19 - 25 July 2001

On neutral ground

The Malta Arbitration Centre has the potential to become an international centre of arbitration, Andrea
Carlevaris, from the ICC’s International Court of Arbitration, tells Blanche Gatt, but first it should focus on
promoting the concept locally

As Malta’s recently set-up Arbitration Centre begins the difficult task of persuading Maltese litigants that arbitration offers a more convenient and rapid alternative to the courts of law, outside Malta, arbitration has long become accepted as one of the world’s most effective ways of resolving commercial disputes. Invited to Malta by the Malta Arbitration Centre (MAC) to conduct a seminar for future arbitrators, Andrea Carlevaris, a legal advisor to the International Court of Arbitration of the International Chamber of Commerce, is giving his full backing to the aspirations of the MAC.
Established in 1923 as the arbitration arm of ICC, the cooperation and input of the International Court of Arbitration, will be a valuable bonus to the Maltese centre.
“There is no formal agreement between the Malta Arbitration centre and the ICC,” said Andrea, “but then we have no formal agreements with other centres either. If the Malta centre so wishes, the ICC is ready to support future programmes of training, even maybe on a more regular basis and perhaps a more formal agreement could be established. From my point of view I think this would be beneficial.”
The Maltese business community’s reaction to our debut into the world of structured arbitration has not been very enthusiastic so far. The MAC have had few cases since they were set up, and many people, both in the business world and in the legal arena, remain lukewarm about the idea.
“The doubts that people in Malta have about arbitration,” explained Andrea during an interview at the MAC premises in Valletta, “are due to a lack of familiarity with the arbitration mentality. The fact that there is no appeal, which is one of the commonly accepted principles of arbitration, worries people – and I can understand these doubts. But finality of decision is one of the greatest advantages of arbitration, and not one that should be dismissed lightly.”
Finality or the lack of an appeal process – in arbitration means that decisions taken and awards granted by the arbitrator/s are final and binding and cannot be further disputed. And while structured and regulated arbitration in Malta is only as new as the recently set up Malta Arbitration Centre, most people when asked will cite the lack of an appeal as the reason they are wary of using this system. The advantages, on the other hand, are less well known. I asked Andrea to outline the main strengths of arbitration.
“First of all,” he said, “is the fact that the proceedings are conducted by professionals in the particular area of each case, who will also be trained arbitrators selected by consensus if possible by the parties themselves. And though there are rules to arbitration, these do not include complex procedural requirements and allow flexibility. There is the fact of no appeal, which in most places is considered a big advantage because it ensures that no case can drag on interminably for years, but must be resolved within the timeframe of the arbitration process.
“Decisions taken by an arbitrator are legally binding and can be enforced. And one enormous advantage is the fact that there is total confidentiality throughout, so that the details of the cases are kept private and out of newspapers or gossip circles. This implies that the parties are able to then continue to have a relationship – even a working business relationship – after the dispute has been resolved. And finally, in most places, costs of arbitration are substantially lower than legal costs, not only in terms of fees, but also in terms of duration – the more time spent on a case, the more money is spent on fees and lost on business opportunities missed or delayed.”
Confidentiality is one aspect of arbitration that could prove enormously valuable to Malta’s small, highly competitive business community. Operating within the confines of our tiny island, any commercial entity that takes a conflict to court finds that half the island – including prospective business partners or clients – are soon privy to all the details, whether accurate or the result of speculative gossip.
“In arbitration,” continued Andrea, “confidentiality is very important, and there are very few cases that have ever reached the public’s ears, even when these are mega cases involving huge sums of money or awards.”
One case Andrea is able to mention involved the divorce between world-renowned consulting firms Andersen Consulting and Arthur Andersen. “This was a very huge case, involving a claim of $15 billion, in which throughout the three-year proceedings, which in Court would have taken 15 years at least, the parties’ main concern was maintaining privacy,” said Andrea. “However, even so, in the last few days rumours started to circulate about the outcome, and this had a marked effect on the way their stock performed. So the importance of confidentiality cannot be exaggerated.”
Malta’s Arbitration Centre has been functioning for just under a year. However, so far they have handled fewer than 10 cases. “This should not be a concern,” commented Andrea. “It is normal to experience this wariness at the beginning. But it is essential that the first cases are success stories, in order to attract more people to arbitration. There must be a certain level of promotion, aimed not only at potential arbitrators, but also anyone who might be using arbitration in the future.”
The Malta Arbitration Centre has ambitions to become an international centre of arbitration, serving as a neutral location for commercial entities from, say, Europe and the Middle East, to use as a place to settle their disputes. “I think Malta can very well enter this field,” said Andrea.
“For a good seat of arbitration you need first of all to have a good law and Malta’s new law follows the main patterns of international arbitration legislation. Sometimes the importance of where arbitration will happen depends on a combination of geographic and cultural concerns, for example an Italian and a North African firm could easily choose Malta as the place to solve their dispute. Italy used to play this role, but certain features of Italian law prevented this from developing further. So, Malta could step into these shoes now quite easily. The legislative
infrastructure is there, as is the
geographic location.”
But before the Malta Arbitration Centre can start planning to cast its net beyond the shores of our island, it faces a major challenge in persuading local people to use arbitration.
“First of all,” said Andrea, “people should be confident that arbitration is a good way to settle disputes. The economic importance of arbitration is significant, though often underestimated, and should be broadcast clearly for all to be aware of. Even just the fact that parties going through institutional arbitration do not have to wait until the end of the process to know how much the costs will be is a great benefit to commercial entities who need to budget and balance books within certain timeframes.
“Rapidity is another strength, which also carries major economic implications. Time is money for businesses and industrial players, so being in a position to conclude a dispute within a relatively short timeframe is valuable for the bottom line, too. And then, of course, there is the fact that our ICC statistics show that arbitration is less expensive than State courts.”
Winning a court case does not necessarily mean that a sentence or award will be carried out immediately and few are those who walk out of the courtroom with their winnings in their pockets. However, arbitration is different.
“We have observed,” said Andrea, “that there is a high degree of spontaneous abiding by decisions taken by arbitrators. The reason, I believe, is that the arbitration environment fosters a spirit of confidence in the arbitrators and the process, which in turn leads disputants to accept the decisions and abide by them. Our statistics show that more than 85 per cent of awards made by the International Court of Arbitration have been complied with spontaneously, without having to be enforced by the State courts.”