Illuminating the top trends

International
arbitrationin 2022

International arbitration in 2022:
top trends

Introduction
Welcome to our annual review of the
top trends in international arbitration for 2022.
This time last year, we hoped that 2021 would see the beginning of the end of the COVID-19
pandemic and the start of a global economic recovery. At the beginning of 2022, despitewidespread vaccination programmes, the pandemic and resulting economic disruption
continue to interfere with many fundamental aspects of life and business across the globe.
In this edition of our top trends publication, we explore
some of the key themes that we predict will influence
the arbitration landscape during the year ahead.
The 10 trends covered in this year’s report havebeen identified by international arbitration specialists
from across our global network.
In addition to the pandemic, there are a myriad ofother political, economic and social factors impacting
the world that our clients operate in, which arehaving knock-on effects on the substance and practiceof arbitration. We have identified some of thesegeneral themes below, which are considered further
in the individual trends.
•	Growing environmental, social and governance (ESG)
expectations of business and the implementationof broader climate change goals are expected to leadto an increase in ESG-related disputes being referred
to arbitration (ESG and arbitration), not least in theenergy and construction sectors as companies
strive to implement net zero and global energy
transition programmes over the coming years(Construction arbitration in the face of energy
transition and climate change).
•	The continuation of the global economic downturn is
expected to lead to a further increase in the numberof disputes across many sectors. Arbitral institutions
reported a record number of cases for 2020 and thistrend is likely to continue as businesses try to recoup
some of their pandemic losses, exacerbated by the
expiration of government protection schemes andagreements to defer or reschedule performance2of debt (COVID-19 and the arbitration landscape).
The effects of the pandemic are likely to catalyseinterest in and use of third-party funding as
companies adopt new strategies for liquidity and risk
management (Developments in third-party funding).
•	In the EU, the European Court of Justice (ECJ) has
sought to further curtail investment protection.
The ECJ has extended the historic decision in
Achmea, which had declared arbitration clauses
in intra-EU BITs incompatible with EU law, tointra-EU ECT arbitration and ad hoc arbitration
clauses. We consider what steps investors cantake to protect themselves going forward(Investment arbitration in the European Union).
•	Mirroring increasing societal expectations on
business mentioned above, the arbitration
community has seen a marked increase in initiatives
designed to improve professional, ethical andenvironmental standards in arbitration conduct
and procedure, including those aimed at increasing
the diversity and civility of arbitration(Emerging standards in international arbitration).
•	Continued scepticism of ISDS has led to renewed
efforts at pushing reform. The long-awaited revised
ICSID Rules are due to be launched in 2022 withnovel features such as a new fast-track arbitration
procedure designed for investor-State disputes.
Reform in the ISDS sphere follows extensive
procedural reforms of rules aimed at making
commercial arbitration more efficientand cost-effective over recent years(Drives towards greater efficiency).

International arbitration in 2022:
top trends•	Accelerated digital transformation and innovation willcontinue to impact the disputes landscape over theyear ahead with the rapid growth and globalisationof the tech sector. New product areas, suchas cryptocurrency, blockchain and AI, for example,
will inevitably give rise to new types of commercial
disputes, while increased government action toregulate the big tech companies may also lead toan increasing number of tech-related investor-Statedisputes (Arbitration and the tech sector).
•	Government involvement in the economy andinterference with business is on the increase inother sectors too, including finance. Financial
institutions are increasingly alive to the protections
available under investment treaties in the eventof government action that adversely affects theirinvestments. We also explore recent developments
in commercial arbitral procedure designed tomake arbitration more attractive to the banking
community (Financial institutions and arbitration).
•	A rare example of government interference inarbitration procedure towards the end of last year
concerned Dubai Decree 34 of 2021, which had theeffect of making the Dubai International Arbitration
Centre the only Dubai arbitral institution withauthority to administer cases. We look at theresulting impact on arbitration in the region(Consolidating arbitration centres in the Middle East).

Freshfields Bruckhaus Deringer LLP

3

Read on to explore these trends in more detail.
If you would like to discuss any of the topics coveredin the report, please reach out to us, the authors of
the trends or your usual Freshfields contact.
We look forward to navigating the challenges andopportunities presented by these developmentswith our clients during the year ahead.

Meet the team:Nigel Blackaby QC
Global Co-Head of International
Arbitration and Co-Head of Latin
America PracticeBoris Kasolowsky
Global Co-Head of International
Arbitration and Partner,
Disputes, Litigation andArbitration

Ashley Jones
Senior Knowledge Lawyer,
Disputes, Litigation andArbitration

International arbitration in 2022:
top trends

Contents

401.
The rising significance of
ESG and the role ofinternational arbitration

06.
Drives towards greater
efficiency ininternational arbitration

02.
How COVID-19 has shaped
and will continue toshape the arbitration
landscape07.
The future of arbitrationin the tech space

03.
Third-party funding:easing into themainstream

08.
Financial institutions
and arbitration04.
Investment protection
within theEuropean Union

09.
Construction arbitrationin the face of energy
transition andclimate change

05.
Emerging standards
for the conduct ofinternational arbitration

10.
Consolidating arbitration
centres in the Middle East

The rising significance of ESG and
the role of international arbitration

International arbitration in 2022:
top trends

01.
The rising significance of ESG and
the role of international arbitration
Jack Terceño
Partner, Tokyo

Will Thomas QC
Partner, London

Amanda Neil

Special Counsel, Vienna

Environmental, social and governance (ESG) issues
continued to dominate legal, political and business agendas
in 2021. Some of the most notable developments thatwill affect how companies address ESG issues in 2022 andbeyond include:•	The groundbreaking Shell decision by the Hague District
Court, which represents the first time a court has
imposed a legal obligation on a company to reduce its
CO2 emissions.
•	The European Commission’s much-awaited ‘Fit for 55%’
legislative package, which aims to achieve a 55 per centreduction in carbon emissions by 2030 and net zeroby 2050, along with the expected publication in early2022 of its proposed Supply Chain Directive, which will
impose human rights due diligence obligations oncompanies operating in the EU.
•	COP26, which made significant progress in achieving
the goals of the Paris Agreement, including by
establishing the Glasgow Financial Alliance for Net Zero,a forum for leading financial institutions to accelerate
the energy transition, and a new International
Sustainability Standards Board to develop ESG disclosure
standards for companies.
These developments make it clear that courts, governments
and investors expect companies to facilitate the energy
transition and safeguard workers’ human rights, two
ESG pillars seen as central to building back better in thewake of the COVID-19 pandemic. Companies will needto rethink the ways they do business to respond to thesechanges, which, in turn, will result in ESG-related
disputes. Given that international arbitration is thepreferred dispute resolution mechanism of many
companies for cross-border disputes, its role in resolving
ESG-related disputes will only increase.

Commercial arbitration
Legal and commercial pressures on companies to move to
net zero and protect workers’ human rights have createdadditional risks, which require overhauling not only

5internal policies and practices, but contractual relationships
as well. As a result, ESG clauses are increasingly finding
their way into commercial contracts.
A company subject to supply chain regulation, for example,
would be well advised to take all possible steps to protect
itself from the risks that arise from its suppliers’ businesses,
and indeed those of its suppliers’ suppliers. It should ensurethat contracts with suppliers contain appropriate
protections, for example, in the form of representations,warranties and indemnities. Similarly, any potential
purchaser of, investor in, or lender to the company shouldtake steps to protect itself from the same risks using similar
contractual mechanisms. The risks arising from supply
chain regulation can be far-reaching and need tobe managed not only by the company targeted by theregulation, but by the entities that interact with it as well.
ESG clauses are novel, complex, and largely untested,factors that are likely to give rise to disputes about how
they should be interpreted and applied. To the extent a
dispute does arise and the underlying contract contains
an arbitration clause, the dispute will be determinedby arbitration.
Several features of arbitration make it particularly well
suited for use in exactly these cases. Arbitration allows
the parties to choose specialist arbitrators who have therequisite knowledge and experience. These may be lawyers
with expertise in human rights law in cases concerning
supply chain regulation, or they may be engineers or otherexperts who understand the technology at issue in cases
concerning the energy transition. Arbitration also provides
a neutral forum and flexible procedures, so the parties candesign a dispute resolution process that accommodates
their needs and the nature of the dispute. For example,
expert evidence may be given prominence and be tested
more thoroughly by other experts. Finally, the almost
universal enforceability of awards through the New York
Convention provides peace of mind that the dispute
will be resolved fully and finally through an enforceableaward, thus providing commercial certainty.

International arbitration in 2022:
top trends

That arbitration is essentially a private dispute resolution
mechanism does pose challenges in cases where questionsof public interest are concerned, such as those involving theenvironment and human rights. However, these concerns
can be addressed by adding features to arbitration such asallowing the publication of awards and permitting
third-party interventions. Such steps can ensure that
arbitration remains an effective way to resolve commercial
disputes going forward, including in the ESG context.

