Global warring.

As the world wakes up to arbitration, Jeremy fleming finds that more work for solicitors also means the possibility of more conflicts.

This summer, an Indonesian member of an international arbitration tribunal sitting in Europe was kidnapped at an airport and whisked back to Indonesia.

He was one of a three-member tribunal deciding a case.

It is thought that one of the parties resorted to this desperate remedy to frustrate the process.

The world is waking up to the importance of arbitration.

The idea has come a long way since its inception through the New York Convention in 1958.

At the time, 50 countries signed up to the Convention; now there are few left who have not.

Last month, the Paris-based International Chamber of Commerce (ICC) court of arbitration reported that it had dealt with more than 500 cases in the year for the first time in its history.

In Britain, arbitration has been slow to take off.

According to Stewart Shackleton, an associate and co-head of arbitration at City firm Simmons & Simmons, arbitration is 'symptomatic of a world less and less eurocentric.

There's an increasing demand, with globalisation, for non-statal tribunals and legal solutions'.

Britain has a long tradition, he says, of exporting justice, and not receiving it from abroad.

As such, it is unsurprising that it was one of the last countries to adopt the UNCITRAL model code - the UN sponsored rules that underpin much modern arbitration - and that, though welcomed, reservations remain about the effectiveness of the 1996 Arbitration Act.

Greg Reid, an arbitration specialist with Linklaters & Alliance based in Paris, says: 'For 20 years, England was in the wilderness with arbitration.

The 1996 Act is good, but it was a mistake to preserve the right for parties to apply to the courts in certain circumstances on points of law.' Mr Shackleton agrees: 'The Arbitration Act was perhaps modelled too closely on court practice.'

Nigel Blackaby, an international arbitration specialist with Freshfields - who divides his time between London and Paris when he is not jetting off somewhere more exotic - says that although the right of appeal is 'not common', the majority of parties adopt institutional rules that exclude this provision.

However, there has been a sea-change in the attitude of the judiciary and legal profession to arbitration in the past three years.

Real change, according to Mr Shackleton, starts with the judiciary: 'In France, arbitration took off as a result of innovative judicial judgments; this is now being reflected in Britain where for the first time judges are beginning to use arbitration findings in their judgments.'

There are competing arbitration centres, and not all are as advanced as the ICC, the London Centre of International Arbitration - based in the new International Dispute Resolution Centre in Chancery Lane - and the Stockholm Chamber of Commerce, which are the big three of the commercial arbitration world.

Daniel Gogek, the head of City firm Lovells' Moscow office, explains that he recommends the big three in contracts drafted in Moscow, to avoid using the Moscow-based International Commercial Arbitration Court.

He explains why: 'It's the same old Soviet system of conducting business.

Their arbitrators are chosen from a list of a hundred predominantly academic lawyers who have been on the list for about 20 years.

If you're arbitrating a foreign company against a Russian one, the ICAC will pick a Russian to chair the tribunal, and two Russian arbitrators.

It's just not the spirit and standard of international arbitration.'

Despite this, Mr Gogek believes international arbitration is at a crossroads in Russia.

First, he says the lack of impartiality in the selection of arbitrators in Russia is in direct conflict with the provisions of UNCITRAL.

Secondly, the ICC itself is currently carrying out two arbitrations in Moscow for the first time.

If these set a trend, then the ICAC arbitrations will come under increasing pressure to reform so that it can compete with the more modern ICC.

Arbitration has some problem areas.

One of these, according to Mr Shackleton is that - as it is unregulated - international arbitration is open to abuse.

He says: 'There are many solicitors, claiming to be international arbitrators, who do absolutely nothing more than order the sandwiches for the counsel they retain in order to look at the particular arbitration dispute.

But solicitors need not use counsel, especially with the new parity of rights of audience.

I have done 70 arbitrations and I've never once referred to a barrister.'

Mr Shackleton believes solicitors should be less hamstrung to recommend other solicitors where they do not have the capacity to carry out international arbitrations, rather than referring matters to barristers.

He says many barristers' chambers are now setting themselves up as specialist arbitration units, and are reaping the rewards of solicitors' referrals.

Another issue beginning to loom large for international arbitrators is conflict.

Linklaters is currently involved in 50 active arbitrations, and is acting as arbitrator in 150.

Mr Reid says:'We've introduced a very strict procedure to avoid conflicts, which could keep us out of other mergers and acquisitions work.'

Hans Houtte, who was in the Amsterdam office of Linklaters & Alliance firm Stibbe Simont, has recently left because conflicts were throttling his arbitration work.

'We don't want to lose partners,' says Mr Reid.

But despite the concerns, arbitration is spreading its wings to new business areas.

Mr Shackleton says the banking sector - traditionally a heavy user of jurisdiction-based litigation - is taking more notice of arbitration.

Mr Reid adds: 'We have recently carried out two large banking arbitrations for Bankers Trust, and we have been responding to keen interest from our merchant banking clients by delivering seminars for Dresdner Kleinwort Benson, Deutsche Bank, UBS, Merrills and Credit Suisse.' The attractions, he says, are ease of enforcing, confidentiality - no one, he adds, 'wants to wash their dirty linen in public' - and cheapness.

Nor has the interest of the banks been beaten back by the Woolf reforms of civil litigation, and similar changes in the US litigation process.

Mr Blackaby has recently been appointed by a large merchant bank to advise generally on arbitration matters.

He says the increase of bi-lateral trade treaties between developing and countries and the first world - which often include provisions for contracts to be automatically governed by international arbitration - are giving rise to much more work, and some 'quite subtle issues'.

The benefits of arbitration in a globalising economy are all too obvious.

Much foreign investment into the developing world is transacted between major Western banks and third world states or quasi-state bodies.

These provide fertile ground for arbitration when disputes evolve.

Mr Gogek says the major advantage for foreigners is that it means they can avoid trying to enforce a civil judgment - even where it has been successfully obtained in a reliable court - in the local court.

Lovells has recently acted in an arbitration in Kazakhstan relating to complaints of expropriation of assets by local leaders.

Mr Gogek comments: 'It is certainly a common perception among western investors and firms in Kazakhstan that the courts are not sufficiently independent of central government.'

The same is true of Western Siberia, he says, where he acted in an arbitration for an Italian petrochemical giant who, he says 'woke up one morning and realised that their $125 million investment in a Russian venture had substantially "disappeared"'.

He explains: 'Money was pouring out.

The whole thing was a mess, but at least with arbitration there was a possibility for getting the cash back, rather than going against the courts in Western Siberia, which are simply not independent of local administration.'

Mr Shackleton was involved in arbitration on behalf of a mining concession holder whose precious metal mine in Africa was snatched by a dictator after a coup d'etat.

The dictator wanted to use the mine to repay a foreign general who helped him in the coup.

Eventually the arbitration succeeded in keeping the mine in the hands of the concession.

Arbitration can but prosper when, as Mr Shackleton notes, 'there are some cases you just can't litigate'.