International Commercial Arbitration Q2 2024

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

In the Danish Arbitration Institute’s (DIA) February 2024 newsletter, attorneys-at-law Johansen and Decker made the following assertion:

“[T]he Norwegian legal market would benefit substantially from building up a full-fledged arbitral institution akin to the DIA, the SCC, and other institutions who have contributed to the development of arbitration in their respective homes over the last decades.”

In this newsletter, we will argue against this view and make the case that the Norwegian arbitration community should instead focus its energy and resources on further developing OCC and NOMA to enhance arbitration in Norway and the Nordic region.

Furthermore, we will, as always, provide the latest NOMA News and highlight What’s On the Agenda.

We hope you like it!

Why Norway does not need a new “full-fledged” arbitration institute

Background

In the Danish Institute of Arbitration’s February 2024 newsletter, attorneys-at-law Johansen and Decker of the law firm Schjødt published a noteworthy article titled “The Anomaly of Ad Hoc Arbitration in Norway.” In the article, they outline their views on why ad hoc arbitration is preferred in Norway, the problems with ad hoc arbitration in Norway, and the way forward.

At the outset, we share the authors’ main view on why ad hoc arbitration has been so dominant in Norway. This is primarily due to historical reasons: many standard contracts refer disputes to ad hoc arbitration, and it has worked well — both in domestic and large international commercial arbitration cases seated in Norway.

Regarding Johansen and Decker’s discussion on the problems with ad hoc arbitration, our view is that the main real “problem” is the lack of transparency (black box syndrome) and the inherent difficulties this presents in explaining and marketing Norwegian (ad hoc) arbitration. We disagree with the authors’ assertion that ad hoc arbitration pursuant to the Norwegian Arbitration Act (NAA) inhibits diversity. On the contrary, the Norwegian “invention” that the parties, pursuant to section 13 (2) of the NAA, shall seek to appoint the tribunal jointly is, in our experience, a good framework for securing both age and gender diversity within the pool of qualified arbitrators.[1] Oslo Centre for Commercial Law’s launch of the first Norwegian Arbitration Education is an important step to steadily develop a diversified pool of qualified arbitrators, see more on this below under “What’s on the Agenda”.

When presenting their view on the way forward, Johansen and Decker acknowledge the work done by NOMA to provide and promote more predictable and transparent institutional arbitration to the Nordic and Norwegian markets. However, based on an unexplained scale of institutionalism, their view is that neither OCC nor NOMA “has […] had full institutional status” and they therefore argue that “Norway continues to need a true and full-fledged institution.”

We disagree that Norway needs a new “full-fledged” arbitration institution in addition to OCC and NOMA. On the contrary, the introduction of a new Norwegian arbitration institution risks derailing the good work and momentum already created by OCC and NOMA. The basis for this standpoint will be set out in the following.

What is “success”?

When running a project — small or large — you need to start with the end in mind and define what “success” looks like. Thereafter, you need to “count backwards” and set out what needs to be done, by whom, and when. In addition, you must be able to adapt as the project progresses and be prepared for unforeseen circumstances. This is the same approach used in a well-led Norwegian arbitration process, in which the arbitral tribunal starts with scheduling the main hearing during the first case management meeting and then agrees on the appropriate steps to complete a timely case preparation – preferably by using NOMA’s CMC-matrix as assistance.

The first question is thus: What does success look like in what we can call “project Norwegian international commercial arbitration“?

There are different ways to approach this question. We believe that the correct angle is the commercial business client perspective—and not the “Norwegian legal market“, as is Johansen and Decker’s take. The question is thus what the potential user of dispute resolution tools in commercial contracts perfers.

Based on available surveys, such as the recent Roschier Dispute Index 2024, 58% of Norwegian commercial business clients prefer litigation over arbitration (Roschier Dispute Index, page 10). When choosing arbitration, the main arguments for doing so are the finality of the award, the expertise of arbitrators, the non-public procedure, and efficiency. (Roschier Dispute Index, page 13).

However, the choice between litigation or arbitration, and potentially the choice between ad hoc and institutional arbitration, is not made unilaterally — it is a result of the parties’ contract negotiations. Here lies, in our view, the crux of the matter: What enables the client (in practice, its counsel) to get the preferred dispute resolution mechanism into the contract?

