International Commercial Arbitration Q4 2024

This update explores trends and developments in international commercial arbitration from a Norwegian perspective.

The main topic of this Q4 2024 newsletter is Nordic Arbitration. Considering that the first Nordic Commercial Arbitration Forum will be held on 11 March 2025, and various discussions in 2024 about “Nordic Arbitration”, we present Wiersholm’s view on what should be done by the Nordic arbitration institutions and the arbitration practitioners to achieve our main common goal: to keep and attract more commercial arbitration to “the Nordics”.

Furthermore, we will, as always, provide the latest NOMA News and highlight What’s On the Agenda – where we take a look at SCC’s newly published AI guide and present our thoughts on potential further development.

Nordic Arbitration – stronger together

Background

On 11 March 2025, the first Nordic Arbitration Forum will be held in Stockholm. You can find the invitation here. The forum is a joint venture between the Stockholm Centre for Commercial Law (SCCL) and the Oslo Centre for Commercial Law (OCCL) – with the backing of all the Nordic arbitration institutions. In our view, this is a historic event marking what will hopefully be a starting shot for a stronger collaboration between the Nordic arbitration institutions to strengthen and develop the Nordics as a preferred place for the resolution of commercial disputes.

From a bird’s eye perspective, all the Nordic countries (Norway, Denmark, Sweden and Finland) have local arbitration institutions. The common goal for OCC, SCC, DIA and FAI is to attract both domestic and international arbitration to its own rules and institutions – with corresponding income (fees) for handling the disputes. To a certain extent, these four institutes are competitors as their continued existence requires that commercial contracts refer potential disputes to their institutions and rules. This again provides a steady case load and stream of income to run the institutes and to be able to carry out marketing. A standout in this landscape is NOMA – which is the only truly Nordic arbitration institution. NOMA’s main goal is to keep and attract maritime and offshore-related disputes to “the Nordics” without charging any fees for being used. However, NOMA’s continued existence depends on it being used, and NOMA is therefore also a competitor to the four previously mentioned local institutions.

Regardless of the competitive environment among the Nordic arbitration institutes, there has been a gradual acknowledgment that everybody will benefit from working together, building Nordic Arbitration as a joint brand for efficient and transparent high-quality commercial arbitration. See e.g. the recent statement from DIA chair Håkun Djurhuus on LinkedIn. This stronger together approach was the backbone of NOMA’s establishment in 2017, and in our view, it is the right path towards the common success criterion: To keep and attract more commercial arbitration to “the Nordics”.

We believe there are three important main steps that should be taken simultaneously to achieve this:

First, it is important to share knowledge and to build trust among Nordic arbitration practitioners (especially in-house and external counsel) with respect to why it is a safe choice, already today, to agree to arbitrate potential commercial disputes in one of the Nordic countries. This will, during contract negotiations, increase the chances of keeping the jurisdiction within “the Nordics” – instead of opting for e.g. “English law and London arbitration“.
Second, alignment and collective development should be sought on a few arbitration and dispute resolution features which, going forward, have the potential of distinguishing “Nordic Arbitration” from other popular arbitration seats. Clear, specific and solution-based features will in our view make it easier to sell Nordic Arbitration to foreign parties.
Third, everybody involved in Nordic commercial arbitration should, within their area of law, work to create a culture for effectively showcasing how this works in practice – by making the award public, in full or in part. On this point, it is in our view important that the “best does not become the enemy of good”, and we advocate that the Nordic academics should lead the way in making Nordic Arbitration more transparent.

In the following we will, as food for thought and bait for future discussions, elaborate on these three main steps.

What is Nordic Arbitration?

This was debated during the 2024 Copenhagen Arbitration Day. According to the DIA’s follow-up LinkedIn-post from the panel discussion (see here), the Norwegian, Swedish and Danish panelists “…agreed that there indeed is something called “Nordic Arbitration” which makes sense to group together. This is partly due to the shared culture of the Nordic countries. High degree of trust between colleagues, low corruption, high transparency and a pragmatism on solving procedural issues.”

In our view, this can be a good starting point for answering what Nordic Arbitration is. However, there are no joint Nordic arbitration rules or principles that stand out compared to other popular arbitration jurisdictions outside the Nordics. All the Nordic arbitration institutions have arbitration rules that are sought aligned with international best practices. Until we see a development of joint arbitration and dispute resolution features that can distinguish Nordic Arbitration (see discussion on this below), the storyline must be built on more general common Nordic features.

