SCHOOL OF LAW SINGAPORE INTERNATIONAL DISPUTE RESOLUTION ACADEMY SIDRA International Dispute Resolution Survey: 2022 Final Report
International Dispute Resolution Survey: 2022 Final Report Nadja Alexander, Angela Ray T. Abala, Sarah Lim Hui Feng, Stacey Lopez, Joshua Phang Shih Ern, Rachel Tan Xi En © Singapore International Dispute Resolution Academy at Singapore Management University, 2022
TABLE OF CONTENTS Foreword Executive Summary 1 Introduction 2 Approach and Design 3 Respondent Profile 4 Respondents’ Perspectives on Factor Importance in Choice of, and Satisfaction with Dispute Resolution Mechanisms: Arbitration, Mediation and Litigation 5 International Commercial Arbitration 6 International Commercial Mediation 7 International Commercial Litigation 8 Mixed Mode (Hybrid) Dispute Resolution 9 Investor-State Dispute Settlement Acknowledgments Singapore International Dispute Resolution Academy (SIDRA) The Singapore International Dispute Resolution Academy (SIDRA) is a platform for thought leadership in international dispute resolution theory, practice and policy. A research centre at the Singapore Management University Yong Pung How School of Law, SIDRA leads the way through projects, publications and events that promote dynamic and inclusive conversations on how to constructively engage with and resolve differences and disputes at global, regional and national levels. In particular, SIDRA differentiates itself through its focus on applied research that has a practical impact on industry. SIDRA is mandated with three research programs: • The International Dispute Resolution (IDR) Survey research program; • The Singapore Convention on Mediation (SCM) research program; and • The Belt & Road Initiative (BRI) research program. 2022 F I NA L REPORT i
Contents Table of Abbreviations v Foreword vi Executive Summary ix Section 1: Introduction 1 Section 2: Approach and Design 2 Section 3: Respondent Profile 3 Section 4: Respondents’ Perspectives on Factor Importance in Choice of, and Satisfaction with 6 Dispute Resolution Mechanisms: Arbitration, Mediation and Litigation Comparing Respondents’ Perspectives of Factor Importance in Choice of 6 Dispute Resolution Mechanism Comparing Respondents’ Satisfaction 7 Factor Importance vs Satisfaction in Choice of Arbitration, Litigation and Mediation 8 Section 5: International Commercial Arbitration 11 Factors that Contributed to Respondents’ Choice to Use International Commercial Arbitration 11 Factors Affecting Respondents’ Decision to Use Arbitration and Respondents’ Satisfaction 12 With Arbitration as a Mechanism Factors Affecting Choice of Seat of Arbitration and Respondents’ Satisfaction with Seat of Arbitration 15 Most Commonly Used International Commercial Arbitration Seats 16 Factors Affecting Choice of Arbitration Institutions and Respondents’ Satisfaction with Choice of 17 Arbitration Institution Choice of Arbitration Institution 18 Factors Affecting Choice of Arbitration Venue and Respondents’ Satisfaction with Choice of 19 Arbitration Venue Most Commonly Used International Commercial Arbitration Venues and Hearing Centres 20 Factors Affecting Choice of Arbitrator and Respondents’ Satisfaction with Choice of Arbitrator 21 How Important is Diversity in the Selection of an Arbitrator 24 Usefulness of Technology in Supporting an Arbitration Procedure 26 Factors Affecting the Choice to Use a Wholly Online Platform to Conduct International Commercial Arbitration 27 Use of Third-Party Funding in International Commercial Arbitration 28 SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY ii
Section 6: International Commercial Mediation 29 Factors that Contributed to Respondents’ Choice to Use International Commercial Mediation 29 Factors Affecting the Decision to Use Mediation and Respondents’ Satisfaction with Mediation 31 as a Mechanism Choice of Mediation Institutions 33 Factors Affecting the Choice of Mediation Institutions and Respondents’ Satisfaction with 34 Mediation Institutions Factors Affecting the Choice of Mediators and Respondents’ Satisfaction with Mediators 36 Usefulness of Technology in Supporting a Mediation Procedure 37 Factors Affecting the Choice to Use a Wholly Online Platform to Conduct International 39 Commercial Mediation Importance of Diversity in the Selection of a Mediator 40 Diversity in Choice of Mediator 41 Use of Third-Party Funding in International Commercial Mediation 42 Section 7: International Commercial Litigation 43 Factors that Contributed to Respondents’ Choice to Use International Commercial Litigation 43 Factors Affecting the Decision to Use Litigation and Respondents’ Satisfaction with Litigation 44 as a Mechanism Dispute Resolution Mechanisms Used for International Commercial Litigation 48 Most Commonly Used Jurisdictions Where Local Courts Were Used 49 Most Commonly Used International Commercial Courts 50 Factors Affecting the Choice of International Commercial Courts and Respondents’ Satisfaction 51 with International Commercial Courts Usefulness of Technology in Supporting a Litigation Procedure 53 Factors Affecting the Choice to Use a Wholly Online Platform to Conduct International 55 Commercial Litigation Use of Third-Party Funding in International Commercial Litigation 56 2022 F I NA L REPORT iii
Section 8: Mixed Mode (Hybrid) Dispute Resolution 57 Mixed Mode Dispute Resolution Procedures with which Respondents Have had Experience 57 Factors that Contributed to Respondents’ Choice to Use Mixed Mode (Hybrid) Dispute Resolution 58 Factors Affecting Respondents’ Decision to use Mixed Mode Dispute Resolution 59 and Respondents’ Satisfaction with the Mixed Mode Dispute Resolution Mechanism Factors Affecting the Choice to Use Mixed Mode Mechanisms Over Arbitration and Mediation 60 Factors When Choosing Institutions for Mixed Mode Proceedings and Respondents’ Satisfaction 62 with the Choice of Institutions Section 9: Investor-State Dispute Settlement 64 Most Commonly Used Dispute Resolution Mechanisms for Investor-State Disputes 64 Factors Influencing Respondents’ Choice of Investor-State Dispute Resolution Mechanism 66 Considerations in Choosing Mechanism for Investor-State Dispute Resolution 67 Factors Affecting the Decision to Use Arbitration for Investor-State Disputes and Respondents’ 68 Satisfaction with Arbitration Factors Affecting the Choice to Use Mediation for Investor-State Disputes and Respondents’ 70 Satisfaction with Mediation Factors Affecting the