Investment arbitration
Two trends we noted in our 2019 and 2020 top trends
reports developed further in 2021. First, investment
arbitration cases continue to arise as a result of domestic
ESG regulation enacted primarily in response to the energy
transition. Some investors are arguing that regulations,and the manner in which they have been introduced, havesignificantly impaired the value of their assets and areclaiming compensation. The high-profile cases relating to
the phase-out of coal in the Netherlands and the ongoingwave of cases concerning the rollback of renewableenergy subsidies in Spain and Italy fall into this category.
Second, States are continuing to include ESG provisions in
trade and investment treaties and are using these treaties
as tools to advance their sustainability objectives. Indeed,
2021 saw the birth of a new breed of investment agreement– the sustainable investment agreement – putting ESG
issues at the heart of trade and investment policy.
The European Commission kicked off negotiations for a
Sustainable Investment Facilitation Agreement with
Angola, which will focus on promoting sustainable
development and responsible investment, improving
economic diversification and resilience, and supporting
the energy transition. The agreement is expected to be
the first in a series of sustainable investment agreements
between the EU and African nations. In a similar vein,
Singapore and Australia commenced negotiations for a
Green Economy Agreement, which is intended to be aworld-first agreement that combines trade, economicand environmental objectives.
Also interesting is the model Sustainable Investment
Facilitation and Cooperation Agreement developed for
The Gambia to assist in its treaty negotiations with othernations. The model agreement draws heavily on the
UN Guiding Principles on Business and Human Rights andincludes a number of innovative elements, in particular
relating to investment arbitration. Not only does it expressly

6

The rising significance of ESG and
the role of international arbitration

allow the host State to bring counterclaims, but it also
permits third-party natural persons to bring claims against
investors relating to human rights matters arising out of
the investment. The model agreement also requires investor
conduct to be considered in determining any compensation,requires the investor to pay the necessary deposits, andallows use of the Hague Rules on Business and Human
Rights Arbitration as an alternative to the ICSID Rules.
This new form of investment agreement illustrates thatwhile States continue to see trade and investment treaties
as essential to achieving their economic objectives, they
are increasingly looking to them to achieve their ESG
objectives as well. Although the exact form of thesetreaties and the dispute resolution mechanisms they willcontain remains to be seen, it appears likely that thelegal regimes relating to trade and investment, theenvironment and human rights will continue to converge.
Companies wishing to invest abroad should keep abreastof these developments to ensure that they can takeadvantage of the opportunities these treaties provide andprotect themselves against relevant risks.
‘The COVID-19 pandemic has brought ESG issues
into sharp focus for companies. The environment,
human rights, health and safety, taxation, dataprotection and corruption are likely to be someof the major ESG themes in coming years.
ESG issues are already familiar in the investment
arbitration context, where disputes concerning
the energy transition and human rights frequently
arise. ESG-related disputes will also increasingly
arise in the commercial arbitration context,
as companies adapt their businesses to comply
with new laws and regulations, and to respondto commercial pressures.’Amanda Neil
Special Counsel,
ViennaHow COVID-19 has shaped and will continue
to shape the arbitration landscapeInternational arbitration in 2022:
top trends

02.
How COVID-19 has shaped
and will continue to shape thearbitration landscapeJohn Choong

Partner, Hong Kong

Lluís ParadellCounsel, RomeAlexandra van derMeulenCounsel, Paris

Olivier André

Client Relationship Advisor,
New York

In 2021, COVID-19 continued to affect almost every
facet of life across the globe, including arbitration.
The pandemic has given and is likely to continue to giverise to new disputes, ranging from the consequencesof business interruption across a wide range of sectors to
the impact of COVID-19-related measures implementedby States on investors.

arbitration proceedings through to the pursuit of arbitralproceedings and ultimately enforcement. The high levelsof debt across Africa and Asia are particularly noteworthy,
due in part to the slowing of the Chinese economy andthe resulting reduction in Chinese foreign direct
investment abroad, as well as COVID-19’s impact on
the Belt and Road Initiative.

Force majeure, frustration and impossibility

Sector-specific commercial disputes

The world economy contracted by 3.5 per cent in 2020and business interruption continues to be felt across theglobe, notably in the travel, retail and energy sectors.
While many corporate entities have sought to adopt a
conciliatory approach towards counterparties’ obligations(eg by reaching agreement on deferred contractual
performance and/or payment), many will be increasingly
unable to avoid submitting their disputes to formal dispute
resolution, including arbitration, as government support
schemes are lifted, and agreements to defer or reschedule
performance or debt expire.

In the insurance sector, we expect the extent andscope of insurance policies’ coverage of COVID-19 tofeature with increasing frequency in commercial
arbitration proceedings.

Where disputes have been submitted to arbitration,
COVID-19 has continued to be invoked as part of force
majeure, frustration and economic impossibility
arguments. Of note, however, is that the threshold torely on these defences is becoming increasingly highwith courts and arbitral tribunals taking the viewthat the second and subsequent waves of COVID-19(and the attendant recurring lockdowns and restrictions)
are not sufficiently ‘unforeseeable’.

Insolvency
Business interruption and liquidity problems have not
yet translated into consistently higher insolvency rates,in part due to extensive State subsidies. However, there issignificant distress in certain markets, and the gradualwithdrawal of subsidies is likely to lead to a sharp increasein corporate insolvencies, making it important to consider
both insolvency-related arbitrations and the effects ofinsolvency on arbitration. Insolvency affects every phaseof an arbitration, from a party’s ability to participate in

7

Type of disputes arisen or anticipatedto arise because of disruption
caused by the COVID-19 pandemic
59%

Breach ofcontract claims

68%

Investment
treaty disputes

31%
27%
29%

Insurance
claims

42%
29%
36%
26%
35%
26%
23%
23%
19%

Fraud-related
claimsConstruction
disputes
Furlough-related
claimsShareholder
disputes
M&A/warranty
disputes
Other

22%
25%
6%
4%

Corporates
Lawyers
Respondents
could select up
to three options

Source: https://www.ey.com/en_uk/assurance/how-covid-19-impacts-the-claimsand-disputes-landscape (April 2021)

While 2021 was a record year for M&A transactions, anumber of high-profile deals were stalled during the
pandemic, giving rise to disputes. Examples include thecancelled takeover of Victoria's Secret as well as LVMH’sdelayed acquisition of Tiffany & Co. In a recent decision,

International arbitration in 2022:
top trends

an ICC tribunal held that EssilorLuxottica could backout of a €5.5bn takeover. Further, COVID-19 uncertainty
has led to an increased use of ‘earn-out’ clauses, adding
a variable amount to the fixed price depending on theperformance of the target, with the associated litigation
risk of such inherently complex clauses.
A growing number of construction and projects disputes
are also expected in the medium to long term, as theimpact of lockdowns on procurement and execution
as well as financial and supply sustainability issues
crystallises, and the lockdowns’ effect on development
timelines becomes clear.

Investor-State disputes
Government emergency measures adopted during the
pandemic are likely to lead to an increase in the numberof COVID-19-related investor-State disputes. Proceedings
have already been commenced in the air travel sector,
including arising out of Chile’s alleged failure to provide
relief to an airport’s concession; Moldova’s claimed use of
COVID-19 as justification for terminating a concession; andCabo Verde’s nationalisation of an airline. They have also
been threatened in relation to energy reforms promptedby COVID-19 and pension fund withdrawal measures.
Further disputes are expected, particularly in thehealthcare sector, in relation to intellectual property rights
and export bans. These cases, which are likely to continue,
will test the boundaries of the meaning of ‘reasonablenessand proportionality’ in State action, of ‘necessity’ and oftreaty exceptions such as public health measures.
A further issue is how COVID-19 may impact the way
damages are assessed in investment arbitration cases.
In particular, it may influence how future cash flows areevaluated in discounted cash flow analyses, perhaps
prompting the valuation date to shift towards the date of
the award to take into account the impact of COVID-19.

Virtual hearings
On the procedural front, the main question is whether
remote hearings that have flourished during the pandemic
will remain a more permanent fixture of the arbitration
landscape in 2022 and beyond.

