Is London still the capital of insurance arbitration?
Deborah Ruff and Charles Golsong examine whether London’s position as the destination of choice for insurance arbitration is at risk.
London’s reputation as the world’s pre-eminent arbitration centre, while well-established, has recently been deemed by certain commentators and surveys to be under threat from two other financial centres: Singapore and Hong Kong.
Although the popularity of both Singapore and Hong Kong as seats of arbitration has increased in recent years, surveys show that they have a largely regional focus. Indeed, the most recent figures published by the Singapore International Arbitration Centre (SIAC) show that seven out of 10 foreign parties to arbitrations which it administered in 2022 originated from the APAC region.
Likewise, fewer than 30 percent of arbitrations administered by the Hong Kong International Arbitration Centre (HKIAC) involved no Hong Kong parties, and fewer than 10 percent involved no Asian parties.
It is clear from the data that users from the APAC region favour arbitrating locally in Singapore and Hong Kong. Our experience suggests that Chinese parties in particular prefer to arbitrate close to home.
As for insurance arbitrations, these made up only 0.9 percent of the cases registered with the HKIAC in 2022 (down from 1.1 percent in 2021). No insurance-specific figures appear to be available from SIAC.
London Court of International Arbitration (LCIA) figures, meanwhile, show that 2 percent of the arbitrations which it administered in 2022 had insurance as the dominant sector, or were initiated pursuant to a contract for insurance. However, the insurance sector dominated ad hoc arbitrations where the LCIA acted solely as a fundholder, which made up 9 percent of the LCIA’s caseload in 2022.
This is no doubt a result of London’s history as a pioneer in insurance and the home of Lloyd’s market, as well as “Bermuda form” policies which, although governed by the substantive law of New York, typically provide for arbitration in London.
London’s continued dominance
The LCIA’s figures for 2022 show that nearly nine in 10 parties to LCIA arbitrations came from countries other than the UK, with 95 percent of LCIA arbitrations involving at least one international party. Perhaps more startlingly, three-quarters of LCIA arbitrations involved no UK parties whatsoever. By contrast, almost a third of cases administered by SIAC in 2022 involved at least one Singaporean party, while just under a third of all arbitrations submitted to the HKIAC in 2022 involved no Hong Kong parties and only 6 percent involved no Asian parties.
Respondents to the most recent survey of international arbitration conducted by Queen Mary University listed their preferred arbitral seats as London or Singapore (tied at 54 percent), followed by Hong Kong (50 percent), Paris (35 percent) and Geneva (13 percent). Respondents appear to have been heavily concentrated in Asia.
Perhaps more surprisingly, three-quarters of respondents from Europe and the Middle East, and 66 percent of North American respondents, considered London to be their preferred choice of arbitration seat, ahead of New York.
What about Brexit?
Whilst certain surveys show business investment in the UK to have slowed since the UK left the EU, this does not appear to have been the case for London as a seat of arbitration.
Likewise, Brexit has not changed the UK’s status as a signatory of the New York Convention, which provides quasi-global enforcement mechanisms under a common framework and certainty to parties looking to enforce foreign awards in the UK or vice versa.
What’s so special about London?
There are certain advantages to arbitrating in London, which are easily discernible:
Geographical location: London is conveniently situated between east and west, and the time zone in which London sits is particularly convenient for virtual hearings spanning different regions of the world. The position of English as the world’s most widely spoken language is another string in London’s bow.
In addition, many of the world’s top lawyers, experts and accountants are based or have a presence in London, making it convenient to locate and instruct the most talented professionals.
English law: Arbitration statistics published by the International Chamber of Commerce show that in 2020, the most frequently selected governing law was English law. English arbitrators, meanwhile, are frequently appointed in arbitrations held under the rules of all major arbitral institutions, irrespective of whether these are seated in common or civil law jurisdictions. Moreover, English-style arbitration is seen as offering a compromise between civil law and US styles of dispute resolution.
The English Arbitration Act: The robust framework which the English Arbitration Act provides, and the limits which it places on court intervention, are often cited by clients as a key factor in electing to arbitrate in London. The recent recommendations published by the Law Commission to update the Act, including the proposal that tribunals be empowered to dispose of claims lacking legal merit, should help ensure that London remains competitive.
London’s crown as the world’s arbitration capital is not yet under threat – but the city cannot afford to rest on its laurels, and will need continued innovation to remain relevant.
Deborah Ruff is head of international arbitration at Pillsbury. Charles Golsong is counsel at Pillsbury.