What are arbitral institutions, and why do they matter?

Many international arbitrations are conducted under the auspices of an “arbitral institution.”  Examples include the American Arbitration Association (AAA), the International Chamber of Commerce (ICC), and the London Court of International Arbitration (LCIA).  Surveys show that choice of institution is a key consideration for commercial parties when negotiating arbitration clauses.  Why?  What are these institutions?  And what role do they play in proceedings they administer?

What are arbitral institutions?

An arbitral institution is a service provider that administers proceedings under its arbitration rules.  There are now hundreds of arbitral institutions, but the bulk of international arbitrations are handled by some 20 centers. 

In the U.S., the largest is the International Centre for Dispute Resolution (ICDR), the international branch of the American Arbitration Association (AAA).  Outside the U.S., leading institutions include the International Chamber of Commerce (ICC) in Paris, the London Court of International Arbitration (LCIA) in London, the Singapore International Arbitration Centre (SIAC), and the Hong Kong International Arbitration Centre (HKIAC).  Reliable regional institutions with a proven track record of administering international arbitrations are found in Switzerland, Sweden, Dubai, Austria, Germany, Malaysia, Egypt, Belgium, Brazil, and China.

Some institutions have been around for many years, like the LCIA (est. 1892) and the ICC’s international court of arbitration (est. 1923).  Many, however, appeared in the 1980s and 90s, as cross-border trade exploded through globalization.  

Although their internal structures vary, many arbitral institutions are part of a wider chamber of commerce.  The vast majority operate on a not-for-profit basis.  With the notable exception of institutions from the former Soviet Union, many arbitration institutions were born of joint local efforts of business communities and the arbitration bar.

Some institutions operate independently of governments (e.g., LCIA, ICC, ICDR).  Others are created and financed by governments.  Some are regulated by statute.  Some are given responsibilities traditionally associated with the judiciary.  In China, for instance, certain institutions are staffed with current or former public functionaries.  

What do institutions do?

Institutions typically publish their own arbitration rules.  Some also administer arbitrations under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules.  When parties agree to arbitrate under a set of rules – for example by referring to those rules in an arbitration clause – they incorporate them by reference into their contract.  The rules then bind the parties.

Institutions also offer commercial parties “casework” services.  They act as the equivalent of a court’s registry and keep a record of filed documents.  Some institutions effect service of papers on respondents.  

Under most rules, once a tribunal is established, the institution takes a back seat, leaving the conduct of the proceedings to the arbitrators.  Post tribunal-appointment, the degree of involvement varies between institutions.  Some, like the ICC or the LCIA, actively supervise proceedings throughout, monitoring communications between the tribunal and the parties.  An important role of most institutions is deciding on an arbitrator’s potential removal when a party challenges that arbitrator’s impartiality or independence.  

At the end of proceedings, some institutions, like the ICC or the CEPANI in Belgium, review draft awards before issuance to correct certain mistakes.  This process, known as “award scrutiny,” aims at making awards effective and enforceable. 

Is the role of institutions purely “administrative”?

Conventional wisdom – echoed by the ICC Rules – is that an arbitration institution “does not itself resolve disputes,” but instead “administers the resolution of disputes by arbitral tribunals.”  A closer examination of institutions’ role reveals a more nuanced reality.

Institutions often make decisions, especially before an arbitral tribunal is appointed.  These decisions can shape the arbitration.  For instance, decisions on language, number of panelists, or the removal of an arbitrator, all inform the makeup of the tribunal.  That, of course, can impact the case’s outcome.  Likewise, a decision on joinder or applicable rules affects procedure.   Procedure, too, can alter a case’s fate.

Arbitral institutions are thus best viewed as incidental decision-makers.  A choice of arbitration institution is not one to be taken lightly.

To learn more about international arbitration, follow us on LinkedIn.  “Brilliant lawyers with courtroom savvy” – Benchmark Litigation.  Copyright MoloLamken LLP 2021. 

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