As they expand into new markets, companies are increasingly turning to international arbitration as a way to circumvent foreign court systems and speed up dispute resolution.
The rapid pace of globalization is leading major players in every sector of the life sciences industry to seek out new growth opportunities in emerging markets. As a result, cross-border disputes are on the rise. Increasingly, companies are using international arbitration as a way to circumvent foreign court and legal systems, which are often significantly slower when it comes dispute resolution.
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James Kwan, international arbitration partner in Hogan Lovells’ Hong Kong office, and Dr. Inken Knief, partner in Hogan Lovells’ Munich office, say that life sciences companies looking to move into emerging markets should be aware of five specific factors currently shaping arbitration.
1. Industry disruption is playing a major role in arbitration
“The life sciences industry is becoming more globalized, with more and more investment by companies across all sectors,” says Kwan. “Increasing collaboration between different industry players is creating complexity and, ultimately, disruption in these new and emerging markets. We’re seeing changing legislation and market factors that allow for an increase in life sciences disputes, which makes having adequate arbitration clauses in place increasingly paramount.”
2. Arbitration continues to serve as a safeguard for critical IP
“Confidentiality is one of the most pertinent issues for life sciences (companies) (that are) expanding their businesses to new markets,” Knief says. “International arbitration offers a wide spectrum of measures to protect confidentiality in a dispute. Unlike court proceedings, in international arbitration our clients don't have to divulge aspects of their business which could potentially be commercially sensitive.”
3. Trade restrictions and protectionism are fueling disputes
“(Due to) the current political landscape, there are increasing levels of trade restrictions, and as a result, we’re seeing more international disputes arise,” says Kwan. “There have been a number of investment treaty claims made involving major life sciences companies for expropriation. These types of new trade restrictions can directly or indirectly effect investments.”
4. The number of arbitral institutions continues to expand
“Regionalization is something new to international arbitration,” Knief says. “It used to be that international disputes were primarily handled in arbitration hubs such as London, Zurich or in Singapore. That's not the case anymore. We now arbitrate wherever a dispute arises.”
5. Aligning arbitration clauses is critical for expanding businesses
“For our clients, devising and developing global dispute resolution policies that are harmonized across jurisdictions is critical,” Kwan says. “A lot of (the) life science companies that are investing in multiple jurisdictions with unique governing laws will have multiple arbitration agreements that may not line up. It's advantageous for companies to have their legal experts ensure these agreements are closely aligned wherever possible. There’s a lot of efficiency and economy to be had as a result.”