Let us say that during contract negotiations, a GC for a Norwegian-based company initially prefers litigation before the ordinary Norwegian courts, as this will provide a local, familiar, and efficient process that will result in an enforceable judgment. Assuming that this is not accepted by the counterparty, the question will then be what can be introduced as an acceptable alternative that will also achieve an efficient, local, and familiar process and an unappealable award. The GC’s top three alternatives to achieving this are: ad hoc arbitration (potentially combined with a reference that NOMA Best Practice Guidelines shall be taken into account) or arbitration pursuant to either the OCC or NOMA Arbitration Rules with the seat in Norway.

As touched upon above, the main “problem” with ad hoc arbitration is not that it does not work well — it is the difficulties in explaining how it works (black box syndrome) and in convincing a foreign counterparty that it is a “safe choice.” Consequently, in a contract negotiation, it is much easier to propose that the arbitration shall be conducted pursuant to either OCC’s or NOMA’s arbitration rules. Irrespective of the choice between OCC or NOMA, during the contract negotiations one can also refer one’s counterparty to NOMA’s Best Practice Guidelines as a good guide for understanding how Norwegian (and Nordic) seated arbitrations are generally conducted.

Our view on the best path to “success”

Johansen and Decker argue that if a new “full-fledged” Norwegian arbitration institute is set up (in addition to OCC and NOMA), “[w]e will benefit from greater predictability, from greater arbitrator diversity, from an easier time marketing Norwegian arbitration to foreign users, and in countless other ways large and small.”

We disagree with all three main points.

First, a new “full-fledged” Norwegian arbitration institute will not provide “greater predictability” than what is already offered by the up-to-date OCC and NOMA arbitration rules. Additionally, NOMA has comprehensive Best Practice Guidelines — which essentially record how Norwegian and Nordic arbitration is conducted. Moreover, several NOMA awards have been published during the last year, showcasing that the rules indeed work in practice.

Second, as already stated above, our view is that the current system of joint appointment [Footnote: OCC arbitration rules Article 8 and NOMA Arbitration Rules Article 7] is a good basis for promoting age and gender diversity within the pool of qualified and available arbitrators.

Third, we believe that a new “full-fledged” Norwegian arbitration institute will not make it easier to market Norwegian arbitration to foreign users. OCC and NOMA already provide the necessary platforms for such marketing.

If there are available funds for promoting Norwegian arbitration (which is a prerequisite for a new arbitration institute), these should be invested in the institutions already established. Moreover, instead of using time and energy to try to create a new Norwegian arbitration institution, the available resources should rather be channelled into what we already have. To be specific, we suggest the following next steps on the path to “success”:

Switch from Ad Hoc to Institutional Arbitration in Norwegian Standard Contracts: The difference between ad hoc arbitration and arbitration pursuant to the NOMA rules with the seat in Norway is small in practice, making a “switch” easy. The more “public switches” showcased, the easier it will be to market Norwegian arbitration to foreign users. A good example is the 2019 implementation of the NOMA clause in the Nordic Marine Insurance Plan Clause 1-4B.

Publish Norwegian Arbitration Awards: Where possible, work to make Norwegian arbitration awards public — either in full or in anonymized versions. The more awards published, the easier it will be to market Norwegian arbitration (and Norwegian law) to foreign users. An example is the publication of several Danish NOMA awards within the bunker industry, making it easier to approach e.g. bunker suppliers and convince them to implement the NOMA clause in their T&Cs.

Market the Nordics as a Good Place for Arbitration: Do not solely focus on marketing “Norwegian arbitration,” but also recognize the benefits of marketing “the Nordics” as a good and safe place for conducting arbitration. Both Norway and the other Nordic countries are small, but combined they can be a strong force on the international arbitration scene. The more “the Nordics” is perceived as a good place for conducting arbitration, the easier it will be to get OCC or NOMA rules into contracts during negotiations with foreign parties. We thus strongly support initiatives aimed at promoting both Nordic arbitration and the common features of Nordic commercial law.

NOMA News

On 25 June 2024, NOMA published updated NOMA Arbitration Rules and NOMA Fast Track Rules.

