By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publication of the Year 2021, CIArb (Kenya) Lifetime Achievement Award 2021 and African Arbitrator of the Year 2022 Shortlisted Nominee. Please follow this link to vote for him by Midnight, Monday, 13th June 2022: https://preview.mailerlite.com/m3m6o7l6c8/1968314795065083207/z0p1/*
Over the past century, international arbitration has grown to become an autonomous legal order.6 It has been growing in its importance especially in settling international disputes within the international commercial circles. Globalization has led to an influx of international contracts, and the resultant increased complex commercial disputes. These have been instrumental in the development of international arbitration as the preferred choice of businessmen for the settlement of their disputes.8 They have further led to a denationalization of arbitration, both procedurally and substantively, as well as to a convergence of national legislation and institutional rules, based on a consensus on a greater liberalization of the process.
It has also been documented that the forces of globalization have also opened the door to the application by arbitral tribunals of general principles of international commercial law, common to all nations, and have contributed to the development of an international arbitration culture. There is however a group that feels that international arbitration has also come with its fair share of challenges. There is an increased concern over its judicialization, its time and cost efficiency and various ethical issues. Some feel that the mechanism of international arbitration has lost a stronghold in the global justice arena despite its continuous growth, and a consensus among scholars, businesses, and parties across the world is also mounting that the mechanism has completely lost feasibility.
It has been argued that generally argued that international arbitration has lost its complete efficiency and seen to be equating with litigation-based mechanisms, where parties’ ultimate goals are no longer realized and justified as the ends of international arbitration. It has been noted that even as the debate on the pros and cons of international arbitration ranges on, there are those who view it as a developed versus developing world issue. One author has rightly pointed out that the success story has been relatively regionally celebrated given that some regions like Africa, Latin America, as well as Asia, except the Asian Pacific, are still grappling with how to mainstream and take their share of global international arbitration growth.
Despite these challenges, it is not in question that both developed and developing countries have actively promoted international arbitration practice as the best option for settling global disputes, and have manifestly substantiated their efforts by massively embracing pro-arbitration laws or statutes, as well as ratifying key international and regional arbitration legal instruments. Most African countries, including Kenya, may be said to be at this stage where they are still trying to make their jurisdictions attractive to business community and international arbitration practitioners. The emerging issues and trends in International Arbitration include:-
Costs and time efficiency
Some authors have argued that although individual parties and businesses traditionally believed that one of the advantages of international arbitration is costs and time efficiency, they have begun to realize clearly that this is not certainly true at all times. It is well known within international arbitration practice that practitioners’ hourly rates and venue charges are usually high especially for the well-established institutions. Sometimes, parties spend hugely to have their disputes conducted, even paying higher than what they would have ordinarily spent in litigation, due to inordinate delays in the conduct of arbitral proceedings. This has therefore raised doubt on the effectiveness of international arbitration as the preferred choice for management of commercial disputes.
Third party funding
In the last decade, the efficiency of arbitration has become a concern. Some of the arbitration advantages that have always been highlighted include the speed and the reduced costs of this alternative method of dispute resolution. International arbitration, while potentially cost effective, can have its costs growing exponentially expensive. To arrest this situation, major players and practitioners have been coming up with creative means of financing the process. One such means is third party funding which is defined as an arrangement where someone who is not involved in arbitration provides funds to a party to that arbitration in exchange for an agreed return. The third party funding or financing usually covers the funded party’s legal fees and expenses incurred in the arbitration and the funder may also agree to pay the other side’s costs and provide security for the opponent’s costs if the funded party is so ordered.
While third party funding is not new, and was originally designed to support companies that did not have the means to pursue claims, its use has become a feature of the litigation landscape in several jurisdictions, including in international arbitration, where it has attracted the funders due to the high-value claims, perceived finality of awards, and the enforcement regime provided by the New York Convention. Initially, the funding focused on investor-state arbitration, but now spreading to commercial international arbitration. While third party funding comes with some risks, it can also enhance access to justice for underresourced parties (especially in investor–state disputes) enabling them to pursue proceedings which a lack of financing would otherwise have prevented. On the other hand, for parties that are adequately resourced, funding can offer a more convenient financing structure, allowing capital which would otherwise be spent on legal fees to be allocated to other areas of their business during the proceedings.
Changing Arbitration Rules
It has been reported that most of the major international arbitration institutions have been considering their arbitration rules as a way of embracing the emerging trends and practice in international arbitration. For instance, as at 2020, the rules of the London Court of International Arbitration (LCIA) were updated, with a particular focus on cybersecurity and data protection. Also noteworthy is the fact that the International Centre for the Settlement of Investment Disputes (ICSID) has also refined its rules –a code of conduct for tribunal members, the need for transparency in third party funding, and a new advisory centre on investor-state dispute settlement, and addressing common criticisms of investor-state dispute settlement by addressing costs, the quality and consistency of decisions, and access to justice.
*This article is an extract from the article “Looking into the Future: Making Kenya a Preferred Seat for International Arbitration,” by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2022.
References
Muigua, K., “Looking into the Future: Making Kenya a Preferred Seat for International Arbitration,” Available at: http://kmco.co.ke/wp-content/uploads/2020/12/Looking-into-the-Future-Making-Kenya-a-Preferred-Seat-for-International-Arbitration-Kariuki-Muigua-Ph.D.-28TH-DECEMBER-2020.pdf (accessed on 11/06/2022)