A. Introduction
Technology or ‘tech’ companies are increasingly turning to arbitration to resolve their disputes. These may encompass a wide range of issues, including shareholders disputes, broken deals, software development projects, or issues arising from licensing agreements.
Arbitration offers several benefits, including confidentiality, choice of adjudicators with the expertise to understand technical aspects of the dispute, and the assurance that awards are easily enforced in another jurisdiction as a general matter. These benefits may not be available in all instances however, and depend on the nature of the litigation.
Below, we consider why arbitration is a suitable dispute resolution method for tech disputes and delve into some of the key aspects of the most used arbitration rules in tech disputes.
B. Unique Characteristics
Arbitration offers several key benefits that makes it suitable for resolving technology disputes. We discuss three of these in detail below: (i) confidentiality, (ii) choice of arbitrators and (iii) finality and enforceability of awards.
Confidentiality
Confidentiality is a key advantage arbitration has over litigation. As a general matter, evidence relating to the dispute, the award, and deliberations of the tribunal are confidential in the case of an arbitration.
Litigation does not offer the same level of confidentiality due to the principle of open justice. The default position in litigation in most jurisdictions is that members of the public, including possibly the media, have access to materials filed in the dispute. Members of the public may also have a right to attend court hearings.
Confidentiality is particularly valuable in tech disputes that may involve products still under development, or where disclosure could give commercial advantage to competitors or expose important code or processes. Confidentiality also serves to safeguard the reputations of the businesses involved in the dispute.
Choice of arbitrators
A second advantage of arbitration is that the parties have some choice over their adjudicators. Most arbitration clauses or arbitral institutions’ rules allow the parties to select their arbitrators. This means it may be possible to select adjudicators with up-to-date and specialist knowledge, which improves the likelihood of an appropriate remedy. This feature of arbitration is particularly useful when highly technical issues are involved, whether these be code, licensing, or even crypto.
In contrast, parties are not afforded the opportunity to choose the judge in Court proceedings. Judges are allocated by the internal practices of a court. Consequently, there is a risk in some jurisdictions that a judge assigned to hear a highly technical techdispute may lack the expertise and specialist knowledge to fully appreciate the issues involved.
Although some judiciaries have specialised divisions to deal with specialised cases, there is a higher likelihood that a private practitioner and arbitrator will be more acquainted with current developments in tech than, say, a full-time judge.
Enforceability of awards
A third benefit of arbitration is that, as a general matter, awards are final and enforceable in many jurisdictions. This is made possible mainly by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).
Awards made under the New York Convention are final and are not subject to appeal. And although a dissatisfied party can ask a court to review an award, review is available on very narrow, and mostly procedural, grounds. Additionally, New York Convention awards are relatively easy to enforce in countries that are party to the New York Convention. At the time of writing, some 170 countries are parties to the convention.
In contrast, procedures for the enforcement of court judgments vary from jurisdiction to jurisdiction. Therefore, the ease or difficulty of enforcing a court judgment depends on the national law and attitude of the courts in the country in which enforcement is sought. This makes the enforcement of court judgments an uncertain venture.
Parties involved in tech disputes, especially those with a cross-border element, will find this feature of arbitration attractive. It provides assurance that any award will be final and not open to appeal, and it will be enforceable with relative ease in many jurisdictions. This is salient given the global nature of tech companies and the fact that cross-border transactions in the tech industry are very international in nature.
Additional advantages of arbitration
There are several other advantages in using arbitration to resolve technology disputes, including:
• Flexible Procedure – Parties have the ability to modify and adapt the arbitration procedure to suit the demands of the case and their specific needs.
• Efficiency – Critical dates for every milestone in the arbitration process are discussed with arbitrators prior to appointment. This allows for time-sensitive cases to be resolved with speed and efficiency, potentially avoiding delays due to court backlogs.
• Costs and accessibility – Arbitration can be as cost-effective or expensive as parties make it, giving parties some control over costs. For example, they can conduct hearings remotely or agree an expedited procedure.
C. Comparison of most commonly used arbitration rules in technology disputes
A significant amount of technology arbitrations are resolved under the arbitration rules of the International Chambers of Commerce (“ICC Rules), Singapore International Arbitration Centre (“SIAC Rules”) and the International Center for Dispute Resolution (“ICDR Rules”). It is unsurprising that these rules share similar innovative procedures that parties find attractive. However, they take different approaches on other aspects of arbitration procedures.
Similarities
There are two major and innovative similarities between these three sets of rules. The first is that all three sets of rules make provision for an expedited procedure. Typically, an expedited procedure fast-tracks the arbitration process, shortening or eliminating certain elements of a normal arbitration process. These include timelines for filing key briefs, the constitution of a tribunal, and the issuance of a final award. As a result, disputes are resolved within a shorter timeframe and at a lower cost. This feature is particularly appealing to tech start-ups which may be involved in value disputes that require quick resolution.
The second similarity is the availability of an emergency arbitrator. These sets of rules allow for the appointment of an arbitrator in a very short period of time, for example due to an urgent issue, before a tribunal is formally constituted to hear requests for interim relief. This may prove useful in tech disputes involving immediate risks to commercial-sensitive information.
Differences
The three sets of rules also have some significant differences.
First, the three rules take different approaches regarding the institutional scrutiny of an award. On one end, ICC Rules and SIAC Rules provide for institutional scrutiny of awards before issuance. The ICDR Rules, in contrast, do not make provision for institutional scrutiny of an award. This may increase the speed at which an award is rendered, but may, in theory, make it more open to attack.
Second, the three rules approach third-party funding differently. The ICC Rules require a party who receives funding from a third party to disclose such a fact. The ICDR Rules provide that upon application by a party, or on its own motion after consulting the parties, a tribunal may direct a party to disclose whether a third party has provided or undertaken to provide funding the cost of the arbitration. The SIAC Rules do not explicitly require disclosure of third-party funding.
Funding is increasingly common these days, with companies realising that in a case with strong merits, funding may reduce their capital outlay as the costs of the arbitration are essentially borne by a funder in return for a portion of a successful award.
D. Conclusion
As the technology sector continues to grow, the importance of effective dispute resolution mechanisms cannot be overstated. Arbitration emerges as a highly suitable and advantageous method for resolving tech disputes.
Arbitration offers several benefits that are not typically available in litigation, including confidentiality, flexibility, choice of arbitrators, and the enforceability of awards.
Whether by including an arbitration clause or by ad hoc agreement when the dispute has arisen, parties involved in tech disputes are encouraged to consider arbitration in light of the above advantages.
