The Shifting Landscape of International Arbitration

The impact of Sanctions, Tariffs, and Investment Reviews

International arbitration faces headwinds as the world fragments into competing regulatory regimes. Hong Kong Arbitration Week offered a roadmap for navigating this new, fractured landscape of sanctions, tariffs, investment reviews, blocking statutes, etc., on international arbitration.

Here are some of the major takeaways from what we’ve learned from the last 12 months:

(1) Realigning global trade patterns are unpredictable, driven by changes in individuals, consumers, businesses, nations, underlying trade patterns, payment methods, and business opportunities. There is no end to such changes, nor do we know what may change next

(2) There is no identifiable best practice for arbitrations in this space; every case is unique, and the measures needed are bespoke. Regulations can change, exemptions can be added, and procedures are subject to review. What was perfectly ordinary yesterday may not be a good idea tomorrow

(3) Arbitration clauses must maximise their chance of being applied by all parties, the institution, and all affected courts. This involves knowing what is acceptable in practice rather than the best outcome in theory

(4) There is an increasing focus on neutral venues and seats, which are neutral in the sense of not having any position on matters like sanctions and investment restrictions but are instead barrier-free markets, with no visa and travel restrictions, etc. The rise of new arbitral seats means many more options than before.

(5) Increasingly, parties care about the nationality and origin of their arbitrators and institutions in a way they did not previously need to worry about. This may mean the arbitrator and institution pool is not as deep or diverse as previously thought.

(6) National courts have been increasingly important, and there has been an explosion of anti-suit, anti-arbitration, and anti-anti-suit/arbitration injunctions in many jurisdictions to support different public policies

(7) Contractual clauses deal with regulatory events act as force majeure clauses (e.g., change in law, change in tariffs, sanctions clauses, export control permits, etc.). However, it is not always possible to predict how courts and arbitrators will give effect to such clauses.

(8) Governing laws have become more important than ever, especially where choices are made at a policy level about how strictly to uphold contracts and how strictly they are to be applied.

(9) We have not yet reached the endgame, as the number of final awards rendered and enforced through courts affected by these matters is tiny. Many unknowns remain about how strong the New York Convention truly is in the face of other global pressures.

The dynamic nature of international arbitration continues to evolve, requiring practitioners to stay agile and informed about emerging trends and challenges.