Decision to Use International Commercial Courts for Investor-State Disputes 71 and Respondents’ Satisfaction with International Commercial Courts Factors Affecting the Decision to Use Mixed Mode Dispute Resolution for Investor-State Disputes 73 and Respondents’ Satisfaction with Mixed Mode Dispute Resolution Most Commonly Used International Commercial Courts 74 Factors Affecting the Choice of Seat of Arbitration for Investor-State Disputes and Respondents’ 75 Satisfaction with Seat of Arbitration Most Commonly Used International Arbitration Institutions in Investor-State Disputes 76 Satisfaction with Enforcement of Outcomes in Investor-State Disputes 77 Factors Affecting the Choice to Use a Wholly Online Platform to Resolve Investor-State Disputes 78 Developments that would Improve the Dispute Resolution Procedure for Investor-State Disputes 79 Acknowledgements 80 Author Team 80 The Singapore International Dispute Resolution Academy (SIDRA) 81 Contents SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY iv
Table of Abbreviations CAM Court-Annexed Mediation CPR International Institute for Conflict Prevention & Resolution DIFC Dubai International Financial Centre FIPA Foreign Investment Promotion and Protection Agreement HKIAC Hong Kong international Arbitration Centre HKMAAL Hong Kong Mediation Accreditation Association Limited HKMC Hong Kong Mediation Centre ICC International Court of Arbitration of the International Chamber of Commerce ICDR International Centre for Dispute Resolution ICSID International Centre for Settlement of Investment Disputes IDRC International Dispute Resolution Centre IMI International Mediation Institute ISDS Investor-State Dispute Settlement JIMC Japan International Mediation Center LCC London Commercial Court LCIA London Court of International Arbitration NYIAC New York International Arbitration Centre PCA Permanent Court of Arbitration PD Practice Direction SIAC Singapore international Arbitration Centre SICC Singapore International Commercial Court SIMC Singapore International Mediation Centre SIMI Singapore International Mediation Institute SMC Singapore Mediation Centre UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development 2022 F I NA L REPORT v
Foreword In recent years Singapore has developed a unique reputation as a practical laboratory for research and development in the management of international commercial disputes, not just in Asia but worldwide. This role is facilitated by the deliberate and thoughtful interaction and cooperation of the Singapore Ministry of Law, the Singapore International Arbitration Centre (“SIAC”), the Singapore International Mediation Centre (“SIMC”), the Singapore International Commercial Court (“SICC”), and the academic sector, most notably represented by the Singapore International Dispute Resolution Academy (“SIDRA”) of Singapore Management University. This SIDRA International Dispute Resolution Survey: 2022 Final Report, a follow-up to its groundbreaking 2020 report, is another important step along the way. The Survey, like its predecessor, aggregates and analyses the perspectives and practices of the primary stakeholders in dispute resolution — the parties who mediate, arbitrate, or litigate in the course of resolving commercial and investor-state disputes, and the lawyers who counsel them or who negotiate or advocate on their behalf. Surveys of this kind are a critical contributor to our understanding of the priorities and expectations business clients and counsel bring to dispute resolution and the factors that promote satisfactory processes and outcomes. Professor Alexander and her team have produced a study that reinforces some aspects of our current understanding but also breaks new ground, laying a foundation for future exploration of developing topics including mediator competence, neutral diversity, and the use of technology and complex mixed-mode approaches. The result is a high-level picture that captures the views of a wide range of clients and counsel in the international marketplace of commercial and investor-state dispute resolution. The respondents represent a cross-section of legal systems, with particularly strong representation from parts of Asia among surveyed businesses. The results are especially meaningful because the survey team limited their canvas to focus on the expectations of active users, and their actual experiences. Among the top-line results of the global survey, the most striking is the preeminence of mediation both in terms of perceptions regarding its relative benefits to users and reported high levels of user satisfaction with mediation. On average, sixty-seven percent of respondents reported satisfaction with various aspects of the mediation experience, as compared to fifty-five percent for arbitration and only forty-two percent for litigation. Mediation stands out most vividly when it comes to relatively high degree of satisfaction regarding the management of costs, relative speed, the preservation of business relationships, and the level of indirect costs experienced by clients, all of which tend to be important priorities of commercial parties and counsel. High levels of approval were also associated with the efficiency of mediation under the rubric of mediation institutions and the attributes of mediators (including dispute resolution experience, ethical values, cultural familiarity, and language skills). Contractual provisions requiring parties to mediate disputes are now SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY vi
