A timeline comparison of International Arbitration versus Litigation.

International Dispute Resolution

Arbitration is often said to be a better dispute determination mechanism than litigation. Why? Well parties often find arbitration desirable, as it can relieve certain financial pressures and time constraints associated with litigation. The American Arbitration Association suggests that through arbitration, on average, US domestic commercial disputes are determined within 11.6 months. Yet, is it the same for international disputes? We explore the timing advantages associated with using international arbitration as a dispute resolution mechanism, with a primary focus on international commercial arbitration.

One of Europe’s leading research centres on International Dispute Resolution, the School of International Arbitration of Queen Mary University of London, conducts regular surveys to observe social perceptions of arbitration. Their results reveal an interesting enigma; while users of international arbitration value efficiency as the main driver behind their reasoning to incorporate the mechanism, they also suggest time delays and costs are the main disadvantages of international arbitration. This paradox indicates a disconnect between initial expectations of arbitration, and actual experiences.

Common Duration of International Commercial Arbitration

Over recent years, international arbitral institutions have released data on the median duration of international commercial arbitrations. This length varies depending on parties' conduct and their procedural choice. The variance between institutions is further magnified by methodology variations which often make direct comparisons between institutions difficult.

The International Chamber of Commerce’s (ICC) 2020 Dispute Resolution Report states that during 2020, the median duration of arbitrations that reached a final award was 22 months. This is significantly longer than the median duration for many alternative institutions and, in part, may be due to the higher value of ICC arbitrations. Further distinguished from other institutions, the ICC requires the drafting of terms of reference which provide a solid foundation for the whole arbitration. They also undertake the scrutiny of arbitral awards, to ensure quality standards and enforceability. While these two procedures may slow down the start of an arbitration, long-term, they may lead to cost savings and increased chances of settlement.

The International Centre for Dispute Resolution (ICDR), an international division of the American Arbitration Association, reported a median arbitration duration of 13.1 months between 2015 and 2017, with a median settlement time of 9 months. Noticeably, 72% of ICDR arbitrations settle. This high proportion, in part, may be associated with the ICDR's policy to encourage parallel mediation.

The Singapore International Arbitration Centre (SIAC) released a 2016 study which focused on the costs and duration of SIAC arbitrations. From a sample of 98 arbitrations, their findings revealed a median duration of 11.7 months, notably lower than results from alternate arbitral institutions.

The Hong Kong International Arbitration Centre (HKIAC) released a 2023 report on the costs and duration of arbitrations. This report encapsulated all HKIAC arbitrations that reached a final award between 2013 and 2023, it revealed a median arbitration duration of 15 months. As approximately a quarter of these were expedited or emergency arbitrations, the results may have been skewed to reflect a lower average.

Although it is difficult to directly compare international arbitral institutions, reports indicate that international arbitrations generally last between 11 and 22 months from the initial request to the issue of the final award.

A Comparison: Resolving International Commercial Disputes in US Court

A helpful resource to understand the length of US federal court litigation, is the data collected from US District Courts. Between April 2021 and March 2022, civil cases recorded a median duration of 29.8 months from the date of filing. Typically, US federal courts do not handle a high amount of complex and cross-border commercial disputes. This can be contrasted with US District Courts, which have longer median durations; New York at 35 months, DC at 38.5 months and Delaware at 40.6 months.

These statistics indicate that US federal court litigation is much longer than international arbitration. However, these results fail to accurately capture the overwhelming majority of cases that do not make it to trial. 2023 US District Court statistics suggest that less than 2% of contract disputes make it to trial, being considerably lower than at the international level. For comparison, a study conducted by Dispute Resolution Data reveals that 35% of international commercial arbitrations reach a final award.

While international arbitration appears to have a far shorter timeline than litigation for international commercial disputes that run their course, these results don’t consider the effects of disputes that conclude through settlement or dismissal.

There are, however, tools that parties can use to reduce the duration of their arbitration proceedings. The International Court of Justice's 2018 "Arbitration Commission Report on Techniques for Controlling Time and Costs in Arbitration" aims to assist parties in reducing the cost and time of their proceedings in recommending:

  • Arbitration clauses be simple and clearly drafted to minimize disputes.
  • Fast-track procedures such as shortening time limits.
  • Selecting experienced counsel who have sufficient capacity.
  • Appointing an arbitrator promptly, and challenges to their independence or impartiality should be avoided.
  • Virtual conferences can be conducted effectively.
  • Documentary evidence be carefully considered.

In summary, while as a whole US courts tend to resolve matters faster than arbitration, this is primarily due to earlier dismissals and settlement. For cases that run their course, international arbitrations are substantially faster than litigation, particularly where experienced counsel have assisted with minimising hurdles and delays.

As Principal, Director and Division Lead for our Commercial Law and Dispute Resolution Division Meghan Warren is one of the few lawyers in Australia who is admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

If you find yourself in need of legal assistance for either a domestic business dispute or an international dispute contact us to find out how we can assist.  Contact our office today on +61 3 9822 8588 or via email HERE.

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