Global survey explores the right to appeal in international arbitration
A right of appeal makes international arbitration less attractive according to 71 per cent of respondents to a new survey by Bryan Cave Leighton Paisner LLP, although an alarmingly high 50 per cent reported direct experience of a tribunal making an obviously wrong decision. The international law firm’s latest arbitration survey examined whether parties to arbitration should have the right to appeal a tribunal’s outcome if that decision is wrong.
“For more than half the respondents to have experienced what they felt was an obviously bad decision by an arbitral tribunal suggests that there is certainly scope for correction of awards if this is the route parties want to go,” says Carol Mulcahy, partner at BCLP. “I felt that there was also a reassuringly high perception of respect for the legitimacy of the arbitration award, good or bad,” she adds. Only eight per cent of in-house counsel respondents felt that a losing party who cannot appeal an incorrect award may feel that they are justified in not complying with the award.
The survey found 38 per cent of in-house counsel, 66 per cent of law firm respondents and 69 per cent of arbitrators felt that a right of appeal would make the arbitration process too long. A similar per centage from each group felt that a right of appeal would make the process too expensive. By contrast, just over half of respondents felt that in some cases the consequences of an incorrect decision can be so serious as to make the absence of an appeal mechanism unacceptable. In fact, 72 per cent of respondents felt that rights of appeal in industry sectors that have long-established and widely used arbitration procedures providing or permitting appeals against an award should be left unchanged.
“I think the theory underpinning the traditional view – that one of the strengths of arbitration is that it offers the advantage of finality and avoids the time and cost of appellate procedures – has a lot of support,” says Mulcahy. “But when you ask parties to think about individual cases, they are often prepared to acknowledge that in some cases a bad decision can have truly catastrophic results and that the absence of an appeal mechanism may be insupportable.”
Support for an internal right of appeal was stronger among in-house counsel than other participants with 77 per cent in favour, compared to 54 per cent of law firm respondents and 38 per cent of arbitrators. Mulcahy believes this may be due, in part, to the need for in-house counsel to manage costs and time to be invested in arbitration.
“An internal appeal is also more consistent with the parties’ initial choice of opting out of national court systems by choosing arbitration – a decision that is often driven by in-house counsel,” she says.
In Mulcahy’s opinion, an increase in appropriately formulated appeal mechanisms would not be a bad thing.
“To my mind, the key point is that parties have freedom of choice,” she says. “They are free to opt in to arbitration so, in appropriate cases, why should they not be free to opt in to a right of appeal?”
BCLP surveyed 123 respondents around the world, including in-house counsel, arbitrators, expert witnesses and litigation funders, from January to March this year. The global firm has conducted nine arbitration surveys during the past ten years, each of which covers a different theme. Recent topics have included cybersecurity in arbitration proceedings and increasing diversity on arbitral tribunals.