London has established an increasingly powerful position as a global arbitration hub. But does it have the facilities to drive forward its growth?
While Russian oligarchs flocking to London’s courts attracted much publicity – and its share of controversy regarding ‘renting’ of British justice – another little-noted boom bringing rich foreign parties to the City to settle disputes is arguably far more significant: the rise of London as an arbitration hub.
The consensus view among senior practitioners is that London is rapidly overtaking Paris as a key global arbitration hub for high-value commercial disputes and establishing itself as the biggest arbitration hub of Europe. Indeed, such is the demand, one element holding back the City is the facilities to cope with surging caseloads; not only is the number of participants in a dispute growing but the major firms now employ sizeable teams to manage these hearings, pushing total headcount upwards of 100. And all with the expectation of state-of-the-art IT systems, such as Opus 2.
International arbitration has taken off on a global level, allowing contracting parties to avoid litigation on the other’s home turf and choose a neutral venue where their disputes are decided and under which rules. Arbitration hubs first formed around the headquarters of the two pre-eminent arbitral institutions, the International Chamber of Commerce (ICC)’s arbitration body in Paris, and in Washington DC, where the investor-state institution the International Centre for Settlement of Investment Disputes (ICSID) is based. At ICSID, the number of cases filed rose from 176 between 2002 and 2007 to 239 between 2008 and 2013.
But amid a wider arbitration boom, many now claim that London has surpassed its French rival on the European mainland as the go-to destination, even if London-seated cases are often being handled under ICC rules. Sylvia Noury, a partner at Freshfields Bruckhaus Deringer and the firm’s most senior ICSID specialist in London, says the City is now ‘the place of choice’ after having swapped London for Paris in 2002. Now, however, Noury is back in the English capital and reflects: ‘London and the London Court of International Arbitration (LCIA) are very much on the rise.’
International Chamber of Commerce – spreading the work
Number of cases filed in 2013: 767
Number of cases seated in 2013: 592
Top five seats in 2013:
| 1st Place | Paris | 118 cases | 19.9% |
| 2nd Place | London | 70 cases | 11.8% |
| 3rd Place | Geneva | 56 cases | 9.5% |
| 4th Place | Zurich | 34 cases | 5.7% |
| 5th Place | Singapore | 33 cases | 5.6% |
Source: The International Chamber of Commerce, Paris
The LCIA received a record number of cases in 2013, with 290 requests for arbitration and 11 requests for mediation or another form of alternative dispute resolution. This tops 2012 by 25 arbitrations and surpasses the record number of cases the centre received in 2009, when 272 disputes were referred to LCIA arbitration following the knock-on from the financial crisis. While the LCIA’s record is still less than half of the ICC’s caseload, 78.6% of these arbitrations were seated in London, 228 cases, compared to just 19.9% of ICC cases being seated in Paris – 118. Only a handful of LCIA disputes were seated in Paris, with Singapore the second most attractive location for the centre’s arbitration with 2.8% of all cases filed in 2013 seated there, and the consensus among arbitration lawyers (outside of Paris) is that not enough clients have a business connection to the French capital to warrant going there to hold a dispute. By comparison, London and its lawyers are now attracting the second largest slice of the ICC’s caseload, with 11.8% of 592 cases seated in 2013 having been conducted in the English capital.
London caseloads are unsurprisingly rising at established teams, even if the increasing level of competition in the area means that there is considerable fee pressure in the mid-market. US litigation powerhouse Quinn Emanuel Urquhart & Sullivan, for example, launched its arbitration practice in London with the hire of partners Stephen Jagusch and Anthony Sinclair from Allen & Overy (A&O) in 2012 and the office ran seven cases that year, a figure that has swelled to 38 live matters as of June 2014, including 18 selections as arbitrator. Aside from the growing number of foreign law firms targeting London’s arbitration work, barristers’ chambers are also getting in on the act and attracting arbitrators that want the clerking support without the conflict problems that come with a major law firm.
It is not just the quantity of cases but their scope. At arguably the three top arbitration practices in the UK – Freshfields, Wilmer Cutler Pickering Hale and Dorr (WilmerHale), and Skadden – those firms alone ran more than 30 cases between them in 2013 where the dispute was worth over £1bn.
Audley Sheppard, co-head of international arbitration at Clifford Chance, says: ‘The myth that you need to be in Paris to run ICC arbitrations has been burst. American firms have never had much interest in Paris so they’ve got less interest in putting Paris as the seat, they’re much more comfortable running it out of London.’ Arbitration leaders, such as Skadden and WilmerHale, house a huge proportion of their global capacity in London, with 42% of all the former’s international arbitration partners based in the UK as of June 2014 and 32% at the Washington DC-headquartered firm. This big-ticket work landing in London with US firms is best exemplified by Nick Henchie, head of Vinson & Elkins’ international construction group, who picked up the Panama Canal Authority’s multibillion-dollar arbitration with its contractors.
London’s growing popularity as an arbitration centre has been driven by simultaneous growth of supply, with big-spending US law firms increasingly focused on the area as a key practice line, and thereby encouraging more clients to come to the Capital. Likewise, the heavy use of English law in international contracts in growth markets like Asia and Africa has further underpinned the rise of London (see ‘Clash of the Titans’).
At Herbert Smith Freehills (HSF), 41.3% of all international arbitration emanates from Asia, the firm says. This compares to 31.5% in 2008. While not all of that work is run out of London, a lot of work flows back to HSF’s London stronghold. The City firm promoted 14 arbitration lawyers to partner in the last seven years, a batch that included the firm’s new global head of disputes Justin D’Agostino, who is now based in Hong Kong.
