SCC 2023 Analytics: “Ad hoc vs. Institutional Arbitration in Construction Disputes”
It is more expensive and time-consuming to resolve construction disputes in ad hoc arbitration than at the SCC Arbitration Institute. This is demonstrated in a new report by SCC Deputy Secretary General Natalia Petrik and Hammarskiöld Associate Adam Runestam. The report compares 35 ad hoc arbitrations with 25 arbitrations under the SCC Rules.
When construction companies choose to resolve disputes in ad hoc arbitration proceedings, the costs are significantly higher, especially in large disputes. The report shows that the average cost in arbitration under the SCC's rules are approximately 40% lower than in ad hoc arbitration. And it is typically faster to resolve disputes at the SCC, which means that companies generally spend less on legal respresentation if the dispute is handled at the SCC than in ad hoc arbitration" says Natalia Petrik.
The data shows that average cost for a construction arbitration is approximately 40% lower for the parties when they resolve the dispute with a three-member arbitral tribunal under the SCC Rules instead of in an ad hoc arbitration. Even though the average claim in an ad hoc arbitration is significantly lower than the average claim in an SCC arbitration (EUR 5 million compared to EUR 64 million), the average cost for resolving the dispute in an ad hoc arbitration is significantly higher (EUR 440,000 compared with EUR 262,000).
The dispute resolution process at the SCC is also swifter, leading to potentially lower overall costs, including those related to legal representation. The average time to award for an ad hoc arbitration is 18.1 months and for an SCC arbitration 15.8 months.
Natalia Petrik summarizes the results: "When companies opt for SCC arbitration instead of ad hoc arbitration, they generally get a quicker procedure at a lower cost, something that companies should prefer.".