COSTS AND DURATION OF ARBITRATIONS: A COMPARISON OF THE SIAC AND LCIA STUDIES

The SIAC Study

On 10 October 2016, the Singapore International Arbitration Centre (“SIAC“) released its inaugural Costs and Duration Study (the “SIAC Study“) based on actual cases filed with the SIAC under the 5th edition of the SIAC Rules (“SIAC Rules 2013“, which came into effect on 1 April 2013). The data set was taken from 98 cases administered under the SIAC Rules 2013 from the period 1 April 2013 to 31 July 2016 where a final award had been issued.

Some noteworthy statistics from the SIAC Study:

  • The mean duration of an SIAC arbitration is 8 months, whereas the median duration is 11.7 months.
  • The mean total costs of an SIAC arbitration is USD 80,337, as compared to the median total costs, which is USD 29,567.

The above figures are fairly impressive given that, according to Gary Born, President of the Court of Arbitration of the SIAC, the “average sum in dispute in the past three years is more than USD 16 million“.

The LCIA Study

In a similar costs and duration study released in November 2015 (“LCIA Study“), the London Court of International Arbitration (“LCIA“) published data on LCIA arbitrations completed between 1 January 2013 to 15 June 2015.

The LCIA Study shows, among other things, that:

  • The mean duration of an LCIA arbitration is 20 months, whereas the median duration is 16 months.
  • The mean costs of an LCIA arbitration is USD 192,000, whereas the median costs is USD 99,000.

The LCIA Study also compared the LCIA’s statistics with the mean and median costs of arbitrations commenced under three (3) other established arbitral institutions, namely, the International Chamber of Commerce (“ICC“), the SIAC and the Hong Kong International Arbitration Centre (“HKIAC“).

Interestingly, based on the LCIA Study, the estimated mean costs of an SIAC arbitration amounted to USD 250,000, while the median costs was approximately USD 140,000.

The main takeaway from the LCIA Study was that LCIA arbitrations were generally more affordable than ICC and SIAC arbitrations; HKIAC arbitrations have the distinction of being the cheapest. However, according to the LCIA Study, the costs of LCIA arbitrations are comparable to that of HKIAC arbitrations for high-value disputes worth more than USD 1 million.

The LCIA uses the hourly rate system to compute the costs of its arbitrations, as opposed to the ad valorem system used by the ICC and the SIAC. (The HKIAC uses both systems, giving parties a choice between the two.) The ad valorem system fixes the costs of an arbitration based on the value of a claim and within limits provided by each institution’s costs scales.

Disparities in data collection

A comparison of the data taken from both studies reveals a significant disparity between the LCIA’s estimated cost of an SIAC arbitration and the SIAC’s own numbers. For example, the median costs of an SIAC arbitration under the LCIA Study was USD 140,000, as compared to USD 29,567 under the SIAC Study. Given that the two studies were conducted only a year apart, the disparity cannot be easily explained away by just the passage of time.

However, the figures obtained by the SIAC Study – which appear to be based on actual costs incurred in real cases – may arguably be more accurate than the numbers published by the LCIA Study, which were derived from estimates using the SIAC’s costs calculator.

Efficiency of SIAC arbitrations

While a close comparison of the two studies would cast some doubt as to the actual mean / median costs of an SIAC arbitration, the efficiency of an SIAC arbitration looks set to continue to improve with the introduction of the 6th edition of the SIAC’s Arbitration Rules, which came into effect on 1 August 2016 (“SIAC Rules 2016“).

In particular, with the introduction of the early dismissal rules as well as enhancements to the Emergency Arbitrator and Expedited Procedure provisions, the median duration of an SIAC arbitration is expected to continue to shorten. At 11.7 months, the median duration of an SIAC arbitration is already shorter than that of an LCIA arbitration, which comes in at 16 months.

The enhanced speed of SIAC arbitrations is likely to be an attractive feature for commercial parties on the lookout for the most expeditious (and inexpensive) method of resolving their commercial disputes.

Conclusion

  • Based on data collected from both studies, SIAC arbitrations are generally resolved more quickly than LCIA arbitrations.
  • The duration of SIAC arbitrations is likely to continue to shorten with the new provisions found in the SIAC Rules 2016.
  • The actual median costs of an SIAC arbitration appears to be subject to dispute, with the LCIA Study yielding very different estimates from the SIAC Study’s published figures.
  • Ultimately, neither study is comprehensive enough to accurately determine whether the ad valorem system or hourly rate system is more cost-efficient.

About Wei Ming Tan

International Dispute Resolution and Arbitration Lawyer
This entry was posted in Arbitration, LCIA, SIAC. Bookmark the permalink.

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