5 trends to watch in International Arbitration in 2025
2024 saw major developments in international arbitration, including the launch of several new arbitration rules, proposals for the reform of national arbitration laws, and some important court rulings. This article looks ahead to 2025 and outlines five of the major trends to watch, which are:
- Digital asset disputes will set some key precedents.
- Third-party funding (TPF) will rise globally, but so too may its regulation.
- There will be greater focus on specialised rules.
- Arbitration will lead in the use of artificial intelligence (AI) but will need to grapple with its unique challenges.
- Environmental, social, and governance (ESG) issues will be pervasive.
Digital asset disputes will set precedents
The circulating value of digital assets is currently estimated by the Financial Times to be in excess of US$50 billion. With such a substantial volume of assets circulating globally, it is not surprising that digital asset disputes have been on the rise. Arbitration is likely to come to the fore as the mechanism of choice for resolving such disputes, and there are many reasons for this. Digital asset disputes often lack a clear geographic nexus, with parties in different countries and the digital asset’s server located where neither party has a true connection. Electing a jurisdiction and language of proceedings through an arbitration agreement avoids having to use national courts, which may adopt vastly different approaches to digital assets and be in an unfamiliar language. In a space where anonymity is prized, the greater confidentiality of arbitration is also an attractive feature. The flexibility of arbitration allows for the selection of arbitrators with specific expertise in managing such disputes.
The enforceability of arbitral awards under the New York Convention is also a key advantage over national courts whose judgments may not be as readily recognised abroad. However, the enforcement of arbitration awards related to digital assets has faced challenges. Public policy grounds, especially in nations where digital asset trading is banned (such as China) or likened to gambling, can impede enforcement. Consumer protection issues, likely to arise when individuals rather than corporates are involved, can render an award unenforceable on public policy grounds as seen with the English High Court's refusal to enforce an award in Chechetkin v Payward.
Arbitration clauses are often used in ‘smart contracts’. These self-executing agreements, established on a blockchain between digital asset traders, often involve parties who remain anonymous to each other. They can take the form of a natural language contract that is automatically executed by code, a hybrid of code and natural language, or a contract solely in code. However, some of these models, in particular where the agreement to arbitrate is within the coded part of the contract, will undoubtedly be the subject of future enforcement cases questioning the definition of ‘in writing’ within national laws, especially those based on the UNCITRAL Model Law.
There has been some national support for the use of arbitration in smart contracts. The Jurisdiction Taskforce of LawtechUK (UKJT)’s Digital Dispute Resolution Rules are designed to be incorporated into smart contracts or on-chain relationships. Key provisions include allowing parties to verify their identity solely to the tribunal and providing for the appointment of arbitrators by the Society for Computers and Law. Similarly, the dispute resolution organisation JAMS has introduced draft Rules Governing Disputes Arising out of Smart Contracts. 2025 may be the year when we start to see a significant number of cases in the public domain as these rules are put into practice.
The growth of TPF—and its regulation?
TPF has become a fixture in international arbitration, both for parties who may otherwise be unable to afford proceedings and for those wishing to mitigate risk or fund claims off the balance sheet. We can expect to see renewed focus on TPF in 2025, with growing usage in some jurisdictions alongside increased interest from regulators.
In 2024, TPF was a topic of general public discussion in the UK for an unusual reason. The TV series Mr Bates vs the Post Office told the true story of litigation brought by Mr Bates with the support of TPF against the Post Office, which had wrongly prosecuted him and many others for fraud due to a defective IT system. Without TPF it is unlikely that what has been called the biggest miscarriage of justice in British history would have been exposed.
While this put TPF is a positive light, there has subsequently been some criticism of the money that the funder has made from the case, and there have been calls for caps to be imposed and more regulation of the industry. The status of funding in the UK has already been under scrutiny following the 2023 Supreme Court ruling in PACCAR, which brought litigation funding agreements within the bounds of existing regulations, arguably rendering some existing agreements invalid. The 2024 UK general election also saw off the planned Litigation Funding Agreements (Enforceability) Bill intended to address the impact of PACCAR. The intentions of the new government are still to be confirmed.
In the European Union there have been calls for more stringent regulation of TPF following a 2022 European Parliament recommendation. 2024 saw the publication of the European Law Institute's Principles Governing the Third-Party Funding of Litigation, designed to provide guidance on best practice alongside promoting transparency and fairness.