a leading factor in use of the process, and in many other cases outside counsel recommend its use. These trends should accelerate as more countries adopt the Singapore Convention (United Nations Convention on International Settlement Agreements Resulting from Mediation), placing more importance on the development of even better guidance for developing and selecting effective mediators in the international sphere. Although the results are generally less notable than those for mediation, arbitration and arbitrators are viewed as performing reasonably well in a number of respects. Most respondents were satisfied with how arbitration served important priorities such as the confidentiality of proceedings, procedural flexibility (including flexibility in choice of institutions, venues, and arbitrators), the impartiality of arbitrators, and the direct enforceability of awards. On the other hand, although efficiency is a high priority for business clients, most were dissatisfied with arbitrators’ performance in this regard. Similarly, although nearly two-thirds of business users rated cost management as an important consideration, only thirty-one percent expressed some degree of satisfaction with costs in arbitration. In fact, when it comes to comparing the costs of arbitration, the speed of resolution, and the preservation of business relationships, expectations of arbitration appear to be no higher than litigation under court auspices. Indeed, among members of this respondent group, it may even be that many are now omitting cost savings as a potential benefit of arbitration. Regarding litigation, the Survey findings show that local courts are still used more than international commercial courts. It is notable that respondents identified a narrower set of important expectations for court-based procedures than for either mediation or arbitration — finality, direct enforceability, impartiality, clarity and transparency of rules and procedures, speed, and cost. While over half of respondents expressed dissatisfaction with their experience respecting speed of resolution and related costs, it is conceivable that the rise of international commercial courts will try to address these issues. Given the relative lack of versatility of litigation (and, to some extent, arbitration) in addressing the potentially broad range of priorities of business parties, it is of particular significance that the SIDRA Survey gave special attention to “mixed mode” approaches in which parties employ settlement-oriented processes (most often, mediation) against the backdrop of adjudication (either arbitration or litigation). Today, tiered dispute resolution provisions calling for mediation of disputes, followed if necessary by resort to arbitration, are becoming more common in international commercial contracts. It is worth noting that in addition to addressing the issues in the SIDRA Survey, Singapore has taken affirmative steps in the form of a joint SIAC/SIMC initiative to administer a form of “Arb-Med-Arb,” in which a mediated settlement may be incorporated as a consent arbitration award. More recently, the Singapore Rules of Court have been amended to require parties in litigation to make an “offer of amicable resolution” (either an offer of settlement or to employ another process such as mediation); the Rules also empower courts to direct resolution by amicable resolution. 2022 F I NA L REPORT vii
Foreword The Survey’s coverage of three other trending issues — the diversity of neutrals, the use and impact of technology, and the growth of third-party funding in dispute resolution — raises questions of the kind that will proliferate in the future. The most salient insights relate to the use of technology, a sector represented by fully one-sixth of the business representatives responding to the Survey. In addition to capturing the extraordinary uptick in the use of virtual/ online proceedings, largely due to the global pandemic, the Survey depicts widespread use of cloud-based information storage systems and e-discovery in arbitration, and automated tools and analytics focused on case analysis, probable damages, and anticipated ranges for settlement. The Survey indicates that despite widespread awareness of the prospect of third-party funding of parties in dispute resolution, its use in the commercial arbitration arena has been limited. Nevertheless, because third-party funding raises critical questions about fairness and due process, Singapore, like Hong Kong, has already taken affirmative steps to regulate the process. The SIDRA International Dispute Resolution Survey: 2022 Final Report is important for a number of reasons, not least of which its value as a contribution to our growing appreciation of the spectrum of choices for managing commercial conflict globally. For Singapore and for other conscientious hubs of dispute resolution, moreover, it may also provide a further stimulus for evolution at the cutting-edge. Thomas J. Stipanowich William H. Webster Chair in Dispute Resolution & Professor of Law Caruso School of Law Pepperdine University SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY viii
Executive Summary The International Dispute Resolution Survey: 2022 Final Report sets out the findings of the second iteration of the SIDRA Survey, which was conducted over the course of 2021. The Survey was conducted to better understand user experience and satisfaction with international commercial arbitration, international commercial mediation, international commercial litigation, mixed mode (hybrid) dispute resolution and investor-state dispute resolution mechanisms. The Survey continued to solicit data regarding user experience and satisfaction with technology in international dispute resolution. User understanding and use of third-party funding were explored in this Survey for the first time. This Report presents the findings of the Survey, emerging trends and areas that can be improved. The data gathered from the Report is summarised below: Respondents’ Perspectives on Factor Importance in Choice of, and Satisfaction with Dispute Resolution Mechanisms: Arbitration, Mediation and Litigation • Speed and impartiality were the two factors users considered ‘absolutely crucial’ or ‘important’ across arbitration, mediation and litigation. • A larger proportion of respondents were satisfied with speed and costs in mediation, as compared to arbitration and litigation. • More respondents ranked preservation of business relationships and indirect costs to client business as ‘absolutely crucial’ or ‘important’ in mediation, as compared to arbitration and litigation. International Commercial Arbitration • Direct enforceability, confidentiality and procedural flexibility continued to be the most ‘important’ or ‘absolutely crucial’ factors for the majority of the respondents in choosing to use arbitration as a dispute resolution mechanism. • The majority of the respondents were least satisfied with the preservation of business relationships, indirect costs to client business and costs associated with arbitration. • The top factors respondents considered when deciding to use a wholly online platform for arbitration were travel restrictions, lower costs, low dispute value and low complexity of issues. • The majority of the respondents understood third-party funding, its implications