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Arbitrators disappoint in disputes, study finds
Oct 14 2010

Half of the multinational companies using arbitration to settle business disputes have been disappointed with the performance of their arbitrator - with some complaining that arbitrators caused delays and lacked specialist industry knowledge, according to a new study.

Research by the School of International Arbitration at Queen Mary University of London found that 20 per cent of companies were disappointed by the performance of their arbitrator, who is often a barrister or retired British High Court judge, because of a "bad decision or outcome".

A further 11 per cent complained about delays caused by the arbitrator, and 9 per cent said the latter lacked specialist knowledge when adjudicating on their dispute.

Lack of independence, bias and excessive fees were among other concerns raised by companies about arbitrators.

The results come as multinationals increasingly turn to arbitration to settle disputes because it is seen as a cheaper and less formal alternative to going to court. The main private institutions that run cases - such as the London Court of International Arbitration - have seen a big increase in business in recent years.

Arbitrators are normally drawn from a small pool of experts and can be academics and industry experts, as well as lawyers. It has been estimated that just 40 or 50 individuals decide the biggest cases internationally.

Professor Loukas Mistelis, director at the School of International Arbitration, who conducted the research of 136 companies said some of those surveyed wanted a system that would enable them to assess and review the skill of arbitrators at the end of a dispute.

"The pool of arbitrators is small," he said. "Many key arbitrators are booked up a long time in advance and often there is a time delay between them hearing a case and delivering a ruling. It is often supposed to take three months but in practice can often take between six months and a year, or up to three years".

Arbitration hearings are not open to the public which makes the process attractive to companies, which prefer a business dispute to be settled without the publicity of a high-profile court case.

The research found that 62 per cent of the companies surveyed said confidentiality is very important to them but it was not the main reason for using arbitration.

Half of the respondents erroneously believed that arbitration is confidential even when there is no confidentiality clause and 38 per cent would use arbitration even if it did not offer the potential for confidentiality.

The research also found that London was the most popular city for arbitration - preferred by 30 per cent of companies. A further 9 per cent preferred Geneva. This was followed by Tokyo, Paris and Singapore.

London's popularity for arbitration rests on the fact that it is home to some of the biggest law firms, and also because many companies prefer to use English law to settle disputes.