and accessibility in institutional arbitration.
6. CONFIDENTIALITY IN INSTITUTIONAL ARBITRATION
Confidentiality is a pivotal factor in institutional arbitration, yet practices vary across different arbitration bodies, leading to potential uncertainties regarding the privacy of proceedings. The LCIA and the HKIAC enforce strict confidentiality obligations for both parties and arbitrators, ensuring that all aspects of the arbitration process remain private. In contrast, the ICC does not automatically impose confidentiality; parties must explicitly agree to such provisions, which could inadvertently lead to disclosures if not proactively addressed. The SIAC adopts a middle ground, maintaining partial confidentiality unless the parties expressly agree otherwise.
The absence of standardized confidentiality protocols can influence parties' decisions to engage in institutional arbitration to a large extent. A 2018 International Arbitration Survey by Queen Mary University of London revealed that 42% of respondents ranked confidentiality as the most important reason for choosing arbitration.
This underscores the necessity for harmonized confidentiality guidelines to bolster trust in the arbitration process and ensure consistent protection of sensitive information.Businesses prioritize confidentiality in arbitration to safeguard proprietary information, maintain competitive advantage, and preserve reputations. Public litigation can expose sensitive business details, potentially leading to competitive disadvantages and reputational harm. Arbitration offers a private forum where disputes can be resolved discreetly, protecting trade secrets and fostering open communication between parties. This privacy not only facilitates candid dialogue but also aids in preserving business relationships that might otherwise suffer from publicized disputes.
In summary, while confidentiality remains a cornerstone of arbitration's appeal, the lack of uniformity in its application across institutions can lead to unpredictability and reluctance among parties. Establishing standardized confidentiality provisions would enhance consistency, protect sensitive information, and reinforce confidence in the arbitration process.
7. SEAT AND VENUE OF ARBITRATION: DIVERGING INTERPRETATIONS
The distinction between the seat and venue of arbitration is crucial, as misinterpretations can lead to practical challenges, including jurisdictional disputes and complications in the enforcement of arbitral awards. While specific statistical data on the frequency of such issues is limited, several case studies and legal analyses highlight the practical implications of this confusion.
Jurisdictional Disputes: Misunderstanding the concepts of seat and venue can result in protracted legal battles over which courts have supervisory authority over the arbitration process. For instance, in the case of Union of India v. Hardy Exploration and Production (India) Inc AIR 2018 SUPREME COURT 4871, 2019 (13), the ambiguity in distinguishing between seat and venue led to extensive litigation to ascertain the appropriate jurisdiction, thereby delaying the resolution of the dispute.
Enforcement Challenges: The seat of arbitration determines the procedural law governing the arbitration and the jurisdiction for any annulment or enforcement proceedings. Confusion between seat and venue can lead to challenges in enforcing arbitral awards, as seen in BGS SGS SOMA JV v. NHPC Ltd. (2020) 4 SCC 234, where the Indian Supreme Court had to intervene to clarify the seat of arbitration due to conflicting interpretations, impacting the enforceability of the award.
These examples underscore the necessity for a standardized and clear distinction between the seat and venue of arbitration. Such clarity would mitigate jurisdictional conflicts and enhance the predictability and efficiency of enforcing arbitral awards globally.
8. THIRD-PARTY FUNDING: DIVERGENT REGULATIONS
The rise of third-party funding in arbitration has led to regulatory discrepancies. While institutions like the ICC have introduced provisions requiring disclosure of third-party funding, others remain silent on the issue. The absence of a uniform regulatory framework raises concerns about conflicts of interest and transparency. Establishing guidelines on disclosure and funding arrangements could prevent potential disputes and maintain fairness.
The role of third-party funders in arbitration is expanding, making it imperative to develop a coherent approach to disclosure obligations, funding limits, and ethical considerations.
Different jurisdictions take varied approaches to regulating third-party funding — for example, Hong Kong and Singapore have introduced legislative frameworks mandating disclosure, while other regions like England & Wales rely on institutional rules or case law to navigate funding complexities. Association of Litigation Funders provides a voluntary code of conduct, to ensure ethical funding practices. On the other hand in Australia, third party finding is common in class actions and arbitration. In fact, International Commercial Arbitration (ACICA) Arbitration Rules 2021 to include provisions for the recovery of reasonable third-party funding costs as part of the arbitration costs. Further, parties shall on its own initiative disclose the existence of any third-party funding and the identity of the funder.