and how it works but have not used it. Unsurprisingly, more Client Users had less experience with using third-party funding compared to External Counsels. International Commercial Mediation • The majority of the respondents identified preservation of business relationship, confidentiality and speed as the top three ‘important’ or ‘absolutely crucial’ factors for opting to use international commercial mediation to resolve disputes. • The majority of the respondents were most satisfied with the ethical standards, language skills and dispute resolution experience of their chosen mediators. • The majority of the respondents indicated that technology was most useful for conducting virtual/online mediation. Interestingly, Client Users found different technological tools, such as e-discovery/due diligence, automated negotiation tools and analytics for mediator appointment more useful than External Counsels. • Gender, nationality and ethnic diversity in the pool of mediators were areas which the majority of the respondents thought should be improved. 2022 F I NA L REPORT ix
International Commercial Litigation • The majority of the respondents indicated that finality was the most important factor influencing their decision to choose international commercial litigation as a dispute resolution mechanism. Other important factors include impartiality and direct enforceability. • The majority of the respondents were satisfied with the clarity and transparency in rules and procedures, impartiality and direct enforceability and somewhat less satisfied with the procedural flexibility, preservation of business relationships, flexibility in the choice of institutions, venues and judges in international commercial litigation. • Local courts were still more frequently used compared to international commercial courts such as the London Commercial Court (“LCC”) and the Singapore International Commercial Court (“SICC”). • The majority of the respondents identified platforms for conducting virtual/online hearings, e-discovery/due diligence and cloud-based storage systems as ‘extremely useful’ or ‘useful’ technologies in international commercial litigation. Mixed Mode (Hybrid) Dispute Resolution • Mixed mode mechanisms have the potential to reduce the perceived disadvantages of standalone arbitration and mediation. • The majority of the respondents indicated contractual obligation as the main reason for selecting a mixed mode dispute resolution mechanism. • Where preservation of parties’ business relationships, cost and speed were important factors, the majority of the respondents chose mixed mode mechanisms as opposed to standalone arbitration. • The majority of the respondents indicated that the preservation of business relationships and the relative procedural flexibility offered by mixed mode mechanisms were the important factors that they considered in choosing mixed mode mechanisms over standalone mediation. Investor-State Dispute Settlement • International arbitration remained the dispute settlement mechanism of choice of most of the respondents in resolving investor-state disputes, with majority of the respondents choosing institutional or ad hoc arbitration. • Direct enforceability and political sensitivity were still the top considerations in choosing a dispute resolution mechanism for investor-state dispute settlement. • More respondents were using institutional mediation to resolve investor-state disputes than international commercial or domestic litigation. • The majority of the respondents indicated that they were satisfied with the speed, confidentiality, ability to preserve business relationships, impartiality and political sensitivity that mediation offers. Executive Summary SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY x
Section 1: Introduction The SIDRA International Dispute Resolution Survey: 2022 Final Report contains the findings of the second iteration of the SIDRA Survey, a cross-border, international survey that examined how and why businesses and lawyers make decisions about resolving cross-border disputes. The Report sheds light on user experiences with arbitration, litigation, mediation, mixed mode (hybrid) dispute resolution and investor-state dispute settlement mechanisms. The SIDRA Survey is commissioned by the Singapore Ministry of Law. It begins with an overview of the approach and design of the Survey questionnaire followed by the respondent profile according to user type, geographical region and legal system. The findings are structured into five substantive sections, namely: (1) international commercial arbitration, (2) international commercial mediation, (3) international commercial litigation, (4) mixed mode (hybrid) dispute resolution and (5) investor-state dispute settlement. There are five aspects of the SIDRA Survey that make it unique. First, it is 100% user-centric. All respondents are users and they are identified either as Client Users (corporate executives and in-house counsel) or External Counsels (dispute resolution lawyers and corporate lawyers) who engage in cross-border commercial dispute resolution. Views of neutrals, academics, institutional providers and other non-user stakeholders are not represented in this Survey. Second, the views are based on user experiences and not just preferences. Respondents were directed to the particular dispute resolution process they have experience with and were then asked to respond to a series of specific questions in relation to that mechanism. Third, the Survey focuses on dispute resolution mechanisms for cross-border disputes only and not for domestic disputes. International dispute resolution involves different considerations compared to domestic settings and we did not want to confuse the two. Fourth, the Survey has been distributed internationally in all six official UN languages: Arabic, Chinese, English, French, Spanish and Russian. Thus, a more diverse selection of users compared to those who primarily work in English was reached. Finally, no single dispute resolution mechanism was examined in isolation. Dispute resolution developments are increasingly interconnected as the emergence of hybrid dispute resolution mechanisms and international court referrals to mediation show. The Report features the birch tree, which shows its beauty in every season. Birch trees symbolise growth, adaptability and the promise of what is to come. With the publication of the findings of the second SIDRA Survey, we share data gathered from hundreds of lawyers and corporate decision-makers and report on the growth of cross-border litigation, arbitration and mediation practice, the adaptability of mixed mode dispute resolution and offer some insights on future trends. We are grateful for their continued contribution in helping us produce an up-to-date evidence-based report on the international dispute resolution landscape. 2022 F I NA L REPORT 1