What unites the Nordic countries regarding commercial arbitration is in our view first and foremost a shared legal culture with strong values of legal protection, and common rules and principles within commercial law and the interpretation of commercial contracts. The Nordic countries have a long tradition, going back to 1872[1], of cooperation on the development of common rules of law. This shared legal culture, in addition to understanding one another’s languages (except Finnish), allows e.g. a Swedish or Danish arbitrator to sit as arbitrators in a Norwegian seated arbitration (even if the language of arbitration is Norwegian). This is quite unique, and it makes the pool of potential competent arbitrators much larger and more diversified.

On this backdrop, and when zooming in on how to keep and attract more commercial arbitration to the Nordics, we believe the crux of the matter is knowledge sharing and to increase trust in the other Nordic arbitration institutions outside the “local default choice”. At the outset, “all” companies entering a commercial contract subject to arbitration want it to be governed by local law and jurisdiction as this provides a local and familiar process in the event of a dispute. However, during contract negotiations with international counterparties, this may in many cases prove difficult, because both parties want their respective local jurisdiction to apply. Let’s have a look at a Danish company as an example:

During contract negotiations with a counterparty from Turkey, the Danish company’s local counsel suggests “Danish law and arbitration in Copenhagen pursuant to the DIA rules” – a choice his client approves of, as it will provide a local, familiar, and efficient process resulting in an enforceable award (if a settlement is not reached). However, the Turkish counterparty’s local counsel does not accept this, as he believes this will give the Danish company a “home-court advantage” in the event of a dispute. The Turkish lawyer counters with “Turkish law and arbitration in Paris pursuant to the ICC rules“. Thus, the crucial question is: what can be introduced as an acceptable alternative for the Danish-based company that will still, in the eyes of the Danish company, cater for an efficient, local, and familiar arbitration process? Here lies, in our view, the crux of the matter. The Danish-based company can (of course depending on bargaining strength and commercial considerations) achieve this by making a counterproposal in which it introduces a different seat of arbitration, institutional rules and governing law outside Denmark, but still within the Nordics. However, to do this, the Danish company (in practice its in-house or external local counsel) needs to have sufficient knowledge and trust to counter with e.g. “Norwegian law and arbitration in Oslo pursuant to the NOMA rules” – a proposal that might be acceptable by the Turkish company as it provides sufficiently neutral grounds.

Consequently, and returning to why we believe the Nordic Commercial Arbitration Forum is such an important event, to share knowledge and to build trust regarding what unites the Nordics when it comes to arbitration institutions and rules, and commercial law, is in our view the first important step towards keeping and attracting more arbitration in the Nordics. The stronger the Nordic arbitration alternatives are, the more likely it is that Nordic Arbitration will be introduced in the contract negotiations and be accepted by a foreign counterparty.

[1] See https://snl.no/nordisk_lovsamarbeid

Which features can distinguish Nordic Arbitration going forward?

In addition to knowledge sharing and building trust, we believe that all the Nordic arbitration institutions will benefit from seeking alignment and develop joint arbitration and dispute resolution features that distinguish Nordic Arbitration from other popular arbitration seats. On this point, we believe one should aim high but focus first on picking the low hanging fruit to see if there is a collective will for such an alignment. Only action will create change.

The question is, then: What is the low hanging fruit? There is of course no right or wrong answer, and the answer may vary from jurisdiction to jurisdiction. From our Norwegian perspective, the following three “fruits” are good candidates:

The first and perhaps most obvious fruit is the Norwegian system of having joint appointment of the arbitral tribunal as the starting point.

The Norwegian Arbitration Act of 2004 (NAA) section 13, second paragraph reads as follows: “The parties shall if possible appoint the arbitrators jointly”. If the parties fail to appoint jointly, the fallback option is that each party appoints one arbitrator, and the two appointed arbitrators appoint the chairman, see NAA section 13, third paragraph.

In the preparatory works to the NAA, the background for introducing the rule on joint appointment is to increase the arbitral tribunal’s independence and impartiality, as none of the arbitrators feels bound to one of the parties – which again increases trust in the tribunal. Moreover, the joint appointment procedure makes it easier to compose a tribunal with the required skills and diversity.

In Norway, the rule on joint appointment has worked well in practice when both parties have been represented by Norwegian counsel. In light of this success, this also became the main rule in the NOMA arbitration rules, see article 6 (1) and 7 (1) of the NOMA Arbitration Rules of 2024.

