Costs and Duration: A Comparison of the HKIAC, LCIA, SCC and SIAC Studies

International
This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.

Introduction

As cross-border contracts involving multi-jurisdictional parties become the norm, more players have entered the arena to offer legal services for parties opting to resolve their disputes by way of international arbitration. The Mumbai Centre for International Arbitration, for instance, was set up as recently as 2016 to cater to India’s growing market and is part of the government’s efforts to promote the country as a regional dispute resolution centre.

Apart from geography, the costs and duration of arbitral proceedings are key factors that determine parties’ choice of arbitral institution. This study compares the recent cost and duration studies conducted by four arbitral institutions to see who comes out trumps.

The HKIAC Study

The Hong Kong International Arbitration Centre (“HKIAC”) recently released an updated report on the costs and duration of cases administered by HKIAC (the “HKIAC Study”). The data set included 62 arbitrations administered under the 2013 HKIAC Administered Arbitration Rules where the final award was issued between 1 November 2013 and 31 December 2017.

Key statistics from the HKIAC Study:

  1. The mean arbitration costs of an HKIAC arbitration is USD 117,045, whereas the median arbitration costs is USD 62,537.
  2. The mean duration of an HKIAC arbitration is 16.2 months, while the median duration is 14.3 months.

HKIAC is unique in offering parties an option of paying the arbitral tribunals’ fees by an hourly rate or by reference to an ad valorem system (i.e. based on the value of the dispute). Interestingly, the HKIAC Study reveals that the costs of arbitration are cheaper under the ad valorem system even though “[t]he vast majority of HKIAC tribunals are paid on an hourly rate basis”.

The LCIA Study

In October 2017, the London Court of International Arbitration (“LCIA”) also updated their report on the costs and duration of cases administered by LCIA (the “LCIA Study”). The data set included 224 arbitrations administered under the LCIA Rules that reached a final award between 1 January 2013 and 31 December 2016.

Notable statistics from the LCIA Study are as follows:

  1. The median arbitration costs of an LCIA arbitration is USD 97,000.
  2. The median duration of an LCIA arbitration is 16 months

The LCIA Study also compared the median costs of arbitrations commenced under four other arbitral institutions, namely:

  1. the HKIAC;
  2. the International Chamber of Commerce (“ICC”);
  3. the Stockholm Chamber of Commerce (“SCC”); and
  4. the Singapore International Arbitration Centre (“SIAC”).

These statistics were derived from the website costs calculator or costs schedule of the respective arbitral institutions.

Based on these statistics, the LCIA Study concluded that LCIA had the lowest median arbitration costs, with the lowest tribunal fees and administrative charges. SCC had the second lowest arbitration costs, followed by SIAC. HKIAC and ICC were equally expensive, although the HKIAC statistics were based on an estimate of the maximum arbitration costs while the ICC statistics were based on an average.

The LCIA Study noted that while the figures for LCIA arbitrations are derived from actual LCIA arbitrations, the figures for other institutions are estimates which are subject to substantial caveats.

The SCC Study

Previously, the SCC and SIAC had released similar reports. The SCC’s latest report on costs and duration was released in February 2016 (the “SCC Study”). It considered 80 cases administered by the SCC under the 2010 SCC Arbitration Rules where an award had been issued between 2007 and 2014.

Key statistics from the SCC Study include:

  1. The median arbitration costs of an SCC arbitration for sole-arbitrator cases and three-arbitrator cases is EUR 33,096 and EUR 167,021 respectively.
  2. The median duration of an SCC arbitration is 13.5 months.

The SIAC Study

SIAC released its costs and duration study in October 2016 (the “SIAC Study”). It considered 98 cases administered by the SIAC under the 2013 Arbitration Rules of the SIAC, where the award had been issued between 1 April 2013 to 31 July 2016.

Key statistics from the SIAC Study:

  1. The mean arbitration costs of an SIAC arbitration is USD 80,337, whereas the median total costs is USD 29,567.
  2. The mean duration of an SIAC arbitration is 13.8 months, while the median duration is 11.7 months.

Comparing the Cost and Duration Studies of the Arbitral Institutions

The LCIA and SCC Studies did not release mean figures for duration and costs, noting that there were several outliers which skewed the data.

Comparing arbitration costs

Table 1 compares the median arbitration costs for the four arbitral institutions, distinguishing between sole-arbitrator and three-arbitrator cases, with the exception of the HKIAC which does not make this distinction.

