David Rivkin and Samantha Rowe in their article titled“ The Role of the Tribunal in Controlling Arbitral Costs” featured in Volume 82 of the Chartered Institute of Arbitrators( CIArb) Arbitration Journal, made this pertinent comment on the need for speedier and cheaper resolution of disputes by arbitration: A two-year proceeding and excessive legal and arbitration fees are unacceptable in this era of the 24-hour news cycle and tightened belts. Resolution, closure and certainty are the order of the day. The improvement in efficiency and effectiveness in the resolution of cases by our judicial courts system has at the same time brought about growing dissatisfaction and erosion of confidence in arbitration among users in arbitration. But this phenomenon is not peculiar only to Malaysia. Voices of such‘ dissatisfaction’ and‘ crisis of confidence’ in international arbitration have been growing louder in recent years.
Sundaresh Menon, the Chief Justice of Singapore, at the London CIArb Centenary Conference earlier this year, made this observation: Murmurs of disaffection among users of arbitration have been mounting in recent years, and it is unlikely to be a coincidence that commercial courts around the world are gaining prominence at the same time. [ 1 ] The decrease in arbitration cases could also be due to the introduction of CIPAA, which provides for an interim summary procedure for the resolution of construction payment disputes. It is worthy to note that at this juncture, construction arbitrations represent a significant percentage of the total number of arbitrations in Malaysia.
Based on the KLRCA’ s Statistics on Adjudication Cases registered with the KLRCA, there were a total of 29 cases registered with the KLRCA in 2014. As at end of July 2015, there have been 90 adjudication cases registered with the KLRCA [ 2 ].
According to the statistical analysis provided by other jurisdictions, such as Singapore, the
United Kingdom and Australia which have similar statutory adjudication regimes in their jurisdictions, the introduction of the statutory adjudication regime in their jurisdictions have contributed to a significant drop in construction arbitration and litigation cases. In Singapore, there was a drop of about 30 %- 40 % in construction arbitration and litigation cases since the introduction of the statutory adjudication regime; in the United Kingdom, a drop of about 70 % was seen; and in New South Wales, Australia, a drop of about 90 % was seen [ 3 ].
A decline in the number of arbitration cases registered with KLRCA in the years 2014 and 2015, and at the same time, a marked increase in adjudication cases, reinforced the adverse impact on arbitration brought about by the introduction of the statutory adjudication regime.
The Main Causes of the Crisis of Confidence in Arbitration
What are the main causes of the crisis of confidence in arbitration? In 2010 the White and Case Survey identified two of the main reasons in users’ disappointment in arbitration as“ excessive or failure to control the process” and delay caused by the arbitrator, and these ultimately traced back to: a lack of control by arbitrators in arbitration proceedings.
The 2010 White & Case Survey also made this observation: It was pervasive throughout the questionnaire results and the interviews that parties prefer pro-active arbitrators who take control of proceedings. This is seen as an effective mechanism to limit cost and delay and reduce risks of later challenges. There may be many reasons for lack( or perceived lack) of control by arbitrators in arbitration proceedings, but they may be grouped into three main categories. The first is the lack of courage on the part of the arbitrator. The second is the lack of skill and quality required of an efficient and effective arbitrator, and this
[ 1 ]“ Safeguarding the Future of Arbitration”, by Daniel Waldek, Herbert Smith Freehills. [ 2 ] Information provided by the Kuala Lumpur Regional Centre of Arbitration. [ 3 ] See Chow Kok Fong’ s Security of Payments and Construction Adjudication [ 2nd Edition, 2013 ].
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