Based on the above, the joint-appointment rule should in our view become the starting point in the rules of all the other Nordic arbitration institutions. We see no downside of having this as the default rule as parties may at any time choose to opt for the current standard appointment rule.

The second fruit is that the arbitrators should encourage the parties to agree on a “mediation window” in the arbitration schedule to enhance the chances of reaching a settlement. This principle is also in our view a clear runner-up for being embraced as a joint Nordic dispute resolution principle.

We have in our previous newsletter, the Q3 2024 Newsletter, advocated that during the first case management meeting, the arbitral tribunal should encourage the parties to agree on a mediation window in the procedural timetable. Even if an arbitration is initiated, it is important that the parties either revisit or start to explore the possibility of a negotiated solution. Our general experience is that at this stage of the process, many parties (and their counsels), regardless of previous attempts to settle the case, are afraid of making the first move towards e.g. agreeing on a mediation process to avoid looking weak. Moreover, in some cases, the dispute needs to mature a bit before it is “mediation ready”. Based on this, we argued in our Q1 2023 Newsletter that it is important that the arbitral tribunal drive the process on this point and it has to be familiar with the potential benefits of a mediation and the framework necessary to ensure the best possible basis for a successful process.

The “mediation window” principle has been a part of the NOMA Best Practice Guidelines CMC Matrix since 2017, and it is now also supported in the ICC publication “Effective Conflict Management” (July 2023) (page 37, paragraph 111).

In our view, the NOMA and ICC approach to the mediation window should be endorsed and incorporated at a relevant level by all the Nordic arbitration institutions. This would underscore the argument that Nordic Arbitration is resolution-oriented, and not just process-driven towards an award. This will again be a selling point towards the potential users of Nordic Arbitration – which at the outset are interested in a solution when a dispute arises. As an anecdote on this specific point, see Christian Gorrissen’s (President and Head of Legal at TORM) presentation on the NOMA day in Copenhagen in October 2024.

The third fruit is to develop a joint Nordic best practice, and eventually firm rules, on the use and effect of “sealed offers” (also referred to as “Calderbank offers”) with the aim to encourage more settlements early in the arbitration process. We acknowledge that this suggestion is perhaps more controversial than the two previous as it will lead to a change in the arbitral tribunal’s normal way of conducting the process (as the award on the merits and the costs needs to be split). We have long advocated that the use of sealed offers should be put on the agenda, see our Q3 2023 Newsletter, and hope this will be picked up by the Nordic arbitration institutions. However, we are of the firm view that all Nordic arbitration institutions should at least consider to incorporate the same rule as in the NOMA Arbitration Rules Art 37(1), which states that a rejected settlement offer “shall” be taken into account in the arbitral tribunal’s cost ruling.

Summing up: Regardless of your view on the above three suggested “fruits” becoming joint Nordic arbitration rules or principles, we hope you share our view that alignment and joint development among the Nordic arbitration institutions can contribute to attracting more arbitrations to the Nordics. If you do, please share your views on what direction Nordic Arbitration should take to keep and attract more international commercial arbitration to “the Nordics”.

The best should not be the enemy of the good

Based on our extensive experience with international commercial arbitration, we know that Nordic Arbitration tribunals are producing high quality awards in commercial disputes – regardless of the governing arbitration rules and laws. Had all the Nordic awards been public in the same way as judgments from the ordinary courts, we would have had extensive material to showcase how Nordic arbitration and commercial law, and interpretation of commercial contracts, are applied in practice. However, the important principle of confidentiality in arbitration is of course hindering this (except for the few cases where the parties have agreed on making the award public). However, the best should not be the enemy of the good on this point, so the the question is: What should be done to make as many Nordic Arbitration awards as possible publicly available, in whole or in part?

The answer to this goes in two directions – depending on whether we are looking backwards or forwards.

If we first look backwards on the awards already “out there”, the picture is of course mixed depending on how far back in history we go. We suggest the following:

First, all Nordic arbitrators that have been involved in international arbitrations should go through their archive and identify awards that could have public interest. The threshold for what is of interest should be low. When identified, a request for publication – either in full or anonymized – should be sent to the counsels or party representatives jointly.

Second, all counsels receiving such requests for publication, should be accommodating, regardless of the outcome, and seek in good faith the necessary approvals – if possible.

Third, to overcome the obvious problem that many of the arbitrators are not active, or the parties to the dispute no longer exist, it should be discussed whether the confidentiality obligation can be overcome in some other way – alternatively that the awards are made available for academics doing research within the relevant field of law to allow the content to be indirectly available.

