The growth of the telecommunications, technology and media sectors in recent years has been dramatic. An understanding of attitudes in these sectors towards dispute resolution is essential to both in-house and external counsel alike.
In this regard, the latest International Dispute Resolution Survey by the School of International Arbitration at Queen Mary, University of London is timely and prescient. It is the first to focus on TMT disputes.
It is available here: http://www.arbitration.qmul.ac.uk/research/2016/index.html.
TMT disputes involve a huge range and depth of issues
Consistent with our own experience, the survey confirms that TMT disputes are not uncommon. Almost a quarter (23%) of respondents had been involved in more than 20 TMT disputes in the past five years. Fully a third (34%) of respondents had been involved in at least one dispute with a value in excess of US$100 million.
Observing that the term "TMT" includes a very wide range of products and services across a range of industry sectors, the survey finds that the most commonly encountered disputes are those relating to: IP; joint venture or collaboration agreements; licensing, IT systems development or implementation; and competition. Unsurprisingly, each industry has its own particular concerns. So for example, regulatory issues are of concern in the telecoms sector, and outsourcing disputes are common in the IT sector.
Of particular interest to crystal ball gazers, the survey finds that the most common disputes in the next five years are expected to be those relating to: IP; data protection/privacy; licensing; data system or security breaches and competition; joint venture or collaboration agreements; and IT systems development or implementation.
The importance of sector specialism
Given the specialised nature of the industry, sector knowledge is key. Respondents rated commercial understanding of the industry sector as the most important factor influencing their choice of arbitrator.
The same message applies to in-house counsel's choice of external counsel. In this regard, subject matter expertise and expertise in the arbitral process were as important in the choice of external counsel.
Increasing use of arbitration in TMT disputes
At first glance, the results suggest that the use of arbitration in TMT disputes should be widespread: "92% of respondents indicated that international arbitration is well suited for TMT disputes."
But digging deeper, there is a sizeable gap between the respondents' favourable impression of arbitration, and whether or not arbitration is in practice encouraged in in-house counsel's dispute resolution policies. In this regard, in-house counsel's attitudes differ. In the telecoms sector, expert determination or adjudication was most encouraged, followed by mediation and litigation: "no respondent said that arbitration was positively encouraged". In the IT sector, litigation was most encouraged (50%), followed by arbitration (27%).
This contrasts with in-house respondents from the energy, construction and manufacturing industries, who all rated arbitration as the most encouraged DR mechanism. This is consistent with our own experience (see Dispute resolution clauses in the energy sector - why they should be given extra thought).
The most commonly cited advantages of arbitration include: enforceability, avoiding litigation in a foreign jurisdiction, confidentiality/privacy, and expertise of the decision maker. The most commonly cited disadvantages include cost and delays, the perceived difficulty in obtaining injunctive relief and a lack of arbitrators with requisite expertise.
In our view, there are a number of plausible reasons why arbitration lags behind litigation in TMT. Some disputes (such as data protection or competition) arise between non-contracting parties. In respect of contractual disputes, it can take time for the increasing awareness of the advantages of arbitration to crystallise into arbitration clauses in contracts, and then for disputes themselves to arise.
Indeed, this optimism is confirmed by the survey. Fully 82% of respondents believe there will be an increase in the use of international arbitration to resolve TMT disputes.
Use of technology in arbitrations
An interesting area explored by the survey is in relation to the use of technology to improve arbitration. TMT companies are unlikely to be attracted by paper-heavy, slow-moving proceedings. "More efficient e-disclosure and e-document review" and "e-case management/resolution software" were amongst the most common improvements that could be made.
Indeed, our own experience is that arbitral tribunals are often more open to the use of new technologies than some local courts, for instance in the presentation of evidence. Used wisely, such technologies have the potential to cut costs and to increase the effectiveness of a party's case presentation.
In light of this finding, the continued willingness of arbitral institutions and tribunals to utilise technology (e.g. electronic filings, hearings by phone or testimony by videoconference) is to be applauded.
As the pace of technological improvements quicken, the prevalence of disputes in the TMT sector will only increase. The Queen Mary Survey provides a welcome and timely insight.
Over the next few years, we expect to see continued efforts by arbitration practitioners, tribunals and institutions to ensure that arbitration caters better to the specific demands of TMT disputes. This could include the further use of specialist TMT arbitrator lists, the promulgation of procedural rules tailored to TMT cases, and increasing experimentation with innovative technology to increase the efficiency of the arbitral process.