Edward Poulton, a partner at Baker & McKenzie in London, says: ‘There has been sharp growth in the amount of arbitration coming out of the Middle East, Africa and CIS. English law is by far the most popular non-domestic law and therefore it makes sense to align your seat and your law.’
The LCIA, which has traditionally been less expansive than the ICC with its overseas marketing, failed to attract much of the Latin American work that produced a major wave of arbitration in the 2000s following a series of expropriations. However, the institution is ahead of the curve in the Middle East, Africa and Asia, where the body has launched sister centres in Dubai, Mauritius and India. While those centres partially exist to ensure international arbitration remains legitimate in the eyes of its users, seeking to avoid too many disputes being sent to Western centres, Tony Dymond, a partner at Debevoise & Plimpton, says the growth of the LCIA ‘brings work to London as the LCIA is becoming the first centre in people’s minds and people naturally come to London to find their lawyers’.
Arbitration – team overview
| Firm | Number of arbitration partners in London in 2012 | Number of arbitration partners in London in 2013 | Number of cases in London 2012 | Number of cases in London 2013 | Number of live cases in London as of 1 June 2014 | Number of cases run out of London in 2013 worth: a) between £200m and £999m; b) over £1bn |
| Freshfields Bruckhaus Deringer | 5 | 5 | 100 | 90 | 55 | – |
| Wilmer Cutler Pickering Hale and Dorr | 5 | 6 | 81 | 82 | 63 | a) 15 b) 14 |
| Herbert Smith Freehills | 6 | 5 | 82 | 100 | 36 | a) 11 b) 6 |
| Skadden, Arps, Slate Meagher & Flom | 5 | 5 | 20 | 23 | 23 | a) 7 b) 11 |
| White & Case | 6 | 6 | 73 | 75 | 55 | a) 7 b) 6 |
| Clifford Chance | 4 | 4 | 30 | 34 | 27 | a) 8 b) 4 |
| Quinn Emanuel Urquhart & Sullivan | 6 | 9 | 6 | 16 | 20 | a) 9 b) 5 |
| Baker & McKenzie | 3 | 4 | 27 | 28 | 35 | a) 4 b) 1 |
| Winston & Strawn | 3 | 3 | 11 | 16 | 16 | a) 5 b) 3 |
| CMS Cameron McKenna | 8 | 9 | 23 | 20 | 26 | a) 6 b) 0 |
NB: Figures refer to roles as counsel rather than arbitrator.
The LCIA has already succeeded in Russia, where high-net-worth individuals are already well-versed in the English courts, taking work away from the Stockholm Chamber of Commerce where Russian arbitration had traditionally been seated. With a large amount of Russian assets stored away in Cyprus and the British Virgin Islands, whose laws are based on English common law, the LCIA has convinced those looking to bring lawsuits against individuals and companies with well-hidden assets to use arbitration instead of litigation due to improved chance of enforcement around the world.
Internal research in Freshfields’ ‘Private M&A/Market Practices and Trends’ report shows that there is a marked increase in the number of major transactions with arbitration clauses, especially for cross-border deals. Noury says ‘the LCIA’s approach over the last 14 years has become much more global’ while at the same time pulling in a greater percentage of work to London than the ICC does for Paris. Freshfields’ research shows that out of 66 arbitration hearings that the team ran globally as counsel between August 2011 and August 2013, London appeared to be its clients’ favourite seat, with seven substantial arbitration hearings in the City, more than anywhere else. The LCIA is a major part of that and energy major Shell has switched from using a mixture of institutions to making the London-based body its default centre, with LCIA arbitration clauses in contracts to direct disputes there.
But London’s growth is being hindered by what many view as inadequate facilities, with one arbitration partner noting that London’s International Dispute Resolution Centre (IDRC) facilities often require six months’ notice for a hearing, extending the time it takes to conclude arbitration. One partner says the IDRC ‘needs updating and the rooms are rather cramped and outdated’. Another tells a story of how ‘I had to rearrange the room just to fit everyone in’. A third describes how the centre is so busy that it ‘lacks privacy: I was once walking by a door and saw a presentation on an opposing party and witnessed the party was in a parallel arbitration that I had not known about’.
Such is the demand that law firms have adapted and are now holding arbitration hearings in their own offices. However, this often proves problematic, with Baker & McKenzie partner Steve Abraham stating how ‘one side’s counsel will typically refuse to have hearings in the opposing counsel’s offices as they will perceive there to be a home advantage, what with all their teams around them, their law library and IT systems’.
Many feel that London is not keeping pace with Singapore, which is on course to overtake Hong Kong as the premium arbitration hub in Asia, partially due to Hong Kong’s perceived closeness with China. Maxwell Chambers’ slick centre in Singapore is widely perceived to be the most advanced centre for arbitral hearings in the world. The facility has 23 hearing rooms, more than double the amount available at IDRC in London, with the largest room able to accommodate up to 140 people and therefore suitable for the largest of cases.
One arbitrator tells Legal Business it is not uncommon for tribunals to have to reorganise tables and chairs in an attempt to cram in witnesses, lawyers and court reporters. Poulton argues that, given the ‘importance to the British economy of the legal world and market, and in particular the dispute resolution market, there would be real commercial sense for the government at national and local level to be taking interest in this; that was part of the policy behind the Rolls Building’.
But even with such challenges, it appears big-ticket arbitration has become yet another weapon in London’s armoury. LB
tom.moore@legalease.co.uk