Section 2: Approach and Design Client Users (corporate executives and in-house counsel) or External Counsels (dispute resolution lawyers and corporate lawyers) who engaged in cross-border commercial dispute resolution between 2019 and 2020 were asked to respond to the SIDRA Survey. The Survey was segmented into five distinct sections: (1) international commercial arbitration, (2) international commercial mediation, (3) international commercial litigation, (4) mixed mode (hybrid) dispute resolution and (5) investor-state dispute settlement. The questions focused on Client Users’ and External Counsels’ actual decision-making processes in relation to the use of different international dispute resolution mechanisms. The questionnaire was disseminated globally in the six official United Nations languages (Arabic, Chinese, English, French, Spanish and Russian) and closed on December 2021. We have used the dataset as it stood in January 2022. The Survey was answered by a total of 139 respondents from 25 countries, with a total of 181 responses across the aforementioned five sections of the Survey. The data analysis in this Report covers summary statistics and disaggregates responses primarily in two ways: • By user category: Client Users vs External Counsels; and • By dispute resolution mechanism: international commercial arbitration, international commercial mediation, international commercial litigation, mixed mode (hybrid) dispute resolution mechanisms and investor-state dispute settlement. SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 2
Section 3: Respondent Profile 3.1 The Respondent profile is set out in this section. Exhibit 3.1 Exhibit 3.2 3.2 Among 139 respondents, 22% were Client Users (corporate executives and in-house counsel) and 78% were External Counsels (dispute resolution lawyers and corporate lawyers). 3.3 Out of all respondents, 14.4% were in-house counsel, 7.2% were corporate executives, 77% were dispute resolution lawyers and 1.4% were corporate lawyers. Countries Represented by Respondents (Client Users) 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% 6.7% 10.0% 56.7% 3.3% 3.3% Bosnia and Herzegovina Cambodia Costa Rica Finland Germany Hong Kong (S.A.R.) Japan Malaysia Qatar Singapore Armenia Client Users Profiles of Respondents 1.4% 14.4% 22% 7.2% 77.0% 78% Client Users External Counsels In-house counsel Corporate executive Dispute Resolution Lawyer Corporate Lawyer 2022 F I NA L REPORT 3
Exhibit 3.4 Exhibit 3.3 3.4 The Client Users operate in different regions, with the majority based in Singapore, Japan and Hong Kong. The top industry sector for Client Users is financial, insurance and professional services (37%). This is followed by general trade and distribution (17%), telecommunications, information technologies, digital communications (17%) and construction and engineering (13%). 3.5 The External Counsels practice in different parts of the world. They come from 20 countries, with 38.5% based in Singapore. This is followed by the Philippines (10.1%) and Brazil (7.3%). Top 4 Industry Sectors of Client Users Countries Represented by Respondents (External Counsels) 1.8% 0.9% 7.3% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% 1.8% 6.4% 6.4% 10.1% 38.5% 3.7% 3.7% 1.8% 6.4% 4.6% 37% 17% 17% 13% Australia Austria United States of America United Kingdom of Great Britain and Northern Ireland United Arab Emirates Switzerland South Korea, Republic of Korea Singapore Philippines Malaysia Lithuania Japan Indonesia India Hong Kong (S.A.R.) Germany France China Cambodia Brazil External Counsels Financial, Insurance, and Professional Services General Trade and Distribution Telecommunications/ Information Technologies/ Digital Communications Construction and Engineering Client Users SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 4
Exhibit 3.5 3.6 The diversity of the legal systems of the respondent countries is illustrated in the table below. 3.7 The respondents come from 25 countries and are distributed among common law, civil law and hybrid legal systems. A majority of the respondents from Asia are from Singapore.1 Country Legal System Armenia Civil Law Australia Common Law Austria Civil Law Bosnia and Herzegovina Civil Law Brazil Civil Law Cambodia Civil Law Costa Rica Civil Law China Civil Law Finland Civil Law France Civil Law Germany Civil Law Hong Kong Common Law India Common Law Country Legal System Indonesia Civil Law Japan Civil Law Lithuania Civil Law Malaysia Hybrid Philippines Hybrid Qatar Hybrid Singapore Common Law South Korea, Republic of Korea Civil Law Switzerland Civil Law United Arab Emirates Hybrid United Kingdom Common Law United States of America Common Law 1 42.4% of all respondents come from Singapore. 2022 F I NA L REPORT 5
Section 4: Respondents’ Perspectives on Factor Importance in Choice of, and Satisfaction with Dispute Resolution Mechanisms: Arbitration, Mediation and Litigation At A Glance: • Speed and impartiality were the two factors users considered ‘absolutely crucial’ or ‘important’ across arbitration, mediation and litigation. • A larger proportion of respondents were satisfied with speed and costs in mediation, as compared to arbitration and litigation. • More respondents ranked preservation of business relationships and indirect costs to client business as ‘absolutely crucial’ or ‘important’ in mediation, as compared to arbitration and litigation. Comparing Respondents’ Perspectives of Factor Importance in Choice of Dispute Resolution Mechanism Exhibit 4.1 Comparing User Perspectives of Factor Importance 4.1 Respondents were asked to indicate which factors they considered as ‘absolutely crucial’ or ‘important’ in deciding whether to settle a dispute through arbitration, mediation or litigation. 4.2 Speed and impartiality were the two factors users considered ‘absolutely crucial’ or ‘important’ across arbitration, mediation and litigation. There were some notable differences in the importance of other factors. Flexibility in choice of institutions,... Cost Speed Confidentiality Procedural flexibility Clarity and transparency in rules... Preservation of business... Indirect costs to client business... Impartiality Political sensitivity Direct enforceability Finality Arbitration Mediation Litigation 63% 78% 69% 79% 83% 74% 81% 89% 26% 81% 72% 40% 72% 67% 37% 71% 44% 42% 94% 26% 42% 83% 76%78% 80% 49%50% 43% 82% 50% 80% 77% 56% 83% 26% 77% SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 6
