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Competition for Commercial Disputes Around the World

Medico Legal

At the moment the political and legal commentators in the UK are fixated on Brexit. Andnowonder.Inonlya few weeks the UK could see the biggest political and legal in generations. In the midst of that change, many have questioned the future role for Lon- don as a hub for international disputes.

Differences between arbitration and litigation

One preliminary question is the difference between ajurisdiction as a centre for litigation (so state endorseddispute resolution) and as a centre for arbitration.Typically these are seen as very different creatures.

So:

u Arbitration is seen as quick, whereas litigation is not;

u Arbitration is confidential, whereas litigation is not;

u Arbitration is flexible, whereas litigation is not;

u Arbitration is inexpensive, whereas litigation is not

u Arbitration allows you to choose your decision maker, with litigation you cannot

.u Arbitration awards can be enforced internationally, where with litigation this can be more difficult.

In reality, these distinguishing features have becomeblurred. An arbitration involving an internationalcommercial dispute can be time consuming, followcourt like procedures and be very expensive. Courts,in contrast, are keen to point to the flexibility of theirprocedures, and their focus on resolving disputes inway that is “proportionate” to the nature or value ofthe dispute.

The English courts have clear rules on proportionalityof costs. In accordance with CPR 44.3(2), the courtwill only allow costs which are proportionate to thematters in issue and will disallow costs which are disproportionatein amount even if they were reasonablyor necessarily incurred. Any doubt as to whethercosts were proportionately incurred, or are proportionatein amount, will be resolved in favour of theClaimant as paying party. In Arjomandkhah v Nasrouallahi[2018] EWHC B11 (Costs) the judge wasclear that he had have regard to all the circumstancesin deciding whether costs were proportionately incurredand proportionate in amount, not just thevalue of the claim.

London, for decades, has been a hub for international disputes, along with New York. The London Commercial Court was set up in 1895 and developeda reputation for excellent judges, sophisticated business knowledge, independence and respect for therule of law. While some will point to the attraction of robust disclosure obligations, others will be highlightthe significant cost that this generates. The working language is also attractive as it is, for now, one of themost common languages in global business.International litigation hubs

Look at the new international hubs being opened,and an obvious feature is that the cases can be conductedin English. The flexibility of procedures is highlighted. And increasingly the dispute resolutionhubs are seeking to increase their attractiveness by building state of the art technology centres so that costs can be driven down and speed of process increased.

These features all seem to reflect an approach that ifthey are to compete with established hubs such asLondon or New York then they need to be as goodas, if not better than, London and New York when itcomes to such things as the quality of judges, independence,efficiency and cost.

Pamela Bookman, in her detailed paper entitled“The Adjudication Business” points out that some seethis not as a competition between courts, but rather a competition between countries. To compete globally for investment, countries need an effective system for resolving commercial disputes. The rationale is that companies investing into a country need to be comfortable that their investment will be protected by the rule of law, and problems will be resolved fairly.

On one view the creation of these commercial courtsis part of the ebb and flow between arbitration andlitigation. As arbitration increases in popularity andadopts new processes and technology, so courts respondand do the same. National courts then seek tosell their new streamlined processes, and lure partiesaway from arbitration.

At a policy level however, there should be a continual focus on improving the national court structure inany jurisdiction, if for no other reason than the courts are the only forum that will publicly state what thelaw is and how it applies in any given situation. That that public statement allows the lawyers and clients tolearn and adapt when conducting their business.

Article by John MacKenzie, Partner, Shepherd andWedderburn LLP

 

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