Dubai International Financial Centre (DIFC) Courts' Practice Direction No. 2 of 2017 provides the requirements for funded parties to disclose their funding arrangements and the identity of the funder to all other parties and the court.
Markets like India are also showing signs of gradual acceptance of the concept of third party funding.
Addressing these issues through harmonisation efforts could enhance the integrity of arbitration proceedings. The rise of third-party funding (TPF) in arbitration has led to substantial concerns among arbitration users, particularly regarding conflicts of interest and transparency. A 2015 International Arbitration Survey conducted by White & Case and Queen Mary University of London revealed that 76% of practitioners advocate for mandatory disclosure of TPF arrangements, with 63% specifically emphasizing the need to disclose the identity of the funder.
These concerns are echoed in broader legal contexts. A recent survey by Fair Civil Justice indicated strong public support for stricter regulations on litigation funding, including mandatory disclosure of funding sources and ownership information. Additionally, 65% of respondents believe that lawyers and funders should not be compensated before claimants in successful group actions.
The apprehension surrounding undisclosed funders stems from potential conflicts of interest that may compromise the impartiality of arbitrators and the integrity of proceedings. Without transparency, parties may unknowingly engage in arbitrations where arbitrators have indirect relationships with funders, leading to challenges and possible annulment of awards. Therefore, establishing uniform guidelines for the disclosure of TPF arrangements is imperative to maintain fairness and trust in arbitration processes.
9. EVIDENTIARY RULES: INSTITUTIONAL VARIATIONS
Evidentiary rules also differ among institutions. While some institutions adopt the IBA Rules on the Taking of Evidence, others apply bespoke procedures. These differences can lead to inefficiencies and inconsistencies in proceedings. A harmonised set of evidentiary rules could improve procedural efficiency and fairness.
Standardisation of evidentiary rules could include guidelines on document production, witness testimony, and expert reports. This would enhance predictability for parties and arbitrators, ensuring that evidentiary processes remain efficient and effective across institutions.
10. RECOMMENDATIONS
Standardising Emergency Arbitration Provisions: Arbitration institutions should align their rules on emergency arbitration, ensuring uniform enforceability and accessibility across jurisdictions.
Establishing Clear Guidelines on Arbitrator Disqualification: Institutions should develop standardised mechanisms for arbitrator disqualification to ensure impartiality and procedural fairness.
Creating a Transparent Fee Structure: Institutions should introduce clear and comparable fee structures, allowing parties to better estimate costs and avoid disputes over arbitration expenses.
Implementing Uniform Confidentiality Standards: A common framework for confidentiality should be adopted to provide consistent protection for parties involved in arbitration.
Clarifying Seat and Venue Distinctions: Institutions should establish uniform definitions and guidelines to eliminate ambiguities and enhance predictability in arbitration proceedings.
Developing a Regulatory Framework for Third-Party Funding: Institutions should introduce uniform disclosure requirements for third-party funding arrangements to prevent conflicts of interest.
Harmonising Evidentiary Rules: Standardisation of evidentiary procedures would streamline arbitration processes and reduce procedural uncertainties for disputing parties.
Encouraging Institutional Cooperation: Arbitral institutions should engage in collaborative efforts to promote best practices and work towards greater rule harmonisation.
11. CONCLUSION
The absence of harmonisation in institutional arbitration rules presents many challenges, affecting enforceability, arbitrator selection, confidentiality, fee structures, and evidentiary standards. While complete uniformity may not be feasible due to jurisdictional variations, increased convergence in key areas could enhance the efficiency and reliability of institutional arbitration. A balanced approach that respects institutional autonomy while promoting standardised best practices would be beneficial for the global arbitration landscape.
In the recent years, many institutions and bodies are attempting to bridge the gap between the diverse institutional rules. Dialogues have been initiated between various institutes to focus on standardization of appointment of emergency arbitration procedures. Similarly, with the growing emphasis on third party funding, institutes are attempting to develop clear guidelines on disclosure or funding arrangements and ethical obligations of the parties.
Through international cooperation and dialogue among arbitral institutions, it is possible to develop a more consistent framework that ensures fairness, predictability, and accessibility in institutional arbitration.
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