4.3 For example, fewer respondents found direct enforceability as an ‘absolutely crucial’ or ‘important’ factor in mediation (50%) compared to arbitration (82%) and litigation (80%). This is consistent with the data presented in the SIDRA Survey Final Report 2020. This seems to reflect mediation users’ thinking that there is an enforcement mechanism gap in mediation. The Singapore Convention on Mediation (the “Singapore Convention”) seeks to change this. The Singapore Convention to mediated settlement agreements is what the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) is to arbitral awards; both focus on the enforcement of the outcome of the proceedings. At the time of writing, the Singapore Convention, with 55 signatories and ten ratifications to date, is still relatively young and has not gained as much traction as the New York Convention with 24 signatories and 170 state parties. 4.4 Interestingly, more respondents ranked preservation of business relationship and indirect costs to client business as ‘absolutely crucial’ or ‘important’ when selecting mediation (preservation of business relationship 94%; indirect costs to client business 83%) compared to arbitration (42% for both factors) and litigation (26% for both factors). In other words, where users sought a dispute resolution mechanism that would support their clients to preserve relationships and minimise direct and indirect costs, they were more likely to select mediation over other dispute resolution mechanisms. 4.5 Fewer respondents found confidentiality ‘absolutely crucial’ or ‘important’ in litigation (26%) compared to arbitration (81%) and mediation (89%). This is consistent with the fact that litigation is a generally more public process compared to arbitration and mediation, and users selecting litigation would generally be less concerned about a confidential dispute resolution forum. Comparing Respondents’ Satisfaction Exhibit 4.2 Comparing User Satisfaction Flexibility in choice of institutions,... Cost Speed Confidentiality Procedural flexibility Clarity and transparency in rules... Preservation of business... Indirect costs to client business... Impartiality Political sensitivity Direct enforceability Finality Arbitration Mediation Litigation 30% 72% 37% 41% 67% 40% 74%72% 34% 76% 67% 26% 68%67% 29% 66% 56% 32% 78% 29% 31% 78% 69% 78% 66% 42% 56% 40% 70% 56% 60% 63%61% 57% 26% 66% 4.6 Satisfaction levels for the different factors identified varied across all three dispute resolution mechanisms. 4.7 More than 50% of all respondents were satisfied with the direct enforceability and finality in arbitration, mediation and litigation. This is similar to what was reported in the SIDRA Survey Final Report 2020. More than 50% of all respondents were also satisfied with the clarity and transparency in rules and procedures and impartiality in arbitration, mediation and litigation. 2022 F I NA L REPORT 7
Factor Importance vs Satisfaction in Choice of Arbitration, Litigation and Mediation Exhibit 4.3 Factor Importance vs Satisfaction with Choice of Arbitration 4.8 With respect to cost and speed, there are some stark differences. More respondents were satisfied with those factors in mediation (72% of respondents were satisfied with the cost of mediation and 67% with its speed) as compared to arbitration (cost 30%; speed 41%) and litigation (cost 37%; speed 40%). 4.9 Respondents’ expectations and experiences for procedural flexibility and flexibility in choice of institutions, venues and arbitrators or mediators in arbitration and mediation were generally aligned. For litigation, only 40% of respondents ranked procedural flexibility as ‘absolutely crucial’ or ‘important’, and only 26% of respondents were satisfied with the same. For flexibility in choice of institutions, venues and judges, only 37% of respondents found this factor ‘absolutely crucial’ or ‘important’, and only 29% were satisfied. This shows that there are low expectations and low satisfaction for these two factors in litigation. 4.10 With respect to confidentiality, respondents’ expectations and experiences in arbitration (81% found it ‘absolutely crucial’ or ‘important’ and 74% were satisfied) and mediation (89% found it ‘absolutely crucial’ or ‘important’ and 72% were satisfied) were also aligned. Interestingly, while only 26% of respondents found confidentiality ‘absolutely crucial’ or ‘important’ in litigation, more respondents were satisfied with the same (34%). 4.11 The exhibits below illustrate the difference between factor importance (respondents’ rating of importance of a specific factor) and respondents’ satisfaction (respondents’ rating of satisfaction of a specific factor) with respect to their choice of arbitration, mediation or litigation. Satisfaction Score of factors in choice of Arbitration Note: X-axis plots the top 2 satisfaction percentage score for each factor. Y-axis plots the top 2 box importance percentage score for each factor. Importance Score of factors in choice of Arbitration Average Satisfaction Score Average Importance Score 90% 55% 20% 36% 68% 100% High Importance Low Satisfaction High Importance High Satisfaction Low Importance High Satisfaction Low Importance Low Satisfaction Speed Cost Political sensitivity Preservation of business relationship Indirect costs to client business (e.g., opportunity cost) Direct enforceability Finality Impartiality Flexibility in choice of institutions, venues, and arbitrators Clarity and transparency in rules and procedures Confidentiality Procedural flexibility Note: Importance Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated the considerations behind the selection of arbitration were “Absolutely Crucial” and “Important”. Satisfaction Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated they were “Very satisfied” and “Somewhat satisfied” with factors used in the selection of arbitration. The average Importance Percentage Score across all factors for arbitration is 68%; The average Satisfaction Percentage Score across all factors for arbitration is 55%. SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 8