In the Middle East, TPF has historically been less common due to the lack of explicit approval in the legal framework, prompting questions over how courts may react during enforcement. However, with national arbitration laws based on UNCITRAL Model Law, alongside supportive laws within some jurisdictions such as the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), we can expect to see a rise in usage.
The trend in arbitral rules has been towards supporting TPF, provided there is transparency. The Saudi Center for Commercial Arbitration (SCCA)’s 2023 Arbitration Rules provide for the disclosure of funding agreements during proceedings, envisaging future TPF growth in the region. The Singapore International Arbitration Centre (SIAC)’s 2025 Arbitration Rules include a comprehensive section on TPF, mandating the disclosure of TPF arrangements and the identity of funders so as to avoid conflicts of interest, as well as allowing the tribunal to consider TPF when apportioning costs.
As regards investor-state disputes, discussions at UNCITRAL Working Group III in late 2024 included proposals that TPF be limited in exceptional circumstances where the tribunal considers the expected return to a funder to be above a reasonable amount or where a funder is supporting an unreasonable number of claims against a state.
However, moves towards more regulation and transparency around TPF are not without criticism. Concern has been raised that the forced disclosure of the existence of a funding agreement (and additionally the identity of the funder or terms of the agreement) may undermine a party’s litigation strategy and that caps on TPF recoveries may dissuade funders from taking on matters.
More specialised rules?
International arbitration is witnessing a paradoxical trend: there is a general shift towards harmonisation across commercial arbitration rules but also an increase in specialised rules seeking to cater to specific sectors or dispute types.
Industry-specific rules are an established bedrock in maritime, commodity, sports, and intellectual property disputes. Examples of regularly utilised rules include the London Maritime Arbitrators Association (LMAA) Terms, the World Intellectual Property Organization (WIPO) Arbitration Rules, and the Court of Arbitration for Sport (CAS) Procedural Rules. However, these tailored rules are typically just one part of a specialist ecosystem, alongside industry-expert arbitrators and even different norms to mainstream commercial practice. The IBA Guidelines on Conflict of Interest in International Arbitration, for example, notes that general guidelines on repeat appointments will not always be applicable in certain sectors where specialised pools or closed lists of arbitrators are used.
Specialised rules are, however, expanding into new areas, such as digital assets disputes (see above) and insolvency. In December 2024, SIAC launched a draft Insolvency Arbitration Protocol which would truncate SIAC’s regular rules and override contrary provisions. The Protocol allows for the amendment of confidentiality provisions in accordance with the insolvency practitioners’ reporting duties to creditors and the court and provides for a specialist panel of arbitrators. While 2025 has only just begun, we have already seen a series of specialised rule announcements, including new rules oriented towards investor-state mediation and the launch of a dedicated e-sports tribunal.
A key question is whether specialist rules are necessary or whether sectoral expertise can instead be brought in via arbitrator appointments. It is notable that many of the recently launched specialised rules are complemented by specialised panels of arbitrators. Specialised panels are an established approach, used for example by the Permanent Court of Arbitration (PCA) for environmental and outer space disputes, by the Hong Kong International Arbitration Centre (HKIAC) for intellectual property disputes, and the Silicon Valley Arbitration and Mediation Center (SVAMC) for technology disputes. An alternative approach is seen with the ICC International Court of Arbitration (ICC)'s Rules for the Administration of Expert Proceedings, where expert determination for specific issues can be incorporated into an arbitration. As the paradoxical trends for harmonisation and specialisation continue to develop, it remains to be seen whether specialised rules will become a greater part of the arbitration landscape.
AI and its challenges
Technology is already one of arbitration’s key offerings to users, with institutions competing to use the latest software to implement increasingly efficient case management systems. For example, the Dubai International Arbitration Centre (DIAC) and Opus2 recently announced a strategic technology partnership involving a new digital platform for DIAC.
