Lack of industry experience stifling use of arbitration for tech disputes

Arbitrators’ lack of industry expertise is stifling the use of international arbitration for resolving technology disputes, according to a study by Pinsent Masons and academics.

Despite being recognised as well suited for TMT disputes by 92 per cent of disputes lawyers, an analysis of the usage of dispute resolution mechanisms over the last five years found international arbitration continues to trail behind litigation as a resolution method, being used for just 35 per cent of disputes.

David McIlwaine, dispute resolution partner at Pinsent Masons (pictured), said: “The stark contradiction between arbitration as a preference but the use of litigation when it comes to the crunch, unearths some fundamental challenges facing the use of international arbitration to resolve TMT disputes.

“There may be a variety of reasons for this difference between preference and practice, including the fact that the parties did not agree to include an international arbitration provision within the governing contract, and the fact that litigation will be the default option for many disputes.”

He added: “However, alongside this there appears to be a lack of confidence in the process. There is particular concern regarding the ability to identify arbitrators with TMT experience. No published list of TMT experienced arbitrators exist, and generally arbitration awards are not published which limits the amount of due diligence that a party is able to perform.

“As such, parties are forced to make critical decisions about the appointment of potential arbitrators based on unverifiable, anecdotal and subjective views. Despite this, there is an increase in the use of international arbitration in the technology sector. This is evidenced both by the survey and by our practice at Pinsent Masons.”

The research, which examined the views of over 340 legal specialists, found that 40 per cent of respondents would feel more comfortable adopting international arbitration for TMT disputes if arbitrators had more specialist industry expertise, even if it meant having non-legally qualified arbitrators on the tribunal.

Professor Loukas Mistelis, director of the School of International Arbitration at Queen Mary University of London, acknowledged the complexity of the sector.

“The technology, media and telecoms sectors are highly technical and nuanced industries and naturally there is an expectation that any arbitrator appointed would have an appropriate depth of knowledge of the industry.

“The number of highly specialised arbitrators is growing, but it is clear that it there is a long way to go before the industry will feel assured. While there is now a good number of specialist IP arbitrators there are not as many technology experts available to act as arbitrators, or so is at least the perception of the respondents.”