4.12 In their choice of arbitration, respondents rated direct enforceability, confidentiality, procedural flexibility, finality, impartiality, flexibility in choice of institutions, venues, and arbitrators and clarity and transparency in rules and procedures as high in importance (rated above 68% in importance scores) and high in satisfaction (rated above 55% in satisfaction scores). 4.13 Respondents rated speed as high in importance (rated above 68% in importance scores) but low in satisfaction (rated below 55% in satisfaction scores). Respondents found cost to be low in importance (rated below 68% in importance scores) and low in satisfaction (rated below 55% in satisfaction scores). In the SIDRA Survey Final Report 2020, speed and cost were both rated as low in importance and low in satisfaction. The discrepancy in importance and satisfaction scores for speed and cost is wide and suggests that the respondents’ expectations and experiences are not aligned. Exhibit 4.4 Factor Importance vs Satisfaction with Choice of Mediation Satisfaction Score of factors in choice of Mediation Note: X-axis plots the top 2 satisfaction percentage score for each factor. Y-axis plots the top 2 box importance percentage score for each factor. Importance Score of factors in choice of Mediation Average Satisfaction Score Average Importance Score 100% 67% 33% 40% 70% 100% High Importance Low Satisfaction High Importance High Satisfaction Low Importance High Satisfaction Low Importance Low Satisfaction Note: Importance Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated the considerations behind the selection of mediation were “Absolutely Crucial” and “Important”. Satisfaction Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated they were “Very satisfied” and “Somewhat satisfied” with factors used in the selection of mediation. The average Importance Percentage Score across all factors for mediation is 70%; The average Satisfaction Percentage Score across all factors for mediation is 67%. Speed Cost Procedural flexibility Preservation of business relationship Indirect costs to client business (e.g., opportunity cost) Direct enforceability Impartiality Flexibility in choice of institutions, venues, and mediators Clarity and transparency in rules and procedures Confidentiality Political sensitivity Finality 4.14 In their choice of mediation, respondents rated preservation of business relationship, confidentiality, indirect costs to client businesses, speed, impartiality, cost and procedural flexibility as high in importance (rated above 70% in importance scores) and high in satisfaction (rated above 67% in satisfaction scores). Impartiality, confidentiality and procedural flexibility were also ranked by more than 70% of respondents as high in importance and high in satisfaction in the SIDRA Survey Final Report 2020. 4.15 Respondents ranked preservation of business relationship as high in importance (94%) and high in satisfaction (78%). Despite the location of preservation of business relationship in the ‘high/high’ quadrant, there exists a discrepancy which suggests that respondents’ expectations and experiences in this area are not entirely aligned. 2022 F I NA L REPORT 9
Exhibit 4.5 Factor Importance vs Satisfaction with Choice of Litigation Satisfaction Score of factors in choice of Litigation Note: X-axis plots the top 2 satisfaction percentage score for each factor. Y-axis plots the top 2 box importance percentage score for each factor. Importance Score of factors in choice of Litigation Average Satisfaction Score Average Importance Score 80% 42% 4% 10% 55% 100% High Importance Low Satisfaction High Importance High Satisfaction Low Importance High Satisfaction Low Importance Low Satisfaction Note: Importance Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated the considerations behind the selection of litigation were “Absolutely Crucial” and “Important”. Satisfaction Percentage Score refers to the top 2 box score, i.e., the percentage of respondents who indicated they were “Very satisfied” and “Somewhat satisfied” with factors used in the selection of litigation. The average Importance Percentage Score across all factors for litigation is 55%; The average Satisfaction Percentage Score across all factors for litigation is 42%. 4.16 Fewer than 70% of respondents ranked finality, direct enforceability, political sensitivity and clarity and transparency in rules and procedures as important. It should be noted that there is a discrepancy between importance (44%) and satisfaction (56%) percentage scores for clarity and transparency in rules and procedures. This suggests that while respondents placed lesser importance on clarity and transparency in rules and procedures, their actual experiences went over and above their expectations. Speed Cost Preservation of business relationship Indirect costs to client business (e.g., opportunity cost) Direct enforceability Flexibility in choice of institutions, venues, and judges Clarity and transparency in rules and procedures Confidentiality Political sensitivity Finality Impartiality Procedural flexibility 4.17 In their choice of litigation, respondents rated finality, impartiality, direct enforceability and clarity and transparency in rules and procedures as high in importance (rated above 55% in importance scores) and high in satisfaction (rated above 42% in satisfaction scores). Respondents indicated finality (83%), impartiality (80%), direct enforceability (80%) and clarity and transparency in rules and procedures (77%) as ‘absolutely crucial’ or ‘important’ and that they were ‘very satisfied’ or ‘somewhat satisfied’ with the same (57%, 66%, 60% and 66% respectively). 4.18 There are significant discrepancies in the percentage amounts between the respondents’ importance and satisfaction scores for cost and speed. Both cost and speed are rated as high in importance (rated above 55% in importance scores) and low in satisfaction (rated below 42% in satisfaction scores). 74% of respondents indicated that speed was ‘absolutely crucial’ or ‘important’. 69% of respondents thought cost was ‘absolutely crucial’ or ‘important’. Only 40% of respondents were ‘very satisfied’ or ‘somewhat satisfied’ with speed and only 37% were ‘very satisfied’ or ‘somewhat satisfied’ with cost. SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 10