8

How COVID-19 has shaped and will continue
to shape the arbitration landscape

The arbitration community quickly shifted to remotehearings as an alternative to in-person hearings, thus
limiting the time and cost consequences of delays dueto the pandemic. Institutions have continued to adapt
their rules and best practices to address remaining due
process concerns. Arbitrators and practitioners havegained more experience with the technology and thelogistics of organising virtual hearings.
Still, virtual hearings continue to present challenges,
such as the difficulty in accommodating disparate timezones, in efficiently advocating or presenting evidence, orin teams of counsel or tribunals being able to confer
during hearing sessions. Long virtual hearings can also
lead to screen fatigue, concentration issues and mental
health issues. At the same time, virtual hearings can be
more cost-efficient and offer greater procedural andlogistical flexibility: they are easier to schedule, enable
greater mobilisation of stakeholders, and have a positive
impact on diversity and inclusion as well as the trainingof junior lawyers. Overall, virtual hearings have worked
well, while aligning with the ESG goals of companies andlaw firms. Some companies have even started to adopt
policies requiring virtual hearings by default and law
firms, such as Freshfields, have committed to further limit
their carbon footprint by reducing travel and paper usage.
For these reasons, and due to persistent volatile travel andhealth restrictions, the trend towards remote hearings will
likely continue in 2022 and outlast the pandemic. Remote
procedural hearings will become the norm, with the costof travelling for smaller hearings becoming increasingly
harder to justify. Remote merits hearings will also likely
gain momentum for a wide range of cases as we continue
to adapt to new skills and techniques and become more
comfortable with the virtual environment. We also expect
to see an increase of ‘hybrid’ hearings combining elements
of in-person and virtual hearings in cases where parties
are not comfortable with purely virtual hearings.

Third-party funding:easing into the mainstream

International arbitration in 2022:
top trends

03.
Third-party funding:easing into the mainstream
Noiana Marigo

Partner, New York

Caroline Richard

Partner, Washington DC

Noah Rubins QC
Partner, Paris

Arbitration funding is benefiting from a convergenceof favourable conditions. As foreshadowed in our2019 trends report, the last three years have brought
incremental clarity on the costs impact and disclosure
requirements of third-party funding in arbitration.
For some businesses involved in disputes, the COVID-19
pandemic and ensuing fiscal challenges have prompteda reassessment of their capital allocation and liquidity
management – questions to which third-party funding
can offer a neat answer.
Arbitral case law developments confirm that theexistence of third-party funding alone is not enoughto justify an order for security for costs. Since the
García Armas v Venezuela case in 2018 (flagged in our2019 report, it does not appear that any funded claimant
in investment arbitration has been required to post
security for costs. One such order against a fundedclaimant was rescinded in June 2020 when it was shownthat the administrator of the insolvent claimant had
been unable to procure the required security(Dirk Herzig as Insolvency Administrator over the Assets ofUnionmatex v Turkmenistan). Meanwhile, at least four
security for costs applications against funded claimants
in investment arbitration were recently rejected.
More arbitral tribunals may be awarding successful
claimants their costs of procuring third-party funding.
The English High Court has, for a second time,
confirmed that arbitral tribunals have the power toaward the reasonable cost of third-party funding to a
successful claimant. In a December 2021 decision in
Tenke Fungurume v Katanga [2021] EWHC 3301 (Comm),
the Court rejected the proposition that the arbitral
tribunal had exceeded its powers by awarding theclaimant the costs that it had incurred in obtaining
funding. This was consistent with the 2016 High Court
decision in Essar Oilfields Services Limited v Norscot Rig
Management PVT Limited [2016] EWHC 2361 (Comm).
These decisions may encourage other tribunals
similarly to allow recovery of funding costs.

9

Samantha Tan

Senior Associate, Singapore

There is still no consensus as to whether parties toarbitration must disclose third-party funding. If anything,
the trend appears to be away from mandatory disclosure,at least for commercial arbitration proceedings.
•	The ICC – still the most preferred arbitral institution
globally according to a 2021 survey – adopted newarbitration rules in 2021 mandating the disclosure of
the existence of third-party funding and the identityof the funder. However, the LCIA’s 2020 rules remainsilent on disclosure of third-party funding. Kuala
Lumpur’s AIAC similarly declined, in its 2021 rules,
to require disclosure of third-party funding, stipulating
only that the arbitral tribunal has the power to makenecessary orders in that regard.
•	The proposed amendments to the ICSID Arbitration andConciliation Rules, to be presented to member States
for approval in early 2022, require disclosure of theidentity of third-party funders, including their owners.
They also expressly empower arbitral tribunals to orderdisclosure of further information regarding the funding
agreement and the funder. The SIAC’s 2017 specialised
rules for investment arbitration move slightly towards
disclosure of third-party funding. They do not require
disclosure but empower the arbitral tribunal to ordernecessary disclosures. They also allow arbitrators to take
into account third-party funding arrangements inapportioning the costs of the arbitration and in ordering
one party to pay the other’s legal or other costs(reminiscent of Essar v Norscot).
‘What is key is that today, with third-party
funding, companies struggling with theprolonged effects of the pandemic canstill bring arbitration claims without impacting
their liquidity.’
Noiana Marigo
Partner,
New York

Third-party funding:easing into the mainstream

International arbitration in 2022:
top trends

Arbitration rules on disclosure of third-party funding
Required

In tribunal’s discretion

SilentICC (2021)

AIAC (2021)

JCAA (2021)

ICSID (2021 proposed
amendments)

ICDR-AAA (2021)

LCIA (2020)

Delos (2021)

SIAC Investment Arbitration
Rules (2017)

SCC (2017)(but with policy encouraging disclosure)

HKIAC (2018)

SIAC (2016)(but with practice note on arbitrator
conduct in cases involving external funding)
KCAB (2016)
UNCITRAL (2013)

The effects of the pandemic are likely to catalyse interestin third-party funding.
Market surveys suggest that companies are still
constrained by their internal resources in deciding
whether to pursue or forgo legal claims. But this model
may have to change as businesses continue to weather
the prolonged economic impact of the pandemic on
supply chains and retail demand.

One key tool for liquidity management is capital allocation
strategy, and third-party funding of legal claims appears
complementary to this strategy. Users cite the freeing up
of working capital, taking cost liability off the balance
sheet, and risk management as the top three key benefitsof litigation funding. There is now even a growing market
for the sale and purchase of arbitration awards, throughwhich claimants can monetise awards in their favour
without incurring the risk and cost of enforcement.

Liquidity management continues to be a central focus incompanies’ strategies for resilience against the pandemic.
This focus is coming into sharper relief as companies
prepare for rising interest rates and the impending
withdrawal of government stimulus programmes.

Consistent with the outlook for the funding market,
Freshfields has a growing portfolio of funded cases andstrong relationships with funders around the world.
Freshfields is currently working on 15 third-party-fundedinternational arbitrations, up from 12 cases in 2018.

10

Investment protection within
the European Union

International arbitration in 2022:
top trends

04.
Investment protection within
the European Union
Nathalie Colin

Partner, Brussels

Carsten Wendler
Partner, Frankfurt

Gregorio Pettazzi

Associate, Frankfurt

2021 saw the European Court of Justice (ECJ) trying to put
a nail in the coffin for intra-EU investment arbitration.
What is next for investors?
After the extensively discussed 2018 decision by the ECJ
in Slovakia v Achmea, which declared arbitration clauses inintra-EU bilateral investment treaties (BITs) incompatible
with EU law, the same court issued two further landmark
decisions in 2021. In Moldova v Komstroy, it held that theEnergy Charter Treaty (ECT) arbitration clause, whenapplied intra-EU, is affected by the same incompatibility
with EU law. A few weeks later, in Poland v PL Holdings, theECJ extended the same finding to ad hoc arbitrationagreements between EU investors and EU Member States.
In principle, these decisions should have no bearing on
intra-EU arbitration proceedings (and resulting arbitralawards) conducted under the auspices of the International
Centre for Settlement of Investment Disputes (ICSID),
given that ICSID constitutes a self-contained regime
under international law and is independent from the
EU and national legal orders.

Known pending intra-EU
investor-State arbitrations

68
TOTAL

46 ECT

11

22 BITs

Alice Lindemann

Legal Consultant, Brussels

It is, however, expected that these two decisions will havea major impact on those ECT intra-EU arbitrations that are
not brought under the ICSID Convention and are seatedwithin the EU. These arbitrations, unlike ICSID ones, aregrounded on the domestic jurisdiction of their seat andthus subject to EU law and the decisions of the ECJ.
National courts at the seat of arbitration within the EU will
most likely find themselves bound to apply EU law andthe ECJ’s finding of incompatibility. In practice, investors
will thus wherever possible avoid commencing proceedings
seated in an EU Member State. In turn, this will meanthat hardly any non-ICSID arbitration proceedings will
be commenced in an intra-EU context.