Arbitration costs include the tribunal’s fee and the arbitral institution’s registration and administration fees. For ease of cross-institutional comparison, the SCC figures in Table 1 are translated into USD values based on historic exchange rates as of February 2016.*

Table 1: Median Arbitration Costs for Sole and Three Arbitrator Cases

Arbitral Institution

Median Arbitration Costs for All Cases

Median Arbitration Costs for Sole-Arbitrator Cases

Median Arbitration Costs for Three-Arbitrator Cases

HKIAC

USD 62,537

-

-

LCIA

USD 97,000

USD 60,000

USD 200,000

SCC

-

USD 36,037*

(EUR 33,096)

USD 181,864*

(EUR 167,021)

SIAC

USD 29,567

USD 27,941

USD 80,230


As evident from Table 1:

  • SIAC remains the most cost-competitive option for both sole-arbitrator and three-arbitrator cases. For three-arbitrator cases in particular, SIAC remains significantly cheaper than LCIA and SCC where the costs extend to six-digit figures.
  • Notably, there is a significant disparity between the estimated cost of an SIAC arbitration from the LCIA Study and the statistics from the SIAC Study.

o As the statistics from the SIAC Study are based on actual arbitration costs derived from real cases, these statistics may be a more accurate indicator. 

Comparing duration of proceedings

Table 2 compares the mean and median duration of arbitrations administered by the four arbitral institutions, with the exception of LCIA and SCC which do not provide mean figures. Duration of arbitration is measured from the commencement of the arbitration to the rendering of the award.

Table 2: Mean and Median Duration

Arbitral Institution

Mean Duration (months)

Median Duration (months)

HKIAC

16.2

14.3

LCIA

-

16

SCC

16.2

13.5

SIAC

13.8

11.7


From Table 2:

  • Based on the data, SIAC arbitrations are the most efficient in comparison to the other arbitral institutions.

o The median duration of an SIAC arbitration is the shortest at 11.7 months.

o The SCC also has a comparable median duration of 13.5 months.

  • However, the SIAC and SCC Studies were released in 2016, while the HKIAC and LCIA Studies are based on more recent statistics.

o A possible explanation may be a recent increase in more complex arbitration cases, which require more time to resolve.

Methodology

The arbitral institutions use different systems to compute their arbitration costs. The LCIA uses an hourly rate system. In contrast, the SIAC and SCC adopt the ad valorem system, which fixes the costs of an arbitration on the value of a claim and within limits specified by the institution’s costs scales. As mentioned, HKIAC allows parties the option between paying the fees by an hourly rate or the ad valorem system, although most parties choose the former.

Forecasting Future Changes

While the LCIA and HKIAC arbitral institutional rules remain largely unchanged since the publication of the above studies, the SCC Rules and SIAC Rules have introduced new features with a view to facilitating a more efficient arbitration process. The impact of the new rules would not have been taken into account in the SCC and SIAC studies.

The 2017 SCC Rules only entered into force on 1 January 2017. The default provision on the number of arbitrators was changed from a three-arbitrator tribunal to one that gives the SCC board flexibility to decide on the number of arbitrators based on complexity, value in dispute and other circumstances. Article 39 of the 2017 SCC Rules also allows parties to make requests for the tribunal to decide certain issues of fact or law by way of summary procedure, if the relevant requirements are met.

Similarly, the 6th edition of the SIAC’s Arbitration Rules only came into effect on 1 August 2016. These rules introduced early dismissal rules and enhanced provisions relating to Emergency Arbitrator and Expedited Procedure, which are expected to improve the efficiency of SIAC arbitrations.

As such, the median duration of SIAC and SCC arbitrations, which are already shorter in comparison to LCIA and HKIAC arbitrations, are likely to improve.

Key Takeaways

  • Based on a comparison of the four studies, the costs and duration of arbitral proceedings are ostensibly most attractive when administered by SIAC.

o Unsurprisingly, in its recently released Annual Report 2017, SIAC announced a new record for the highest number of new case filings and administered cases in 2017, with 452 new cases filed by parties from 58 countries in 6 continents - a 32% increase from the number of cases filed in 2016.

  • While other factors such as the scale of disputes before the respective tribunals may explain this difference, the analysis provides parties with a better idea of the time and expense that are likely to be incurred when using different arbitral institutions.
  • With arbitral rules being amended to reflect evolving commercial realities – as is the case with the SCC and SIAC – the effect such amendments can have on the costs and duration of arbitrations should be closely monitored.

*This article is co-written by Wei Ming Tan (CMS Holborn Asia), Shriram Jayakumar and Jolyn Khoo (students at Singapore Management University [“SMU”]) as part of a joint initiative by CMS Holborn Asia and the Society of International Law (Singapore) based at SMU’s School of Law.