Short cut on road to justice

The Life: International business contracts often contain an arbitration clause to guard against disputes. Some complain that the process is slow and costly, but rule changes to one service could change that.

Mohamed ElGhatit, an associate in Hogan Lovells's international arbitration practice in Dubai. Jaime Puebla / The National

When an Abu Dhabi rig builder was involved in a dispute with a foreign company earlier this year, the contract stated the issue must be referred to an arbitrator.

The local company needed a quick fix to prevent the rig from leaving the port, but appointing an arbitrator would take time.

In the end, it was left with no choice but to approach the courts, rendering the arbitration clause virtually worthless.

But companies in a similar predicament could be helped in the future after changes to the rules of one of the most well-known international arbitration services.

Experts recommend that companies insert an arbitration clause into international contracts to safeguard against disputes, yet businesses often complain the process is slow and costly.

Revisions to the International Chamber of Commerce (ICC) Rules of Arbitration will address both issues, says Michael Davison, a member of the task force responsible for the changes. It used to take up to three months to get an arbitration tribunal appointed, but under the new rules it can be done in a matter of days.

"If you have got something really urgent happening, if something is about to collapse or something is about to go horribly wrong, you can get an emergency arbitrator appointed - someone who can appear very quickly on the scene and start making orders which are binding on the parties," says Mr Davison, who is also co-head of the international arbitration practice in the London office of Hogan Lovells.

In the old days, the feuding parties used to rush to a court to get an injunction order, complaining that the arbitrators could not do anything. The new rules help keep the issue out of the courts, preventing it from becoming public.

And there is usually little enthusiasm to have the case heard in a court that one of the parties is not familiar with.

"A UAE party won't want to come to London to get an injunction, and conversely, a London party won't necessarily want to come to a court in Abu Dhabi to get an injunction. This deals with that big concern," says Mr Davison.

The changes, which will become binding on January 1, but are effective immediately if the parties agree, also include measures to keep costs under control.

"There are lots of little changes to it, like for example using emails instead of faxes. But the other big thing is that it really focuses on cost … this is really an opportunity for the arbitrators to say this has to be done as cheaply and as efficiently as possible, and that's good too," says Mr Davison.

The ICC offers one of the best-known and most used arbitration services internationally.

Middle Eastern countries tend to favour the ICC service because it is based in France, the source of many of the region's laws historically, says Mohamed ElGhatit, an associate in Hogan Lovells's international arbitration practice in Dubai.

"That as well with the fact that most Middle Eastern practitioners have either studied or worked in Paris … [so these two factors] coupled together provides businessmen and decision-makers in the Middle East to be more favoured towards the ICC," he says.

In 2008, 663 cases were filed with the ICC. Of those, 157 parties were from the Middle East.

However, the onset of the financial crisis led to a rise in the number of cases as volatile prices put pressure on contracts. In 2009, 817 cases were filed, 171 of which involved parties from the Middle East.

The number of cases has now levelled off, but it could be in line for another rise.

"The political events or political changes [in the Middle East] will definitely result in a considerable amount of disputes due to contracts being cancelled, etc, so I think there will be a spike in the next year or so," says Mr ElGhatit.