What’s cooking in investment protectionin the EU?
In early December 2021, the European Commission launchedinfringement proceedings against seven EU Member States,in addition to those initiated in 2020 against Finland and theUK, for their failure to remove intra-EU BITs from theirrespective legal orders. It will be interesting to see if they
will be referred to the ECJ since, although some EU Member
States have simply not yet completed the ratification processof the agreement for the termination of intra-EU BITs
(Termination Agreement) (Belgium, Italy, Luxembourg,
Portugal and Romania), Austria and Sweden did not sign
the Termination Agreement at all.
Moreover, further to a public consultation conducted in
2020, the European Commission is expected to shortly
adopt a legislative proposal for an intra-EU Investment
Protection and Facilitation Framework aimed at‘better protecting and facilitating cross-border investments’in light of the ‘momentum created by the termination of
intra-EU [BITs]’. This will also give the EU the opportunity
to ensure that this new investment protection legal
framework is aligned with the EU’s commitments related
to climate change and digitalisation. If ultimately
passed as legislation, this proposal could prove to bea game-changer for EU investors.

Investment protection within
the European Union

International arbitration in 2022:
top trends

In parallel, the European Commission is one of the driving
forces behind the modernisation process of the ECT. In thiscontext, the European Commission has been advocating
both for the establishment of a multilateral investment
court that would replace the current arbitration system –also in light of the ECJ judgments discussed above – as well
as for the ECT’s alignment with the Paris Agreement withrespect to sustainability goals.
‘Given the blatant necessity of green investment
to secure a sustainable future, it is essential
for States, and the EU in particular, to recognisethat ISDS can help tackle the challenges
arising from climate change, notably withrespect to the clean energy transition.’
Nathalie Colin
Partner,
Brussels

What do investors need to consider wheninvesting in the EU?
Against the backdrop of the new developments, intra-EU
investors should carefully take into account a numberof factors when making their investment decisions toprotect against unlawful sovereign intervention:•	Considering possible future adverse measures andregulatory changes: governmental measures withdetrimental impact on investments as well as changes
to the regulatory and legal framework that were the basisof the investments may be implemented anywhere.
EU Member States with high investment-protection
standards and good track records in terms of compliancewith the rule of law, such as Austria, Belgium, Denmark,France, Germany, Italy, the Netherlands and Spain,
have all in the past adopted measures that gave rise toinvestment disputes.
• Structuring the investment properly: investors shouldcarefully evaluate how to structure their investmentsin the EU. It may be advisable to invest from an entity
located in a jurisdiction outside the EU (eg Switzerlandor the UK) with good investment protection treaties inforce with the EU State in which the investment is to be
made. This is particularly important in countries that are
not parties to the ICSID Convention, for example Poland.
Similarly, when deciding to initiate an intra-EU
investment treaty claim, investors must equally
bear in mind the following:

12•	Choosing the appropriate forum: it is of utmost
importance not to underestimate the relevance ofthe different forums available to resolve investment
disputes. For the reasons discussed above, bringing
arbitrations under the auspices of ICSID may be thepreferable option.
‘What appears at first sight to be a conflict of legal
norms may be better described as a clash ofdifferent perspectives. In pursuit of its objectiveof strengthening the EU legal order, the EU
Commission will most certainly continue tointerfere with intra-EU investment arbitrations.
We have so far observed that this may span frominitiating legal actions before domestic courts
to attempting to force claimant-investors to drop
their investment claims or opening State aid
investigations. Investors should therefore beprepared to pursue their legal rights indifferent forums.’
Carsten Wendler
Partner,Frankfurt• Tracing assets early on: given the hurdles to be overcome
to enforce any intra-EU investor-State awards within
the EU, intra-EU investors should consider enforcement
outside the EU. Investors should therefore develop
effective enforcement strategies from the outset of aninvestment dispute and identify extra-EU jurisdictions
where respondent States hold sufficient enforceable
assets. Australia, the UK and the US appear so far to be
the preferred options for extra-EU enforcement.
•	Keeping the settlement option open: both the effective
enforcement mechanism of arbitration awards as wellas the potential reputational damage of adverse awards(eg when issuing government bonds) make settlement
negotiations still attractive for respondent States.
Recently, Germany agreed to pay €1.4bn to Swedish
Vattenfall to settle its nuclear energy dispute brought
under the ECT. It has also been reported that theRepublic of Croatia settled its disputes with four
European banks over the forced conversion into euroof Swiss franc-indexed loans.

International arbitration in 2022:
top trends

Emerging standards for the conductof international arbitration

05.
Emerging standards for the conductof international arbitration
Sylvia Noury

Partner, London

Lee Rovinescu

Partner, New YorkMariia Puchyna

Senior Associate, Paris

Stephanie Mbonu

Global IAG Project andHearing Manager‘While it is uncontroversial to say that the procedural architecture of alegal system is among the most pivotal elements that determine its ability
to deliver justice, we have tended not to accord procedural issues
and reforms the attention that is commensurate with their significance.’
The Honourable Chief Justice Sundaresh Menon’s opening words at the36th Annual Freshfields-SIA Lecture in November 2021
The past few years have seen a marked increase ininitiatives and cross-border protocols seeking to regulate
the procedure and conduct of various aspects ofinternational arbitration, many of which are worthy ofattention. Here, we focus on notable initiatives relating
to (i) standards of practice; (ii) diversity; and (iii) greener
arbitrations and virtual hearings.

Standards of practice
In June 2021, ICCA introduced its Guidelines on Standards ofPractice in International Arbitration (the Guidelines), an
amalgamation of professional standards and ethical rules
reflecting the melting pot of cultures and legal traditions
germane to the international arbitration community.
Seeking to encourage ‘civility’ and diversity but also toguarantee cost-efficiency, privacy and confidentiality, ICCA’s
Guidelines are not intended to be mandatory, yet are designed
to enable their incorporation by reference into arbitrationagreements or procedural orders. The Guidelines containguidance for various stakeholders across the arbitration
community, including party representatives (eg refraining
from disrupting or delaying the process), arbitrators(eg acting ‘efficiently’) as well as other participants.
While the aim of achieving greater ‘civility’ in our practiceis undoubtedly a laudable one, cross-border culturaldifferences may make convergence in some areas
challenging. The Guidelines themselves acknowledge
that ‘[w]hether a particular course of action is offensive...
may vary depending on... personal, cultural and/or
religious background[s]’. To take a practical example,
while the first guideline provides that ‘[a]ll participants’
are to ‘act with integrity’, there are legitimate differences

13

across jurisdictions as to the extent to which counsel
may prepare fact and expert witnesses ahead of their
testimony. Practices in some jurisdictions may give rise tointegrity concerns in others. While such differences will
endure, the Guidelines nevertheless successfully record
basic rules of civility and ethical standards that can beuniversally referred to and ought not to be controversial
for any participant in an international arbitration.
In September 2021, the third version of the Code of Conduct
for Adjudicators in International Investment Disputes (IID)(the Code) was published by ICSID and UNCITRAL following
an extensive consultation period during which Statedelegates and other stakeholders were invited to provide
their input. The Code seeks to increase the efficiency andtransparency of investment dispute proceedings andenhance confidence in the independence and impartialityof investment dispute tribunals, as well as to give effect toimportant policy considerations, such as fostering diversity.
Two developments bear mentioning.
Firstly, the third version of the Code contains a morenuanced provision governing the permissibility of sitting
arbitrators concurrently playing other roles, such as
counsel, in other proceedings (so-called ‘double hatting’),
providing the parties with greater autonomy to consent toor prohibit the practice (Article 4). The prior iteration of
the Code was less permissive and the drafters observedthat a more permissive structure would create fewer
barriers to entry, with a view to fostering an environmentthat will promote diversity of arbitrators as much as
possible. Relatedly, the Code provides that arbitrators shalldisclose all investment disputes ‘in which the Candidate orInternational arbitration in 2022:
top trends

Emerging standards for the conductof international arbitration

Adjudicator has been involved in the past [five/ten] years or
is currently involved in as a legal representative, expert
witness, or Adjudicator’ (Article 10), equipping the parties
with the information necessary to raise any ‘double hatting’concerns at the outset.
Secondly, the initial draft of the revised Code suggested
specific limitations on the number of cases investment
dispute arbitrators could handle concurrently. Whilecontroversial, that provision would have helped to solve
two problems that continue to plague the community:
an insufficiently diverse pool of arbitrators appointed tohear cases and overly subscribed arbitrators that causedelays in the resolution of disputes. The third version of
the Code omits any specific limitation but maintains thepreviously existing provision that arbitrators shall not
accept appointments if they do not have the ‘availability
to fulfil their duties’ (Article 6.2). If adhered to properly,that rule would also foster diversity.

Diversity
On diversity of arbitrators, while the trend remains
positive, more progress is needed.
In relation to gender diversity, real progress has been
made over the last few years thanks to initiatives likethe Equal Representation in Arbitration (ERA) Pledge andArbitralWomen. The average percentage of women
arbitrators being appointed in cases reported by themain arbitral institutions has doubled from around
12 per cent in 2015 to nearly 24 per cent in 2020.