If we look towards the future, we think the following should be discussed and considered in order to increase the chances of future Nordic Arbitration awards becoming public:

The arbitrators should in the first CMC address the issue and seek agreement on the publication of the award, in full or in part. See NOMA’s CMC-Matrix section 3.2 as an example. An add-on could be to seek agreement on a “time bar” rule where the arbitral tribunal is allowed to make the award publicly available after e.g. 3 years.

If no agreement on publication is reached in the first CMC (or later CMCs), the arbitral tribunal chair should, 6 months after the award is rendered, and assuming that the award is not attacked by any of the parties, ask the parties’ counsel jointly to approve publication in part or in full (or in an anonymized version).

If the above initiatives do not lead to anything, we strongly advice, in the cases where academics have been part of the panel – that they should consider writing short (or long) articles bringing the relevant and interesting parts of the award into the public without violating any confidentiality obligations. Of course, the same could also be done by “non-academics”, and lawyer Mikal Brøndmo’s article “Post M&A Disputes: Recent Nordic Case Law, Especially Regarding Loss Calculation” in The Swedish Arbitration Yearbook 2022, Chapter 6, is a good example.

The above suggestions should be seen as a first step towards trying to make Nordic Arbitration more transparent – in line with the goal of making it more attractive for foreign parties to have arbitration in “the Nordics”. We look forward to potential discussions on this, and the other above suggestions, in connection with the Nordic Commercial Arbitration Forum on 11 March 2025 – and beyond!

NOMA News

During NOMA’s annual meeting on 20 November 2024, Hanne Aarsheim and Lars Boman were elected as new board members representing NOMA’s Swedish member – the Swedish Maritime law Maritime Law Association, see here.

In line with our views presented above, NOMA highlighted in a recent LinkedIn-post that the development of Nordic commercial arbitration, together with the other Nordic arbitration institutions, is an important task for 2025, see here.

In the same LinkedIn-post, NOMA also announced that it is in the process of launching an updated version of its Best Practice Guidelines to underline NOMA’s solution-oriented approach. We will revert with comments on these once they are published.

What’s On the Agenda

SCC AI Guide: A Step Forward, with Room for Refinement

Last year, Wiersholm turned the spotlight on the use of AI in dispute resolution during the Trends in Dispute Resolution Forum 2024. The event explored the rapid advancements in AI technology and how these developments are shaping the landscape of arbitration and litigation (see here).

Wiersholm has also entered into a strategic partnership with Newcode.ai – providing direct access to advanced AI solutions, positioning us at the forefront of AI development in the legal sector (see here). We thus welcome the recent launch of the Guide to the Use of AI in Cases Administered Under the SCC Rules (“SCC AI guide”) by the SCC Arbitration Institute. At the outset, this guide is a good effort to address the complexities of integrating artificial intelligence into international arbitration. However, while it represents a step toward establishing best practices and fostering further discussions on this important topic, we believe it currently falls short of serving as a practical guide for arbitral tribunals in their decision-making processes.

The first practical issue an arbitral tribunal will encounter is whether AI tools can be used at all, given the confidentiality considerations and sensitive nature of arbitration (as highlighted in the SCC AI guide). The practical problem here is distinguishing between tasks that require a secure, proprietary AI solution and those that may be performed using AI tools such as ChatGPT without compromising confidentiality. Without going into detail, we believe that, following the precautionary principle, any AI solution used for tasks involving confidential data must be thoroughly evaluated to ensure it meets stringent security and confidentiality requirements.

Assuming that the arbitral tribunal has access to a secure AI solution, we believe that the following rules of thumb should guide the arbitral tribunals at present:

First, from a Norwegian legal perspective, using AI to assess applicable laws is considered a “no-go zone” due to the risk of hallucinations. This significant risk arises from factors such as the lack of comprehensive training material specific to Norwegian law in current large language models (LLMs). For example, an AI might misinterpret statutes, overlook important contextual details like cultural or societal factors, rely on outdated or superseded laws, or misunderstand legal terms that have multiple meanings depending on the context. Since hallucinations are inherent in AI models and are unlikely to be completely eliminated, this underscores the necessity of human oversight in legal matters.