Section 5: International Commercial Arbitration At A Glance: • Direct enforceability, confidentiality and procedural flexibility continued to be the most ‘important’ or ‘absolutely crucial’ factors for the majority of the respondents in choosing to use arbitration as a dispute resolution mechanism. • The majority of the respondents were least satisfied with the preservation of business relationships, indirect costs to client business and costs associated with arbitration. • The top factors respondents considered when deciding whether to use a wholly online platform for arbitration were travel restrictions, lower costs, low dispute value and low complexity of issues. • The majority of the respondents understood third-party funding, its implications and how it works but have not used it. Unsurprisingly, Client Users had less experience with using third-party funding compared to External Counsels. Factors that Contributed to Respondents’ Choice to Use International Commercial Arbitration Exhibit 5.1 In-house counsel’s advice External counsel’s advice Opponent’s request Management’s advice Client’s request Contractual obligation Others 36% 62% 47% 16% 90% 16% 37% 4% 54% 31% 85% 8% 8% 8% 45% 13% 91% 17% 42% 4% 31% All Respondents Client Users External Counsels 5.1 The top three influences on respondents’ choice to use international commercial arbitration were contractual obligation (90%), external counsel’s advice (47%) and client’s request (37%). 5.2 This comes as no surprise as most international commercial arbitration cases arise out of contractual obligation, with parties complying with the arbitration clauses found within their agreements.2 2 Gary Born, International Commercial Arbitration (2nd ed), Kluwer Law International (2014) at 73. 2022 F I NA L REPORT 11
Exhibit 5.2 Importance of Factors Affecting Decision to Use Arbitration Satisfaction with Arbitration as Mechanism According to Factor Factors Affecting Respondents’ Decision to Use Arbitration and Respondents’ Satisfaction With Arbitration as a Mechanism 63% 30% 79% 41% 81% 74% 81% 76% 72% 68% 71% 66% 42% 32% 42% 31% 76% 69% 49% 42% 82% 70% 77% 63% Flexibility in choice of institutions, venues, and arbitrators Flexibility in choice of institutions, venues, and arbitrators Clarity and transparency in rules and procedures Clarity and transparency in rules and procedures Preservation of business relationship Preservation of business relationship Indirect costs to client business Indirect costs to client business Impartiality Impartiality Political sensitivity Political sensitivity Direct enforceability Direct enforceability Finality Finality Cost Cost Speed Speed Confidentiality Confidentiality Procedural flexibility Procedural flexibility All Respondents All Respondents 3 In the SIDRA Survey Final Report 2020, respondents were ‘very satisfied’ or ‘somewhat satisfied’ with confidentiality (69%), enforceability (65%) and flexibility of processes (63%). 4 V. K. Rajah, SC, W(h)ither adversarial commercial dispute resolution?, Arbitration International, Volume 33, Issue 1, March 2017, available at https:// doi.org/10.1093/arbint/aiv075 5.3 In choosing international commercial arbitration, 82% of respondents ranked direct enforceability as ‘important’ or ‘absolutely crucial’. Respondents indicated confidentiality and procedural flexibility, both at 81%, as ‘important’ or ‘absolutely crucial’ characteristics towards the decision to use arbitration. In the SIDRA Survey Final Report 2020, 87% of respondents found enforceability as ‘absolutely crucial’ or ‘important’. This reinforces the impact the New York Convention has had regarding the enforceability of arbitral awards across different jurisdictions. 5.4 Speed (79%), finality (77%) and impartiality (76%) are the other characteristics that respondents found to be ‘important’ or ‘absolutely crucial’. 5.5 The majority of the respondents were ‘very satisfied’ or ‘somewhat satisfied’ by the procedural flexibility (76%), confidentiality (74%) and direct enforceability (70%) that arbitration facilitates. This is similar to what was reported in the SIDRA Survey Final Report 2020.3 5.6 Preservation of business relationship (32%), indirect costs to client business (31%) and cost (30%) were ranked lower in terms of user satisfaction. This is perhaps due to the transformation of arbitration into a process that “mimics litigation”4 and ultimately affects business relationships and increases costs. SIDRA INTERNATIONAL DISPUTE RESOLUTION SURVEY 12
Exhibit 5.3 Importance of Factors Affecting Decision to Use Arbitration Satisfaction with Arbitration as Mechanism According to Factor 62% 15% 77% 38% 85% 77% 92% 69% 69% 92% 69% 69% 62% 46% 62% 46% 85% 85% 31% 38% 92% 69% 92% 69% Flexibility in choice of institutions, venues, and arbitrators Flexibility in choice of institutions, venues, and arbitrators Clarity and transparency in rules and procedures Clarity and transparency in rules and procedures Preservation of business relationship Preservation of business relationship Indirect costs to client business Indirect costs to client business Impartiality Impartiality Political sensitivity Political sensitivity Direct enforceability Direct enforceability Finality Finality Cost Cost Speed Speed Confidentiality Confidentiality Procedural flexibility Procedural flexibility Client Users Client Users 5.7 For Client Users, direct enforceability (92%), finality (92%) and procedural flexibility (92%) were ‘important’ or ‘absolutely crucial’ in deciding whether to use arbitration. Interestingly, cost, preservation of business relationship and indirect costs to client business all came in at 62%. 5.8 In terms of satisfaction, Client Users were ‘very satisfied’ or ‘somewhat satisfied’ with flexibility in the choice of institutions, venues, and arbitrators (92%), impartiality (85%) and confidentiality (77%). In the SIDRA Survey Final Report 2020, satisfaction in the flexibility in choice of institutions, venues, and arbitrators ranked lower than impartiality and finality. Client Users were least satisfied with preservation of business relationship (46%), indirect costs to client businesses (46%), political sensitivity (38%), speed (38%) and cost (15%). Speed and cost were also ranked last in terms of Client User satisfaction in the SIDRA Survey Final Report 2020. 2022 F I NA L REPORT 13
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