Women as a percentage of total
arbitral appointments 2015–2020
50
40
30
20
10
0
2015

2016
Institutions

14

2017
Co-arbitrators

2018
Parties2019
Average

2020

Although party appointments of women still lag
significantly behind appointments by arbitral institutions(some of which, including the LCIA, DIS, VIAC and SCC,
have achieved gender parity in their recent statistics),
the statistics for 2020 show improvement, with women
arbitrators appointed in over 21 per cent of appointmentsby parties, compared to only 8.5 per cent in 2015.
The ERA Pledge (founded and co-chaired by Partner
Sylvia Noury) will continue to focus on improving party
appointments, including through its Corporate
Subcommittee, focusing not only on ensuring the visibilityof more qualified women candidates, but also on moving
women candidates off lists and on to tribunals. The Pledge’s
extensive network of subcommittees will continue toaddress diversity issues in specific regions. 2021 saw thelaunch of its Middle East and USA Subcommittees and a
new Asia-Pacific Subcommittee is in the pipeline for 2022.
There has also been a recent increase of initiatives
focusing on other forms of diversity in arbitration,
including notably Racial Equality for Arbitration Lawyers(REAL), launched in early 2021, with the main aim ofprogressing racial equality and the representation of
unrepresented groups in international arbitration.
The ‘Africa Promise’, Katherine Simpson’s list of Arbitratorsof African Descent with a US Nexus, and the African
Arbitration Academy, an initiative focused on improving
the expertise of African arbitration practitioners byequipping them with the right set of skills to succeed
within the international arbitration community, areexamples of other initiatives aimed at promoting African
arbitrators that have emerged over the past few years.

Greener arbitrations and virtual hearings
There has also been an emergence of greener arbitration
initiatives, led by the Campaign for Greener Arbitrations(CGA), which won the GAR Award for Best Developmentin 2020. The CGA is an initiative to reduce theenvironmental impact of international arbitrations througha variety of measures. It launched in 2019 with a Green
Pledge pursuant to which signatories undertake to adhere
to a set of guiding principles. CGA reached a milestone
in its work on Earth Day this past year, 22 April 2021,
when it launched its landmark six Green Protocols.
The Green Protocols provide practical guidance to allarbitration stakeholders on how they can reduce theircarbon footprint. A unique Protocol exists for each of:arbitral proceedings generally, law firms and legal service
providers, arbitrators, arbitral institutions, arbitration

International arbitration in 2022:
top trends

conferences and arbitration hearing venues. The Protocols
include guidance on the elimination of paper copies,
minimisation of travel, use of clean forms of energy anduse of virtual hearings, among other things.
The CGA’s work has, naturally, coincided with the global
pandemic, which has caused the arbitration community
to adopt by necessity many of the carbon-reducing
measures that CGA recommends. If 2020 was the yearthat virtual hearings came to the fore, 2021 was the year
in which the arbitration community perfected (for themost part) the art of the virtual hearing. And, dependingon the state of the pandemic, 2022 may be the year whenvirtual hearings continue to take place by choice rather
than by necessity. In that regard, coinciding with CGA’s
work has been a confluence of efforts by a variety ofdifferent arbitration stakeholders in the developmentof protocols and procedures for the effective conduct of avirtual hearing. Most institutions now have either a setof guidelines or a model procedural order for the efficient
conduct of virtual hearings. Although the arbitration
community is perhaps not yet ready for arbitration
hearings in the metaverse (and that no doubt will come),
virtual hearings in their current form will be aconsequence of the pandemic that is here to stay.

15

Emerging standards for the conductof international arbitration

It is clear that the recent and growing initiatives addressing
standards of practice, diversity, environmental andpandemic-related issues in arbitration are already having
a positive impact on the conduct of international
arbitration and the behaviour of its participants. In order
for arbitration to remain attractive to its users, it isimportant that the arbitration community continues
not only to produce new standards and guidance on‘best practice’, but also to implement those standards
to effect real and lasting change. Only time will tellwhich codes, protocols and guidelines achieve the ubiquity
of one of the earliest and most successful efforts at
harmonising arbitral practice: the IBA Rules on the
Taking of Evidence. Stay tuned in 2022.

Drives towards greater efficiency
in international arbitration

International arbitration in 2022:
top trends

06.
Drives towards greater efficiency
in international arbitration
Nicholas Lingard

Partner, Singapore/Tokyo

Patrick Schroeder
Partner, Hamburg

Hinda Rabkin

Senior Associate, New York

Making international arbitration cheaper and faster for its
users has been a key goal for years and is driving recent
reforms to arbitral procedure. Arbitral institutions as well
as UNCITRAL have introduced (or are planning to
introduce) provisions in rules governing arbitrations toimprove efficiency. A recent reform that considerably
improves efficiency for certain disputes is the introductionof expedited proceedings. This and other procedural tools
are discussed further below, in the context of both investorState arbitration and international commercial arbitration.

Senior Knowledge Lawyer,Paris‘As these new provisions come into force and areused by parties, we hope to see arbitral disputes
being resolved more quickly for a lower cost.
However, given the sensitivity involved in resolving
investor-State disputes, which entail issues of State
sovereignty, it remains to be seen whether States
will opt in to using the new expedited provisions
and whether they will be widely adopted.’

Expedited proceedings under various
international arbitration rules

Arbitrators

Ketevan Betaneli

Hinda Rabkin
Senior Associate,
New York

UNCITRALICSID (draft rules)

ICC

SCC

SIAC

HKIAC

Sole
arbitrator

Sole arbitrator or
three-member
tribunal (if parties do
not notify that theywant three-member
tribunal, sole
arbitrator applies
by default)

Solearbitrator

Solearbitrator

Solearbitrator,
unless SIAC
determines
otherwiseSolearbitrator,
unlessagreement
for three

Monetary
threshold

N/A

N/A

Yes, US$3m

No

Yes, S$6m

Yes,
HK$25m(over
US$3m)

Application

Opt-inOpt-inOpt-outOpt-inOpt-inOpt-inDeadline
for award

Six months

120 days after
the hearing

Six months
from casemanagement
conference

Threemonthsfrom casereferralSix months
fromtribunal
constitution

Six months
from casereferral16

Drives towards greater efficiency
in international arbitration

International arbitration in 2022:
top trends

Investor-State arbitration

Commercial arbitration

This past year has seen the introduction (or proposal)of rules that provide for expedited proceedings that canbe used in investor-State arbitration.

In commercial arbitration, the following procedures havebeen playing an important role in improving efficiency
in recent years and it is expected that they will continue
to do so in the coming years:

In September 2021, the UNCITRAL Expedited Arbitration
Rules (UNCITRAL EA Rules) took effect. These rules do not
apply automatically. The parties must expressly agree to use
them. Although these rules were not specifically designed
for investor-State arbitration, in practice the UNCITRAL
rules are often used in such proceedings and there may
well be opportunities to use them in investor-State disputes.
The main features of the UNCITRAL EA Rules are:(i) a sole arbitrator is the default; (ii) hearings are optional;(iii) the tribunal can decide to forgo the document
production phase; and (iv) an accelerated timeline forthe conclusion of the arbitration, with the award to beissued within six months of the date of the constitutionof the tribunal.
In November 2021, ICSID released its Working Paper #6,
which marked the culmination of a five-year process on
updating the ICSID Rules for arbitration. ICSID Working
Paper #6 addresses topics that States and the broader
public had raised on the previous iteration of the proposed
amendments to the ICSID Rules and sets out the complete
set of amended rules. These rules include a fast-track
procedure. ICSID said that it plans to table the amendments
for a vote of approval by member States in early 2022.
The ICSID expedited procedure is opt-in. Its main features
are: (i) no bifurcation, so jurisdiction, merits and quantum
issues would be considered in a single phase of thearbitration; (ii) quicker timelines, with an award to beissued within 120 days of the hearing; (iii) limited lengthof written submissions; (iv) limited procedural applications;and (v) expedited annulment proceedings.
In addition to amending rules governing proceedings,
States are also including certain procedural features thatwould apply in investor-State arbitration in newly issued
bilateral or multilateral investment treaties. These include
treaties recently concluded with the EU as well as Canada’s
Foreign Investments Promotion and Protection Agreement
Model 2021 (Canadian Model FIPA). Thus, for example,
the Canadian Model FIPA provides that where damages
claimed by an investor are less than CA$10m, an expedited
procedure applies. This procedure entails a sole arbitrator,
a compressed procedural schedule and a virtual hearing.

