Global arbitration in a post-COVID world

Inside the preliminary arbitration and alternative dispute resolution (ADR) statistics of the International Chamber of Commerce (ICC) for 2023, we find a clear trajectory indicating that the pre-COVID popularity of commercial arbitration has not only rebounded but also resumed. The ICC remains the world’s leading arbitral institution, exemplified by the sheer volume of cases and the number of countries using ICC arbitration. In 2023, the ICC registered 890 new arbitration cases (third highest in history) and 141 countries respectively. The first and second highest occurred in 2016 (966) and 2020 (946).

The 2023 ICC success story indicates that the negative impact of COVID-19 has all but completely dissipated into history. The construction and energy sectors contributed the largest number of cases in 2022 (45 per cent) and 2021 (44 per cent), from which we can infer a likely repeat in 2023. Likewise, the London Court of International Arbitration (LCIA) saw three industries dominate their caseload: banking and finance, energy and resources, and transport and commodities; altogether, 65 per cent of cases in 2022.

The essential takeaway feels exceedingly intuitive. Real GDP growth predictions from OECD quote ‘stabilised’, referencing, in particular, Asia (led by India) at 7.0 per cent for 2024 and Latin America (led by Mexico) at 2.6 per cent. In other words, global trade and construction is back on the menu and where there is growth, there is an increased likelihood of disputes. We all know that nobody likes litigation, except perhaps litigators. It is clear why ADR has grown, in light of its popularity as a preferred dispute resolution mechanism.

The fact that economic resurgence coincides with arbitration is a meditation to remember. The Bahamas’ growth-driven approach to arbitration reflects that of the wider world and a resurging Caribbean.

The ICAA 2023

The immediate crux of the International Commercial Arbitration Act 2023 (ICAA 2023) is to enact the global gold standard of the United Nations Commission on International Trade Law’s (UNCITRAL’s) Model Law for International Commercial Arbitration (the Model Law). This is stated clearly in section 4(1) of the Act, at the same time as including a ‘good faith’ requirement in interpretation.

The Arbitration Act 2009 was based on the UK Arbitration Act 1996, and not the Model Law. The UK is now seeking to ‘fast-track’ an Arbitration Act 2024 to introduce much-needed efficiency by, for example, introducing a new default rule to use the laws of the juridical seat unless the parties agree otherwise.

That efficiency is the essence of UNCITRAL, to carve a legal path forward for persons of independent states attempting to trade with one another when an agreement is obviously not forthcoming. Throughout ICAA 2023 are provisions written in the same theme, but enabling some freedom for the parties.

For example, section 13(3) speaks to the default appointment of arbitrators and section 19(1) affords the arbitral tribunal powers to grant interim measures unless otherwise agreed by the parties. By clearly drafting in the style of ‘if X and Y fail to agree, Z occurs’, ICAA 2023 invokes the pricelessness of impartiality while providing little room, if any, for bad faith. Likewise, Trinidad & Tobago incorporated the Model Law in 2023 and the British Virgin Islands in 2013.

The AAA 2023

Bahamian Prime Minister Philip Davis reiterated the same need for streamlining with respect to trust disputes, referencing instead the advantage of acknowledging written or oral agreements between the parties seeking to arbitrate. In addition, parties or arbitrators who knowingly disclose information are liable to pay damages. Altogether, the scope for arbitrable agreements expands as do the penalties for bad faith actors.

Amidst the two Acts sits such an emphasis on good faith and clarity. Where commercial parties find themselves in a sea of disagreement, ICAA 2023 grants the tribunal power to carve a way forward and grant interim orders on a ‘balance of harms’ test. Where one party wishes to avoid a trust arbitration when having earlier provided indications pointing in the opposite direction, the Arbitration (Amendment) Act 2023 (AAA 2023) provides a reroute back to honesty. Impartiality dominates commercial resolutions and honouring intention may well bring peace to multi-generational estate plans.

The AAA 2023 echoes the decision of the Supreme Court of the Bahamas in Volpi where the court set out in no uncertain terms that the Bahamas parliament had ‘intended to create a regime that was permissive and supportive of the arbitration of trust disputes’ [279-280], including settlors unless they were expressly excluded in writing. Where a common intention to arbitrate is found, it will likely be salvaged even if part of another invalid agreement.

Litigation should be a last resort and is a bar to progress. The reality of the Bahamas and the UN’s Small Island Developing States is that they also continue to grow on pace with the world, receiving a 39 per cent jump to foreign direct investment inflows in 2022. That arbitration laws correlate with COVID-19’s demise is no accident.

The United Nations Conference on Trade and Development notes that the Bahamas continues to have strong foreign direct investment inflows (approximately USD1.5 billion for 2023). In addition, the Central Bank of the Bahamas brings news of ‘medium scale’ construction projects alongside the Ministry of Tourism’s declaration of 9.7 million visitors for all of 2023. Streamlined arbitration is simply an act of recognition.

Written by Paul Winder, Global Head of Wealth Planning, Deltec Bank & Trust Limited