AI has been integral part of the arbitration process for some time, with the technology having been used for many years in document reviews. However, there is uncertainty regarding how much more broadly AI will be used in arbitration given the legal and ethical issues that can arise. A key development from 2024 was SVAMC’s Guidelines on the use of Artificial Intelligence in Arbitration. Although non-binding, it presented some detailed industry guidance. This included, at Guideline Three, that arbitrators should not delegate their personal mandate to any AI tool, in particular with regards to the arbitrator’s decision-making. However, this does not altogether rule out the use of AI during the drafting of the final award, which some have speculated could lead to challenges on the basis that the arbitrator is not the author. Russia challenged an award relating to the Yukos dispute on the basis that it was primarily drafted by a tribunal secretary, although the argument was rejected as the tribunal had nevertheless assumed responsibility for the award, regardless of who had actually written it. It remains to be seen if AI-drafted awards will be considered in the same way.
Using AI to more efficiently prepare draft awards could significantly speed up the time they take to be issued. Using AI to actually decide the outcome of a dispute is more controversial. One of the issues is whether AI could ever have a large enough dataset to reliably predict the outcome of a dispute, as arbitrations are confidential and only a minority of decisions are ever published, meaning there is a limited dataset for training.
2025 will no doubt see the arbitration community expanding the use of AI, while continuing to grapple with the legal and ethical issues presented.
ESG issues will be pervasive
ESG-related disputes have increased in recent years and will continue to do so. We can expect to see disputes arising from allegations of greenwashing and a new generation of investor-state disputes reflecting public policy shifts. We can also expect ESG concerns to grow within the arbitral process.
‘Greenwashing’ disputes relate to allegations of exaggerated or unsubstantiated environmental claims. While disputes may arise with regulators, they may also arise between parties accused of breaching ESG clauses in prospectuses, supplier contracts, joint ventures, and other commercial relationships. The IBA Report on use of ESG contractual obligations and related disputes found companies commonly incorporate a wide range of ESG contractual obligations, often specifying consequences of breach including remediation, termination, or damages. Greenwashing disputes illustrate the danger of accepting ‘boilerplate’ clauses without appreciating the actions needed to remain in compliance. The IBA report also found that confidentiality is a key concern for parties to contractual ESG disputes (no doubt to limit the risk of reputational damage), meaning that arbitration is an attractive forum.
Investor-state disputes directly related to energy transition are far from new, but we are seeing notable shifts in law. Some 150 investor-state cases have been brought under the Energy Charter Treaty (ECT), many related to renewable energy or decommissioning. In 2024 the European Union notified its withdrawal from the ECT, taking effect in 2025 while subject to a 20 year ‘sunset clause’. With multiple states having already withdrawn and EU institutions taking a hostile approach towards intra-EU cases, we can expect to see domestic courts continuing to tackle the enforceability of the resulting arbitral awards.
The ‘next generation’ of investment treaties have sought to grapple with the challenge of ensuring adequate protections to encourage renewable energy investment, while providing broader public policy carve outs for environmental protection. For example, the 2024 India-United Arab Emirates Bilateral Investment Treaty covers renewable energy but excludes natural resources from the investment protection, while providing at Article 3 the right to regulate for ‘legitimate public policy objectives’ including ‘protection of environment, health and safety’. However, some of the high-profile investor state cases in recent years have been under ‘next generation’ treaties, albeit without an exclusion for natural resources (for example Eco Oro v Colombia under the 2008 Canadian-Colombian FTA).
The procedural flexibility in arbitration has allowed greener practices to take root, encouraged by the Campaign for Greener Arbitrations and the forced adoption of virtual proceedings during the COVID pandemic. It is increasingly common to see procedural orders issued by tribunals providing for e-bundles and paper-free arbitrations, where submissions and evidence are provided in electronic format only. Virtual or hybrid hearings are also an established feature in arbitrations, particularly for shorter meetings such as procedural hearings. Virtual hearings are here to stay, not least as they simplify the logistics when dealing with parties and arbitrators located across the world. Some arbitral institutions have already incorporated such considerations into their rules, for example Article 32.4(b) of the SIAC 2025 Rules encourage the adoption of environmentally sustainable arbitration practices. The SCCA 2023 Rules encourage tribunals and parties to consider how technology could be used in the procedures for their arbitration and specifically how its use could reduce the environmental impact. We can expect to see further progress from tribunals and institutions in this regard.
Conclusion
The five trends highlighted in this article gives some insight into how international arbitration may develop in 2025, but what is for certain is that international arbitration will continue to adapt to new challenges, technologies, and user expectations.
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