SCC releases new report “Settlements in cases administered under the SCC Rules”

The SCC has published a new report titled “Settlements in cases administered under the SCC Rules”. The report, co-authored by Jake Lowther, Raoul J. Sievers, and Joakim Raivio, provides an in-depth analysis of settlement patterns in arbitrations conducted under the SCC Arbitration Rules and the SCC Expedited Arbitration Rules between 2021 and 2023.

More than one in six cases settle at the SCC

The report reveals that 16.1% of all proceedings administered under the SCC Rules during the examined period were concluded through confirmed settlement, meaning more than one in six arbitrations ended in settlement. Notably, 2022 was an exceptional year for settlements at the SCC, with roughly every fifth case settled as a comparatively lower number of concluded proceedings coincided with a higher number of settlements.

The observed settlement rate is significantly higher in proceedings under the SCC Arbitration Rules (18.5%) compared to cases administered under the SCC Expedited Arbitration Rules (11.5%). This suggests that the expectation of a longer dispute resolution process promotes the parties’ efforts to find amicable settlement, and that the parties’ willingness to explore the prospects of settling their dispute is lower if they have already committed a significant proportion of the financial resources the case necessitates.

Settlement halves the duration of proceedings

One of the report’s most striking findings is that by settling their dispute, parties cut their dispute resolution process short by an average of 8.3 months (48.5%) under the SCC Arbitration Rules, effectively halving the duration of their dispute resolution process. Under the SCC Expedited Arbitration Rules, parties reached a settlement after an average of 4.3 months and a median of 3.8 months, meaning parties were twice as fast to find a settlement under the SCC Expedited Arbitration Rules compared to the SCC Arbitration Rules.

“At the SCC, we know that for arbitration users, time is money,” the report notes, emphasising that given the general rule that the lengthier the proceeding, the greater the costs of legal representation, settlements represent an important method at the parties’ disposal to reduce the overall costs of dispute resolution.

UK and Nordic parties lead in settlement rates

The analysis found that 59.5% of settlements occurred in domestic disputes, demonstrating what might be considered an overrepresentation of domestic cases in the settlement statistics compared to the overall distribution of cases registered with the SCC in the same timeframe, which typically sees more international cases. When examining settlement rates by jurisdiction, parties from the UK achieved the highest settlement rate as six of 20 parties agreed on a settlement (30%), followed by Finland (26.3%), Norway (21.4%), Denmark (14.3%), and Poland (11.8%).

“This finding may be taken as reflecting the deep roots of a cooperative approach to dispute resolution in the Nordic legal traditions,” the authors observe. Remarkably, among the ten most frequently represented home jurisdictions at the SCC, parties from the Russian Federation and from Ukraine were the least likely to settle their disputes, with not one of the 39 Russian parties nor one of the 15 Ukrainian parties registered by the SCC in the relevant time span settling a dispute.

Settlement patterns reveal optimal timing for negotiations

The report reveals that roughly one third of all settlements (32.4%) were agreed already before the referral of the case to the Arbitral Tribunal. Interestingly, the share of pre-referral settlements increased dramatically over the examined period, from 19% in 2021 to 52% in 2023.

The highest settlement rates occur either immediately before referral of the case to the Arbitral Tribunal or after the conclusion of the phase of written submissions, with the high rate of pre-referral settlements suggesting that the initiation of arbitral proceedings, and the advance on costs to be paid, may at times serve to compel a party to return to the negotiating table, with some success. Following the conclusion of the final round of written submissions, 26% of all post-referral settlements were reached. Notably, no settlements were observed once the parties had participated in the hearing on the merits, suggesting that the parties’ willingness to explore the prospects of settlement is lower if they have already committed a significant proportion of the financial resources the case necessitates, and they anticipate a binding adjudication of their dispute in the near future.

Industry trends and the “holiday effect”

A review of the confirmed settled cases reveals that the most common industries represented were real estate and construction (20%), retail and consumer products (18%), and energy (15%), with the leading contract types being share purchase agreements (28%), construction contracts (11%), and supply agreements (9%). This indicates that the profile of settled cases largely reflects the overall SCC caseload, including the recent increase in corporate and post-M&A disputes.

Interestingly, the report found no discernible correlation between the amount in dispute and the parties’ likelihood to reach a settlement, with significantly more than half of the settlements occurring in cases in which the amount in dispute was under EUR 1,000,000.

The analysis also uncovered a “holiday effect”, with the time of year and specifically the proximity to certain Swedish holiday periods appearing to influence the likelihood of the parties to reach a settlement, with the number of settlements increasing in the months immediately prior to Swedish Midsummer and the end-of-year festive season.

Commitment to efficient dispute resolution

The report demonstrates the SCC’s continued commitment to providing parties with all tools to resolve their disputes in the most efficient way possible, including updating the SCC Mediation Rules, introducing SCC Express, and implementing new routines to promote the parallel use of mediation when it becomes aware of ongoing settlement discussions between the parties.

In line with the SCC’s commitment to transparency and accountability, the findings from this report equip the users of arbitration with all possible information to resolve their disputes effectively and in the most efficient way possible, and provide guidance to arbitrators on how the SCC considers the question of fees in the case of settlement.

The authors are grateful to Erik Erba Stenhammar and Leonardo Catovic for their invaluable contributions to this report.