Secondly, while it is evident that an arbitral tribunal cannot delegate its decision-making mandate to AI, the SCC AI guide states that “AI tools may be used to support arbitral decision-making but cannot replace it”. Considering the potential inherent and unknown biases that may be built into AI tools, as well as psychological phenomena like the anchor effect, we believe that arbitral tribunals should exercise great caution using AI generated material as input into their decision-making processes. This includes AI-generated summaries of the facts. However, when used properly and with an understanding of the limitations of current LLMs, AI can serve as a sparring partner for the arbitral tribunal, helping them understanding the submitted facts.

Third, considering the above points, there are areas where AI currently serves as a straight-forward and cost-effective tool:

Searching for relevant facts and understanding the chronology
Analyzing and testing witness statements against the evidence presented
Improving language of draft procedural orders and awards (written by members of the arbitral tribunal)

Given that AI continues to develop exponentially, it is essential to constantly monitor these advancements and assess both the risks and benefits. The publication of the SCC AI guide is an important starting point for ongoing discussions and future developments in this field.

Wiersholm further explores best practices in Tribunal’s Decision-Making process

In February 2024, Wiersholm hosted a pre-event for the Norwegian Arbitration Day, focusing on “Best Practices for Decision-Making Processes in International Commercial Arbitration” (see Q1 Newsletter 2024). There, psychologist Jan-Ole Hesselberg, on the backdrop of the dangers of collective thinking in decision-making processes, questioned the voting method of the Norwegian Supreme Court. See follow-up article in Advokatbladet (link to English version here) and a condensed version in DIA’s newsletter 27/5/2024 on “Hvordan sikre bedre beslutningsprosesser“.

Following this, Hesselberg was invited to present his perspectives directly to the Norwegian Supreme Court judges in November 2024 (see here). Additionally, the topic of “Groupthink in the Courts” was explored in-depth in a recent episode of Dommerpodden. The episode featured Supreme Court Judge Thom Arne Hellerslia, Jan-Ole Hesselberg and Christian Hauge, moderated by Mikkel Ø. Hamar (listen here).

In the wake of this development, Wiersholm will on the upcoming pre-event for the Norwegian Arbitration Day of 26 February 2025 delve further into practical strategies for improving the decision-making process. The keynote speaker will also this year be Jan-Ole Hesselberg. He will revisit the developments since his last contribution and explore the benefits of using decision trees as a structured and effective tool. He will outline its advantages across three dimensions and share actionable insights for practitioners. Seats for this highly anticipated event are limited. Register now to secure your spot and receive the full program once available: Pre-event NAD 2025 – Advokatfirmaet Wiersholm

Newly published article on the extension of an arbitration agreement to non-signatories under Norwegian law

In the newly published edition of the Norwegian journal on Commercial Law, the subjective scope of an arbitration agreement was put on the agenda. The article is written by Lisa Hauge Andersen (who is also an editorial member of this newsletter) and can be found here: Voldgiftsavtalens subjektive grenser | Tidsskrift for forretningsjus.

Determining who is bound by an arbitration agreement is essential in “giving life” to an arbitral process, as the arbitral tribunal can only consider the position and render a decision towards the actual parties to the arbitration agreement. The assessment may appear straightforward at first: it should be sufficient to identify the parties solely by looking at the arbitration agreement itself.

However, the commercial reality with complex and dynamic contractual relationships challenges this approach. This potential pitfall has sparked numerous discussions in international arbitration theory. The article aims to provide insight into the Norwegian approach to this subject matter. In particular, section 10, second paragraph of the Norwegian Arbitration Act is further examined through practical examples such as assignment of claims, recourse, direct action and claims in tort.

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There are many events to choose from on the international commercial arbitration scene. We recommend considering the following upcoming happenings:

23 – 24 January 2025: Swedish Arbitration Days
26 February 2025: Norwegian Arbitration Day in Oslo, with a pre-event at Wiersholm with the following main topic: “The rule of t(h)ree – Use of decision trees as a research-based tool for better decisions in commercial arbitration. Link to the pre-event reservation: Pre-event NAD 2025 – Advokatfirmaet Wiersholm
11 March 2025: Nordic Commercial Arbitration Forum – Nordic Arbitration: A Strategic Choice for Business, see here
1 – 2 May 2025: Nordic Arbitration Day on Reykjavik, Iceland
4 September 2025: Copenhagen Arbitration Day 2025 – Save the date

Read our newsletter on International Commercial Arbitration for Q3 2024 here.

Read our newsletter on International Commercial Arbitration for Q2 2024 here.

Read our newsletter on International Commercial Arbitration for Q1 2024 here.