TOKYO -- Asian financial hubs like Singapore and Hong Kong are benefiting from rising demand for cross-border corporate arbitration driven by the coronavirus pandemic, partly thanks to the prevalence of English in those cities.
A total of 2,997 cases were submitted last year to five of the world's largest venues -- London, Paris, Singapore, Hong Kong and Stockholm -- a 35% jump from 2019. The upward trend has continued in 2021, according to the Hong Kong International Arbitration Center.
The upswing comes as the pandemic and a spate of cyberattacks hit corporate earnings and spur a rise in disputes over breaches of contract. The arbitration format has met this need partly due to its greater flexibility compared with litigation, allowing for growing requests for virtual proceedings.
The London Court of International Arbitration reported having an "exceptional year" in 2020, with arbitrations and referrals at an all-time high.
"It's now possible for parties spanning multiple countries to complete the process from their own homes," said Yoshihiro Takatori, a Japanese attorney and a fellow at the U.K.-based Chartered Institute of Arbitrators.
In cross-border disputes, the parties decide on which venue to send their cases, often based on contractual stipulations. The past few years have seen Asian cities rise up the ranks as popular destinations.
A 2018 survey by the University of London was dominated by Europe. London led the pack, with 64% of respondents including it in their list of preferred arbitration seats, followed by Paris at 53%. But in the 2021 edition, Singapore jumped 15 points to tie with London for the lead, and Hong Kong ranked third, while Western cities shed points.
Singapore and Hong Kong can handle proceedings in English.
"We've put most of our paperwork online to meet user demand," said Lim Seok Hui, CEO of the Singapore International Arbitration Center.
The Hong Kong arbitration center has established offices in Seoul and Shanghai to attract multinational companies, helping boost its caseload.
But the shift toward Asia has not benefited Japan. Japanese arbitration centers took on 18 new cases last year -- Singapore had 60 times more -- and only 1% of respondents to the University of London survey named Japanese cities as preferred seats.
In 2017, the Japanese government included steps to bolster the country as an international arbitration venue in its basic economic policy and reform guidelines. Facilities have been set up in Osaka and Tokyo. But the national push has done little to move the needle, and Japan has yet to reap the benefits of pandemic-driven demand as other Asian countries have.
This result comes down partly to a lack of people with the skills to work as arbitrators or representatives.
"There are few people who have extensive knowledge and experience in international arbitration," Takatori said, "and can handle verbal sparring in English.
Japan also has made little headway in bringing its arbitration laws up to international standards. It remains in the process of amending legislation to allow for interim or conservatory measures, which protect parties' assets before a final ruling is handed down.
"The pace of revisions is slow, and the content is unremarkable," said Hiroki Aoki, a Japanese attorney based in Singapore.
The dearth of international arbitration cases handled in Japan means Japanese companies rarely enjoy a home-field advantage. Businesses that undergo arbitration in their home countries can provide evidence more easily.
"We always have to contest cases as the 'away side,'" said Tsuyoshi Harada, an executive officer at Nippon Steel, "and it can leave us in an unfavorable business position."