As highlighted by NOMA, the updates are designed to ensure that the two-rule set remains clear, coherent, and harmonised without making any material changes. Moreover, minor adjustments have been made to improve procedural timelines and communication protocols, promoting efficiency in arbitral proceedings.

In light of our view on the best way forward regarding Norwegian (and Nordic) international arbitration as presented above, we believe that updates like this are important and should be presented every 3-4 years to show the market that NOMA remains at the forefront of maritime and offshore arbitration.

What’s On the Agenda

In light of our view on the best way forward for “project Norwegian international commercial arbitration” as presented above, we are pleased to see the timely launch of the first Norwegian Arbitration Education. This education programme is led by the Oslo Center for Commercial Law, with Johnny Herre and Amund B. Tørum as responsible for the courses.

From the invitation to participate in the first cohort, we find the following, in our view spot-on, description of the background for this important launch (translated from Norwegian to English by use of AI-engine):

“Norway has long had a strong arbitration environment, particularly in oil and gas, shipping, marine insurance, and construction. With the growth of the petroleum sector in Norway, the country has also become the venue for an increasing number of significant international arbitration cases, providing Norwegian lawyers and arbitrators with more international experience.

In our neighbouring countries Sweden and Denmark, largely thanks to the Arbitration Institute of the Stockholm Chamber of Commerce (SCC Arbitration), there have been a large number of complex international disputes with Sweden as the arbitration seat. This has greatly influenced Swedish arbitration practice and contributed to a strong professionalization. The Danish Institute of Arbitration (DIA) has contributed to a similar development in Denmark. In Norway, we are witnessing a similar trend today, with the Oslo Chamber of Commerce (OCC) and the Nordic Offshore and Maritime Arbitration Association (NOMA) being important contributors.

The Swedish development is also due to the fact that SCC has, on several occasions, organized training for young and promising lawyers on various arbitration topics and the arbitration process in practice. Numerous arbitration courses have been conducted with instructors from academia, the judiciary, and the legal profession. The courses have also led to a more balanced gender distribution among both counsel and arbitrators, contributing to renewal. The result is an ever-growing pool of experienced arbitrators and lawyers with thorough knowledge of arbitration.

Similar courses have been held under the auspices of the Danish Bar Association, with several Norwegians participating.

As part of the effort to further develop Norway as an attractive place for national and international arbitration, it is natural to have a similar course program tailored to the Norwegian market.

The background for this letter is that the Oslo Centre for Commercial Law (which is under the Scandinavian Institute of Maritime Law (NIFS) and the Department of Private Law at UiO) is now launching a similar course program tailored to Norway. The plan is to arrange the course regularly in the coming years.”

Wiersholm has been a strong supporter of the launch of this education, and our managing partner Stephan L. Jervell will be one of many experienced arbitration practitioners lecturing. In our view, this course will also be an important step towards more diversity, as the pool of qualified and available arbitrators will grow steadily.

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

29 – 31 August 2024: The Nordics in Hamburg. An international arbitration seminar and workshop with the theme “What you need in your arbitration toolbox”. The seminar is co-hosted by the German Initiative of Young Arbitrators North, Young Arbitration Practitioners Norway, Young Arbitration Club Finland, Young Arbitrators Copenhagen and the Young Arbitration Practitioners Iceland.
4 September 2024: Copenhagen Arbitration Day: The yearly event in Copenhagen futures the theme “Developing Arbitration amid Challenging Times” to acknowledge the need for arbitration to evolve with changing times, especially in the face of crises, rapid developments in international trade sanctions, AI, ESG impacts on businesses, and geopolitical tensions.
5 September 2024: The day after Copenhagen Arbitration Day, DIA invites everyone to the separate event Women in Arbitration, where a panel of top-arbitrators will share their experiences about their careers in arbitration. The event’s objective is to underline the importance of getting more women to enter the scene as arbitrators and takes place in the Valencia building in Copenhagen.
9 – 12 September 2024: New York, Columbia Law School – Chartered Institute of Arbitrators Comprehensive Course: A four-day course designed to broaden practitioners understanding and expertise in international arbitration.
10 October 2024: The second NOMA Day in Copenhagen with the following main theme: “Arbitration from departure to arrival – the NOMA solutions”.
21 – 25 October 2024: SCC Arbitration Week – both online and in Stockholm.