17•	The use of expedited rules continues to increase.
According to the ICC’s 2020 statistics, 261 cases havebeen conducted under its expedited rules since theprocedure was introduced in March 2017. The successof the expedited rules has led the ICC to widen the scopeof their automatic application from disputes valued at
US$2m to US$3m. This mechanism is also popular in
SCC proceedings: 31 per cent of cases registered in 2020
were registered under its expedited rules.
•	A comparison of the length of proceedings under the
expedited rules versus those under the standard ICC
Rules shows a clear time benefit. The ICC Statistics for2020 reported that 67 per cent of final awards rendered
under the Expedited Procedure Provisions were deliveredon or around the six-month time limit. The average
duration of proceedings in cases that reached a final
award in 2020 was 26 months.
‘Expedited rules need to be handled with care,
especially when they contain a time limit for thearbitral tribunal to render the award. There areissues for the respondent in presenting their casein a very short time frame, and there is a latentrisk that exceeding the time limit may beconsidered a relevant procedural error in ajurisdiction of enforcement.’
Nicholas Lingard
Partner,
Singapore•	Many of the leading arbitration rules (LCIA, SCC, SIAC,
HKIAC, etc) have introduced summary dismissal procedures,
which are being used with increasing frequency.
This procedural tool empowers arbitral tribunals torender prompt decisions on discrete claims, allowing
the tribunal to dispose of frivolous claims.
•	Most leading arbitration rules contain provisions on
joinder and consolidation (ICC, SCC, SIAC, HKIAC, etc).
The 2021 version of the ICC Rules allows for joinder of aparty after the arbitrator’s appointment or confirmation.
It also allows for consolidation of proceedings undermultiple agreements with compatible arbitration clauses.

International arbitration in 2022:
top trends	Simplified procedures that allow for joinder andconsolidation reduce parallel proceedings and,potentially, the inefficiencies that suchproceedings entail.
•	The potential benefits of electronic filings and virtual
hearings became evident during the COVID-19 pandemic.
As the international arbitration community has grown
further accustomed to them, electronic filings andvirtual hearings are expected to continue to be widelyused. Similarly, new online platforms (such as the recently
launched HKIAC Case Connect or the existing SCC, ICC
and other electronic case management platforms) makedocument sharing and case organisation more efficient.
•	Institutions have begun incentivising the timely renderingof awards. Certain arbitral rules (such as the SCC’s)
provide time limits for rendering an award but do not
penalise non-compliance. The ICC, however, reduces
the arbitrators’ fees if an award is delayed in the absenceof a valid reason, which has proven to be an effective
tool. The ICC Statistics for 2020 reported that the
number of instances of delays of three to six months
in final awards has halved since this new practice was
implemented in 2016.
•	The number of emergency arbitrations has increased.
Emergency arbitrators usually render a decision within
two weeks (five days under the SCC Rules and 14 days
under the SIAC, LCIA, HKIAC and ICC Rules) that
may later be revisited by the tribunal once constituted.
This procedure was initially used for constructionand engineering disputes but is now being used byparties operating in other industries.
‘Technology and digitalisation of proceedings willchange the way arbitrators and counsel work.
Efficiency gains will result in faster and morecost-effective proceedings. Virtual hearings are
just the beginning. Expect artificial intelligence
to help with legal research, dealing with data, theanalysis of evidence, etc, both on the arbitrator
bench and at the counsel table.’
Patrick Schroeder
Partner,
Hamburg

18

Drives towards greater efficiency
in international arbitration

The future of arbitrationin the tech space

International arbitration in 2022:
top trends

07.
The future of arbitrationin the tech space
Elliot Friedman

Partner, New York

Sofia Klot

Senior Associate, New York

Annie Pan

Senior Associate, London

Tech companies are innovators and disruptors. But they
have largely been traditionalists in the disputes space:
habitual users of litigation and underrepresented in methodsof alternative dispute resolution like arbitration. That ischanging. Tech companies are becoming more aware ofinvestment treaty protection and are also turning toarbitration for disputes involving cryptocurrency,
blockchain and artificial intelligence (AI).

The rise of tech-related investor-State disputes
The energy and industrial sectors have long relied on the
power of investment treaties to protect investments againstinterference by foreign governments. The tech sector is now
increasingly making use of investment treaties to protect
itself from or push back against adverse government action,
including in response to concession cancellations, unfair
and discriminatory data laws, and the protectionist use oftax, antitrust and foreign investment regulation.
A high-profile example is Uber’s January 2020 threat to bringa claim against Colombia under the US–Colombia Trade
Promotion Agreement. In response to a complaint filed bya local competitor, the Colombian competition authority
imposed a nationwide ban on Uber’s ride-hailing app.
The ban was overturned shortly after Uber threatened tocommence investment treaty arbitration against Colombia.
Even more recently, Canadian and US investors filed
claims against Mexico under NAFTA and USMCA following
Mexico City’s cancellation of a concession to replace allanalogue taximeters with digital ones and develop an
accompanying ride-hailing app.
A number of recent investment treaty cases also implicate
countries’ attempts to regulate data, security and cybersecurity. For instance, a Chinese company filed an arbitration
against Ukraine following the blocking of a takeover of anaerospace company that allegedly owns sensitive technology,
and Huawei notified a dispute against Sweden under the
Sweden–China BIT after being banned from the country’s
5G rollout amid allegations of spying. Investment treaty

19

protections are also being considered in relation to new rules
around the world concerning the localisation of data.
We expect more of these disputes in the coming years,
as tech companies increasingly become aware of theavailability and power of investment treaties, andgovernments expand the regulation of the tech sector.
These cases are also set to raise interesting questions relating
to how investment treaties protect purely digital ordelocalised platform investments, since treaties typicallyprotect investments ‘in the territory’ of the host State, aquestion we explored in a recent podcast. And as we
discussed in our Freshfields blog, with regulation poised
to continue to ramp up, tech companies can and should
structure their foreign investments to make sure thatthey are protected by investment treaties.

Commercial arbitration in the tech space –moving beyond M&A disputes
M&A and financing disputes involving tech companies
have been on the rise, as the pandemic has unleashed aflurry of deal-making activity in the sector. But beyond
instances of deals gone sour, other types of technology
disputes are emerging.
Recent years have seen a proliferation of new products andservices based on blockchain, complex AI (such as machinelearning and neural networks) and augmented reality
technologies, with many contracts for the development,
sale or licensing of these novel technologies containing
arbitration clauses. This is hardly surprising, as the benefitsof arbitration for these increasingly borderless technologies
are obvious: they allow the parties to select subject matter
experts with relevant technical expertise to resolve theirdispute in a confidential setting and obtain a readily
enforceable award in any of the almost 170 countries thathave ratified the New York Convention. We expect to see
an increase in international arbitrations involving
blockchain, AI and augmented or virtual reality as thesetechnologies become more mainstream.

International arbitration in 2022:
top trends‘International arbitration often makes good sensein this sector: disputes can be resolved by expert
decision makers, the confidentiality of the processmeans that proprietary or sensitive information
can be kept out of the public eye, and the resulting
award can be enforced easily around the world.’
Elliot Friedman
Partner,
New York
Cryptocurrency disputes are already in the spotlight, driven
by the meteoric popularity of crypto exchanges that tradebillions of dollars a day. One noteworthy example is theimpending ‘class action’ arbitration reportedly involving
thousands of individual claimants against Binance, theworld’s largest crypto exchange, before the HKIAC.
The dispute arose out of an hour-long shutdown of partsof the Binance online trading platform on 19 May 2021, a
day that saw one of the largest historical drops in the valueof bitcoin, which is said to have caused huge losses to users
who were unable to access their accounts and trade. In asecond ICC arbitration against Binance, a European investor
is reportedly seeking US$140m in damages on thebasis that his funds were allegedly unjustly liquidated by
the exchange’s automated liquidation system.
The continued growth and popularity of crypto exchanges
sets the stage for future arbitrations brought by traders
under the platforms’ terms of service, many of which
include arbitration clauses. Crypto exchanges would bewell advised to review their arbitration clauses, and inparticular their treatment of mass claims.

20

The future of arbitrationin the tech space

Financial institutions
and arbitration

International arbitration in 2022:
top trends

08.
Financial institutions
and arbitration
Oliver Marsden
Partner, London

Thomas Walsh

Special Counsel, New York

Ruth Montiel

Associate, New YorkFinancial institutions have traditionally favoured court
litigation as a means of resolving their contractual
disputes. However, there are situations in which financial
institutions may want to consider opting for arbitration
for certain types of deals, especially in light of recent
developments in arbitral procedure designed to makearbitration more attractive to the banking community.
In addition, financial institutions are increasingly alive
to the protections available under investment treatiesin the event of government action that adversely affects
their investments. We take a closer look at both ofthese trends below.

