Malta’s success in promoting arbitration as an alternative means of resolving commercial disputes is boosting its credentials as a dispute resolution centre, and the country is now targeting a share of the worldwide multi-billion-dollar arbitration market. Malta is interested in joining forces with the private sector to push arbitration to the next level and establish itself as a preferred hub for international arbitration. The island hopes to attract foreign arbitration courts, from Singapore or London, for example, to use Malta as a venue in which to set up operations to serve cross-border European company issues.
Malta has already made great strides in creating a neutral and welcoming environment for arbitration. A central location with links to Europe, the Middle East and North Africa, the county’s high professional standards in the legal and technological fields, along with the support offered by the Malta Arbitration Centre (MAC), have helped arbitration gain traction. Most cases being handled thus far are of a local nature, but that may be about to change. The formation of a strategic alliance, as considered by the Maltese government, would enable Malta to deal with a greater number of arbitrations involving foreign parties.
A Neutral Forum
Despite being a small island in the Mediterranean Sea, Malta has a history of being the venue of international conflict resolution: the country hosted the famous Bush-Gorbachev summit in 1989 that ended the Cold War. More recently, Malta has enhanced its appeal as the go-to hub for corporations seeking to solve commercial disputes of all kinds within the maritime, aviation, gaming, energy and construction industries to name just a few. In 1996 the island implemented the Arbitration Act, which is based on the Model Law on International Commercial Arbitration set out by the United Nations Commission on International Trade Law (UNCITRAL). This created a legal framework that gives parties all the necessary flexibility for arbitral proceedings, acting as a precursor for the establishment of the MAC, which started its operations in March 2000.
Arbitration is one of the fastest-growing areas of legal practice worldwide. It is favoured by many for its procedural flexibility and cost-effectiveness when compared to litigation. Arbitration is a form of voluntary dispute resolution by a private ‘judge’, an arbitrator, instead of a state court. An arbitrator, who is a neutral third party, renders a final and binding award – a method that is especially useful in international commercial transactions, where parties are often unfamiliar with foreign legal systems. In arbitration, both parties control the process from the outset, leading to significant cost-savings compared to litigation; they themselves mutually choose the arbitrator, who often has special expertise in the subject matter, and decide on issues such as the venue and the language of the proceedings. All arbitrations in Malta have to be carried out under the auspices of the MAC, which has seven panels of Arbitrators with expertise in various areas, including insurance, construction, taxation, maritime, finance and accountancy. In the case of international arbitrations, parties can engage a foreign arbitrator who can also be chosen from the Panel of International Arbitrators maintained by the MAC.
The Current Status
The MAC manages over 450 arbitrations a year. However, the majority of disputes being referred to the MAC are between Maltese parties. This is due to the introduction of mandatory arbitrations in 2004, where certain disputes, such as motor traffic claims, amongst other classes of disputes, are by law referred to arbitration. In the field of international arbitration, where at least one party is foreign, Malta is still to some extent playing catch- up, with international arbitrations often bypassing the island. However, in 2017 nine international cases were filed with the MAC, while also providing for some 40 commercial disputes between local companies in a year. In fact, many firms repeatedly use the Centre’s services and appreciate the confidentiality of the proceedings. While the high percentage of local arbitration has given the country’s arbitrators valuable experience and a thorough understanding of the arbitration process in general, it has absorbed the centre’s capacity to fulfil its intended role as a promoter of Malta as an international centre of arbitration. While strengthening its staff complement is currently on the agenda of the MAC, discussions are also underway for the expansion of the centre’s premises and the introduction of productivity-improving technology.
Room to Grow
Malta’s robust, internationally oriented economy and concentration of companies engaged in cross-border business means it holds significant potential as an international arbitral venue. In fact, the MAC has already registered an increase in disputes in the fields of ICT and gaming, two of Malta’s export-oriented service industries. The MAC now intends to introduce specific panels of arbitrators for these sectors. Malta’s emerging blockchain economy and its drive to introduce regulations for Distributed Ledger Technologies (DLTs) could also provide for arbitration business in the years to come. There is a real chance that Malta will become the go-to-place for the arbitration of disputes in gaming, IT and DLT, similar to London’s status as a premier centre for maritime arbitration.
Located strategically between Europe and North Africa and within easy reach of the Middle East, Malta also offers companies from the region the right environment in which to solve commercial disputes. The island positions itself as a European location which offers lower costs than other arbitration centres, such as London, Paris and Munich. The MAC could become the first choice for Asian companies with disputes in Europe, for example, in which case it would be cheaper to fly in experts and witnesses only to Malta as opposed to an arbitration centre in Singapore and Hong Kong. Although the exact cost of arbitration depends on the duration of the proceedings, the number of witnesses and the expert analysis required, registry fees are lower in Malta than in other European arbitration centres, which makes the country an ideal location for arbitration of trans-border contracts whose parties wish to avoid the risk of having to litigate in the other party’s courts.
There is a real chance that Malta will become the go-to-place for the arbitration of disputes in gaming, IT and DLT, similar to London’s status as a premier centre for maritime arbitration.
The entire arbitration process in Malta is underpinned by an efficient infrastructure, which comprises educated English-speaking professionals who have experience in dealing with international businesses. The law in Malta is strongly pro-arbitration. To ensure the enforceability of awards, the Malta Arbitration Act incorporates: the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been signed by some 150 states; the 1923 Geneva Protocol on Arbitration Clauses; the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards; and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. These international agreements help the successful party in arbitration to enforce the award in the country in which the losing party has assets. Each year a number of foreign international arbitration awards are registered by the MAC on the request of the interested party in order to be enforced in Malta through the Maltese courts.
A Voice in International Arbitration
While the MAC has so far been seen primarily as a domestic arbitration centre, progress has been made in recent years to enhance confidence in Malta as an international arbitration hub. However, ultimately, Malta needs to overcome the challenge of attracting cases between non-Maltese parties to really establish itself as a credible international hub. The Maltese government believes that much more can be done to promote Malta, in particular as a cost-competitive location for arbitration of disputes arising in the markets of North Africa. Efforts are also underway to find a private partner with a proven track record in cross-border disputes for the management of Malta’s international arbitration business. By inviting foreign arbitration centres to open case management offices on the island, Malta’s arbitration sector could gain international relevance. The island is now using its well-established arbitration infrastructure and ties to Europe to market itself to potential partners. While other locations may have a stronger track record in handling international arbitrations, with support from the government and the right partner, tried and tested mechanisms and a strong pool of arbitrators, Malta is ideally placed to provide appropriate, effective resolution services to parties in European cross-border disputes.
Arbitration Procedures in Malta
Once a case is filed with the Malta Arbitration Centre, a consultation between the parties is held in order to deal with all preliminary matters, including the appointment of the arbitral tribunal to hear and decide the case, thus ensuring that the arbitral proceedings commence right away. The parties are free to agree whether one arbitrator or a panel of three arbitrators should be appointed. The MAC will only intervene should the parties fail to agree on an arbitrator. The arbitration hearings themselves are much less formal than court proceedings. Time, date, deadlines and location are selected at the behest of the parties themselves, and it is their decision as to whether lawyers or other experts are to be involved. Awards delivered are final and binding and, once registered with the MAC, they constitute an executive title and can thus be enforced as court judgements. An award can be appealed in a court of law on a point of law, and following amendments to the Arbitration Act, awards delivered in mandatory arbitrations can be appealed against both on points of law as well as on points of fact. This right of appeal, however, can be excluded by agreement between the parties.