This is the fifth article in a series looking at legal issues in the video game and technology industries. This article discusses what arbitration is, the recent rise of disputes opting for arbitration rather than litigation, and various arbitration frameworks implemented,  which companies in England and Wales ought to consider. London is one of the most popular seats of arbitration for cross-border contract disputes.

What is Arbitration?

Arbitration is a formal procedure of dispute resolution. The dispute is submitted, by agreement of the parties to one (or more) arbitrator, who assess the legal merits of both parties of the dispute, and makes a legally binding decision on the dispute. Tech and Gaming disputes will most likely arbitrate under the World Intellectual Property Organization (“WIPO”) Arbitration Rules (“the WIPO Rules”).

The procedure is private (confidential), and is a substitution for going to court. It can only occur if both parties consent to arbitration, and the parties have more control over where the arbitration takes place, the governing law, jurisdiction, and other elements of the dispute.

The decision of any arbitration is final, and easy to enforce. The decision is enforceable under the WIPO Rules and can be enforced internationally under the New York Convention (with which over 165 states comply). It is, therefore, an efficient method of dispute resolution that keeps commercial relationships amicable and are particularly favoured by multinational corporations. Furthermore, the global enforcement mechanism is particularly helpful in the tech and gaming industries, as the products/services and disputes are often, cross border (and when online, completely borderless). The courts of England and Wales has been the preferred seat of arbitration in cross-border contracts on the basis that they have a robust framework

There has been a considerable increase in parties choosing arbitration, generally, primarily due to the courts’ failure to reduce the current backlogs. It is also a commercially strategic dispute resolution method, as it balances privacy, speed and cost-effectiveness.

Technology Disputes

In a survey conducted by CMS in 2022, Arbitration was the most favoured form of dispute resolution in the tech sector. Tech companies with cross-border disputes, value the confidentiality and international enforceability that comes with arbitration. Arbitration is particularly helpful for Joint Ventures (“JVs”) between two or more tech companies developing a new product who run into a dispute. Real world examples include automotive companies and battery companies collaborating to develop electric vehicles. The arbitration process is efficient at dealing with the dispute, but the confidentiality assists all parties to keep any details of the JV (trade secrets) out of the public eye. Furthermore, due to the long-term nature these business relationships, a neutral arbitration process is more effective at maintaining commercial relationships than litigation.

Post merger and acquisition (“M&A”) disputes are also on the rise within the tech sector, particularly in MENA territories. In arbitration, the parties can tailor the proceedings to their needs. For example, arbitration will usually be used as a mechanism to determine the final purchase price (this is due to tech companies having higher EBITDA multiplier values). The parties will determine what the specific issues are which are causing contention over the final price and instruct the arbitrator(s) to the specific needs of the case, based on the arbitrator(s)’s expertise.

E-Sports and Gaming

 E-Sports is a relatively new industry in the UK, but it is already valued at around £1 billion. There is little by way of a regulatory framework in place, so the industry has followed ‘traditional sports’ law and methods for dispute resolution. Previous disputes involved the Court of Arbitration for Sports (“CAS”).

The E-Sports Integrity Commission (“ESIC”) and WIPO have announced a collaboration to develop alternative dispute resolution mechanisms within the global video-game and e-sports industries. This includes identifying and training specialist dispute resolution experts to be able to arbitrate in the ACES, as well as support other dispute resolution methods.

Furthermore, the ESIC and the World E-Sports Association (“WESA”) have recently launched the Arbitration Court for E-Sports (“ACES”) as a specialist forum specifically for e-sports disputes.

There is an ongoing arbitration in America concerning Activision Blizzard Inc.’s (“Activision”) (publisher of the ‘Call of Duty’ (“CoD”) franchise) alleged monopoly over the streaming of competitive CoD tournaments. The Plaintiffs (claimants) are some of the CoD community’s top players, who are allegedly subjected to “devastating financial terms.” Activision has attempted to force the proceedings into arbitration rather than litigation to keep the proceedings confidential. The validity of the arbitration clause is being determined currently, and the court proceedings are paused until jurisdiction has been determined. Disputes where there is an imbalance of power should also carefully consider if arbitration is the most strategic alternative. In the Activision/CoD dispute, forcing the proceedings into arbitration will mean any decision cannot be appealed, and any details of the case will also be confidential. This will mean that any other party with a similar dispute with Activision cannot know the details which may assist their dispute and would, therefore, have to spend more money on legal fees. On that basis they would be less likely to bother bringing forward their claim.

Griffin Law is a dispute resolution firm comprising innovative, proactive, tenacious and commercially-minded lawyers. We pride ourselves on our close client relationships, which are uniquely enhanced by our transparent fee guarantee and a commitment to share the risks of litigation.  For more details of our services please email justice@griffin.law or call 01732 52 59 23.