Arbitration for contractual disputes infinance deals: recent developments
For contractual disputes, deciding whether to opt forarbitration or litigation involves weighing a variety offactors and will depend on the specific circumstancesof each individual transaction. As mentioned above,financial institutions have traditionally favoured litigation
for many of their contractual disputes, particularly in
the London and New York courts. These jurisdictions havejudges who are especially familiar with the complexities
of financial transactions and have an establishedtrack record of rendering sound decisions, as well as
well-established summary dismissal procedures for claims
and defences that manifestly lack merit. Where financial
institutions opt for arbitration over litigation, it is often
because a deal involves a counterparty based in ajurisdiction where arbitral awards are more readily
enforceable than court judgments, or the institution
anticipates that it may benefit from the increased
confidentiality protection and/or narrower disclosure
requirements of arbitration as compared to litigation.
To make arbitration more attractive to financial
institutions and other businesses, in recent years manyof the major arbitral institutions have amended theirrules to introduce or clarify certain procedural tools aimed
at making arbitration more efficient and cost-effective.
These changes include new rules on summary dismissal,

21

emergency arbitrator procedures for urgent interim
relief before the arbitral tribunal is constituted, andexpedited procedures (see trend 6 for a more detailed
analysis of these tools).
For financial institutions in particular, two recent
developments are worth highlighting in more detail:1. Summary dismissal. Until recently, there has been
uncertainty as to whether an arbitral tribunal candismiss a claim or defence that is manifestly without
merit on a summary basis (ie dispensing with a fullevidentiary process). In contrast, summary dismissal
procedures are readily available in litigation, particularlyin the English and New York courts. That divergencehas increasingly fallen away: over the past few years, themajor arbitral institutions, and now P.R.I.M.E. Finance(an arbitral institution dedicated to arbitrations in thefinance sector), have either amended their rules toexpressly confer on the tribunal a power of summary
dismissal or (in the case of the ICC) published guidancenotes confirming that tribunals have such a power.
Provided that parties arbitrate under the rules of oneof those arbitral institutions and seat their arbitration
in a jurisdiction such as London or New York where
there is now helpful case law confirming that awards
rendered pursuant to summary procedures are valid
and enforceable, they can be comfortable that suchprocedures will be available and can be confidently
deployed by the tribunal.
‘An arbitral tribunal’s power to make an ordersummarily dismissing a meritless claim or defence
is now written into the procedural rules andguidance notes of the major arbitral institutions.
That is an important step forward for the use ofarbitration in the financial institutions community.’
Oliver Marsden
Partner,
LondonFinancial institutions
and arbitration

International arbitration in 2022:
top trends

2. R evised P.R.I.M.E. Finance Arbitration Rules 2022.
As an alternative to adopting the procedural rules of the
traditional arbitral institutions, financial institutions
can choose to arbitrate their disputes under the P.R.I.M.E.
Finance Arbitration Rules, the latest version of whichcame into force on 1 January 2022. The P.R.I.M.E. FinanceArbitration Rules are specifically designed for thearbitration of finance disputes, including under complex
financial products such as derivatives and in emerging
areas such as fintech and sustainable finance. The 2022
revisions seek to address feedback from financial
institutions on earlier versions of the rules, including
by introducing an emergency arbitrator procedure,
making better provision for consolidation in multi-party
and multi-contract situations, incorporating a new
expedited procedure and (as noted above) providing forsummary dismissal of meritless claims and defences.
P.R.I.M.E. Finance’s offering also includes the option
to select arbitrators from its expert panel of around
250 international arbitrators with specialist knowledge
and experience in the finance sector.
It remains to be seen whether these recent developments
will lead to more financial institutions opting forarbitration in future finance deals, but the framework
now exists for arbitration to better meet the needs offinancial institutions.

Using investment treaty protection as arisk-mitigation tool for cross-border investments
Financial institutions are increasingly structuring(or restructuring) their cross-border investments totake advantage of one or more of the thousands ofinvestment treaties that protect investors fromadverse government action affecting their foreign
investments. Many institutions are now conducting‘investment treaty planning’ simultaneously withtax planning.
Most treaties guarantee foreign investors a basic setof rights such as: the right to be treated fairly and in a
non-arbitrary manner; the right to compensation forany expropriation; protections against discriminatory
treatment favouring domestic competitors or competitorsfrom other foreign countries; and the right to transfer
funds and returns outside the host country. Critically,
most investment treaties permit investors to bring adamage claim directly against the host government
through arbitration in circumstances in which theirtreaty rights are violated. This is a powerful tool, and22

the threat of such a claim may provide a financial
institution with leverage to negotiate with thegovernment and secure a favourable resolution.
A significant percentage of the investment treaty claims
referred to arbitration each year are brought by financial
institutions. For example, in 2021, HSBC brought a claim
against El Salvador alleging that El Salvador violated its
BIT with the UK (HSBC Latin American Holdings (UK) Limited v
Republic of El Salvador (ICSID Case No. ARB/21/46)). Alpene
Limited also brought a claim against Malta in 2021 onbehalf of its wholly owned entity, Pilatus Bank, foralleged violations of Malta’s BIT with the People’s
Republic of China.
We expect this trend to continue as states grapple with the
COVID-19 pandemic and disruption in global supply chainsby changing regulations affecting financial institutions, forexample by suspending or limiting their ability to collecton debt, including mortgages, or prohibiting the collectionof fees on public projects, with a detrimental impact on the
project financing for those projects.
‘Financial institutions are increasingly attuned
to the value of investment treaties as a tool
to protect themselves against the risk of futureadverse government measures that impact
their cross-border investments.’
Thomas Walsh
Special Counsel,
New York

International arbitration in 2022:
top trends

Construction arbitration in the faceof energy transition and climate change

09.
Construction arbitrationin the face of energy transitionand climate change
Tom HutchisonCounsel, London

Samantha Lord Hill
Counsel, Dubai

Jon Gilbert

Knowledge Lawyer,
LondonTrend 1 above outlined some of the key developmentsthat have accelerated the pace of global energy transition,
notably the commitments made at COP26, thegroundbreaking decision in the Shell case by the Hague
District Court and the European Commission’s ‘Fit for 55%’
legislative package. In this trend, we evaluate the likely
impact of the proliferation of planned renewable andlow-carbon energy projects on construction arbitrationand consider the related risks of increasingly extreme
weather events on ongoing major projects.

Energy transition – new project risks
The size, scope and ambition of renewable and low-carbon
projects are on the increase. Rapidly developing newtechnology, new entrants to the market and developing
government policies (such as subsidies) will create newrisk profiles for ‘green’ energy projects across the globe.
We anticipate that this will translate into a rise in new,novel and ultimately high-stakes disputes being taken
to arbitration as these projects progress from planning
through to construction and operation. The key reasonsfor this include:• Reliance on new technology: many (but not all) energy
transition projects rely on relatively new technology.
Even tried-and-tested technology such as solar and windcontinues to evolve – think molten salt solar and floating
offshore wind. Where novel technology fails to operate as
intended, or is more expensive or complex to construct,
there may be serious consequences for all project
participants. Delays to completion, failure to achievecommissioning standards or, ultimately, lower than
anticipated output may lead to complex and high-value
claims. This may be particularly acute against
a backdrop of time-limited State subsidies or financecommitments. Moreover, new technology can also takelonger to achieve regulatory and planning approvals
if it is necessary to prove the safety case and/or the
regulator is unfamiliar with the technology, a common
issue in recent nuclear new-build projects.

23• Lack of developed industry standards may lead towarranty or fitness for purpose claims against
contractors. Even where specifications are available,
issues can arise – in the widely reported UK Supreme
Court case of MT Højgaard v E.On [2017] UKSC 59, thefoundations for an offshore wind farm failed less than ayear after completion even though the contractor had
complied with the relevant industry specification.
•	Lack of industry standard forms or settledinterpretation of existing standard forms, such as FIDIC
in the context of new project structures (with different
risk interfaces to traditional energy projects), may resultin a greater number of claims where the parties differ
in their understanding of their contractual rights inrelation to a novel project. A common feature of manyenergy transition projects is that the owner takes oninterface risk, largely due to the uncertainties involved.
Uncertainties can be difficult to manage and price, and thepotential for disputes arising is increased, especially wherenovel scope is undertaken on a fixed-price or EPC basis.

Global investment in theenergy transition:$501.3bn
in 2020

Source: BloombergNEF

Energy transition – arbitration procedure
Arbitration is likely to continue to be the preferred methodof dispute resolution for large-scale energy projects,
particularly where parties from across the globe are
involved. In 2019, the ICC Commission on Arbitration and
ADR and the ICC Commission on Environment and Energy

International arbitration in 2022:
top trends

Construction arbitration in the faceof energy transition and climate change

issued a joint report on the ‘Arbitration of Climate Change
Related Disputes’, outlining the benefits of arbitration in
resolving disputes arising out of existing traditional energy
projects as a result of climate change regulation and achanging market towards renewables and low-carbon,
and those arising out of the challenges and complexitiesof new projects themselves. Among the top benefits
were access to arbitrators with appropriate climatechange-related expertise, availability of expedited
procedures, the ability to join parties or consolidate
multiple arbitral proceedings, and enforceability of awards.

Well-established mechanisms, including expert
determination and dispute boards, may assist, but
expedited or fast-track arbitration is likely to become
increasingly important, whether to resolve a technicalpoint or more broadly to ensure continued progress.

Time will tell whether any arbitral institutions go further
to position themselves as being particularly suited toresolving disputes arising from energy transition projects,
as we have seen the ICC, HKIAC and others do in respectof Belt and Road disputes, but we anticipate some market
pressure to do so.

Turning to the current effects of climate change, extreme
weather events have the potential to significantly delay
and/or disrupt existing construction projects and will test
the resilience of assets like never before. This will, in turn,test the contractual risk allocation, in particular whether
such events were foreseeable.

For example, there is likely to be a desire for an expedited
arbitration procedure to obtain a final and binding award
on a technical issue, especially where there are multiple
identical assets being constructed (eg wind turbines or solar
panels). This might enable the parties to move on with the
project with the certainty and enforceability of an arbitralaward and thus without the uncertainty of a criticaldecision being re-opened at a later stage when it is very
difficult or expensive to carry out remedial works.

Examples of delay or disruption events include extreme
temperatures reducing working hours, strong winds
disrupting power supplies, or flooding delaying thetransportation of materials. Construction contracts normallyset out who is to bear the risk of extreme weather events –for example, whether the contractor is entitled to an
extension of time. However, it is not always clear what
actually constitutes a qualifying weather event under agiven contract (even where a standard form contract is used),
and it could fall to a tribunal to determine this crucial point.

‘Delay, disruption, defects and disputes – all are
set to be on the rise as significant investment
pours in and construction gets under way on new
renewables and low-carbon projects across theglobe. For many, these projects mark a journey
into uncharted waters as new technologies aredeveloped at pace, new regulatory frameworks
are set and the ability of familiar contractual
mechanisms to manage project risks is tested.
The certainty: international arbitration will no
doubt be the go-to for dispute resolution overthe coming years.’Samantha Lord Hill
Counsel,Dubai
More broadly, the need to commence operation of assets
on time to ensure financial viability is particularly acutefor renewables projects. We anticipate that owners/
operators will increasingly focus on means to avoid lengthy
delays caused by disputes on live projects.

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Finally, we expect to see the continued growth of investorState arbitration if States resile from the subsidies andincentives to invest in green energy projects made as partof wider commitments to net zero and emissions targets.

Extreme weather

Many contracts include a requirement that the weather
event must have been unforeseeable. However, climatechange might pose some difficulties here: (i) the thresholdof what is unforeseeable will shift (and in some regions has
already shifted) as extreme weather events become morecommonplace; and (ii) some contracts assess foreseeability
by reference to historical data, assuming weather patterns
are constant, which is no longer the case.
As for asset resilience, extreme weather events risk causing
or worsening defects that might not otherwise have arisen
and/or been uncovered. They may also impact the operabilityof assets and/or reduce expected outputs, thereby impacting
the ability of the owner to recover capital expenditure costs.
Such outcomes are likely to result in an increase in claims
being brought against contractors and construction
professionals relating to the design parameters andtolerances. We may also witness more claims based onalleged negligence or breach of the standard of care,for failing to account for the effects of climate change
in design and construction.

Consolidating arbitration centresin the Middle East

International arbitration in 2022:
top trends

10.
Consolidating arbitration centresin the Middle EastSami Tannous
Partner, Dubai

Amani Khalifa
Counsel, Dubai

In a development that surprised many, including the LCIA,
on 14 September 2021 the DIFC-LCIA arbitration centre
was effectively abolished by Dubai Decree 34 of 2021
concerning the Dubai International Arbitration Centre(the Decree). Prior to the Decree, the DIFC-LCIA arbitration
centre did not have an independent legal presence inDubai and operated through a joint venture between
the DIFC Arbitration Institute (DAI) and the LCIA.
The Decree abolished the DAI and transferred ownershipof its property and employees to the Dubai International
Arbitration Centre (DIAC). The Decree also abolished theEmirates Maritime Arbitration Centre, which was theregion’s only specialised maritime arbitration centre(although to our knowledge, unlike the DIFC-LCIA, it
did not have an active caseload).
The Decree has created some uncertainty, especiallyin relation to pending arbitration cases and theadministrative aspects of the DIFC-LCIA’s presence andoperations. To ease the transition of cases to DIAC, theDecree provides for a six-month period for DIAC to‘coordinate’ with ‘all concerned entities’ to help themto bring themselves into compliance with the Decree.
In addition to these important changes, the Decree includes
the new DIAC statute (the Statute), which provides for acomprehensive restructuring, as a result of which DIAC
now has a board of directors, an arbitration court andan administrative body. The Decree also provides for DIAC
to have headquarters in ‘onshore’ Dubai and a branch in
the DIFC. Several members of the board and the chairmanof the DIAC have since been appointed.
The changes to DIAC’s corporate structure and the abolitionof the other arbitration centres was seen by some as ahelpful move to consolidate arbitration centres in thisimportant regional arbitration seat. Other practitioners
have expressed the view that the lack of choice in ‘local’Dubai arbitration institutions and the sudden change inpolicy may harm Dubai’s reputation as a hub for disputes.

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Irrespective of these opposing viewpoints, it is importantfor Dubai’s future role as a regional arbitration hub for
any uncertainty arising out of the Decree to be resolved
as soon as possible.

DIFC and LCIA stances
On 7 October 2021, the DIFC issued a press releaseindicating that existing cases would continue to beadministered by the LCIA and the DIFC-LCIA
casework team on a secondment basis. The statement
fell short of providing any details of the terms of the
proposed secondment.
Separately, the LCIA made an official statement on thesame day clarifying its position in relation to the Decree.
The LCIA did not address the proposal for secondment of
DIFC-LCIA employees, but noted that there were several
outstanding questions, including the status of the casework
team, that needed to be resolved urgently. As at the dateof writing, there remains considerable uncertainty
regarding the transitional arrangements, although inpractice existing DIFC-LCIA arbitrations are continuing tobe administered by the former DIFC-LCIA case management
team, albeit now under employment by DIAC.

Transition of pending cases
With respect to cases currently being heard under the
DIFC-LCIA arbitration rules, the Decree provides that therules of the abolished centres will continue to apply tothe extent they do not conflict with the provisions of theDecree until DIAC issues its new rules. There is therefore arisk that Dubai Courts may find that tribunals continuing
to apply the DIFC-LCIA arbitration rules beyond this dateare acting unlawfully, which could, in turn, put arbitration
awards seated in onshore Dubai at risk of annulment.
The Decree clarifies that arbitration clauses in existing
agreements referring to the abolished centres where
the tribunal is not yet constituted will remain valid, andthat DIAC will replace the abolished centres in theInternational arbitration in 2022:
top trends

administration and supervision of such disputes. While
this would suggest that DIAC will continue to apply theabolished centres’ rules to pending arbitration proceedings,
it is unclear how this will be implemented in practice andwhether this is expected to change when DIAC issues its
new arbitration rules.

The future of DIFC as a seat
The Statute provides that where no seat or place ofarbitration is agreed upon by the parties to a DIAC
arbitration, DIFC will be the default seat. This is likely
to increase the volume of cases heard in the DIFC Courts,
which will, in turn, lead to more published judgments
and greater certainty regarding the application andinterpretation of the DIFC Arbitration Law.
The Decree confirms that Dubai Courts and DIFC Courts
will continue to exercise their jurisdiction to consider
and determine claims relating to awards issued by theabolished centres.

The way forward
The Decree does not impact the position of the DIFC as aseat of arbitration. On the contrary, the DIFC’s position asa seat of arbitration has been strengthened by the Decree
providing it to be the default seat for DIAC arbitrations.
Nevertheless, parties should no longer include DIFC-LCIA
or EMAC arbitration clauses in their contracts and, given
the continuing uncertainty with regard to transitionalarrangements, would be well advised to renegotiate
existing clauses before a dispute arises. Parties wishing
to arbitrate in the Middle East can still choose from anyof the well-known institutional arbitration rules and may
opt to seat their arbitrations in the DIFC, the ADGM
(Abu Dhabi Global Market) or any other seat that isrecognised as being supportive of arbitration.

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Consolidating arbitration centresin the Middle East

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