Introduction

In modern times, disruptive innovation is the poster child for progress. Uber for taxis, Airbnb for hotels, Netflix for movie watching, Amazon for retail of everything, have taken their place in the daily fabric of our lives and in no time at all weaved themselves into our reflexive habits, quietly destroying entire swabs of the economy in the process with a cost-effective approach to disintermediation (doing away with intermediaries) and dematerialisation (being virtual). And the rise of blockchain is about to take disintermediation and dematerialisation to a new level.

The legal field is not immune to this phenomenon, albeit it is fair to say that we are woefully unprepared to address it, and have yet to articulate meaningfully and confidently how we remain relevant in an era where the services we provide can be (will be) disintermediated, and dematerialised. ¹

For international arbitration (IA), disruptive innovation is a multi-layered phenomenon, striking at both the very practical, and also the meta-physical, aspects of what it means to resolve international disputes via private tribunals deriving their jurisdiction from party consent. Intelligent technology presents immediate procedural and due process challenges. ² More pernicious, and less immediately curable by practical means, are the value-based disruptions presented by the immediate demand from users for fewer, if any, intermediaries between their dispute and obtaining a fair outcome at a reasonable cost. The Report from the Global Pound Conference Series, published on 16 May 2018, ³ identified key themes for dispute resolution:

• the importance of efficiency for users;
• users’ interest in collaborative, mixed mode, adjudicative and non-adjudicative processes; and
• the fact that in-house counsel consider external lawyers to be the primary obstacle to putting these goals into effect.

A number of recent instances give us cause for reflexion:

• The Chief Justice of the UK Supreme Court, one of the most arbitration-friendly jurisdictions on the planet, has forcefully bemoaned the negative influence of arbitration on the development of English law;
• The EU, a behemoth not known for its nimble footing, performed a 180-degree turn in less than a year from its initial, resolutely pro-ISDS stance towards pushing forward a court proposal complete with appellate jurisdiction on fact and law;
• International commercial courts with English-speaking judges are being set up in France, Germany, Belgium, the Netherlands and Singapore to provide modern, timely, practical resolution to cross-border disputes; ⁴
• Perhaps most tellingly of all, scholars and commentators welcome these developments as an opportunity for introducing standards of legitimacy and transparency that they perceive IA in its current form is not addressing adequately.

IA is a field that has historically shown its capacity to be multi-faceted, flexible, and responsive to challenges. But responsive is no longer enough. In the face of rapidly-paced and seismic disruption, we need to be proactive, lest we become the Kodak and Blockbusters of dispute resolution. ⁵

Without being unduly alarmist, this exercise does involve taking a good look at what our values are, and some of the practical means to uphold or recalibrate them.

Lord Glasgow’s tale

Disruption is not a new phenomenon. The tale of Lord Glasgow’s estate, reportedly a true story, is taken from a letter by the English writer, journalist and reviewer Evelyn Waugh (the author of Brideshead Revisited) to his wife on 31 May 1942.

E. Waugh was then with the Royal Horse Guards, a regiment stationed in Scotland under the command of Colonel Dornford-Slater. His unit was near the estate of Lord Glasgow, whose favour the colonel wished to curry by having his men blow up an old tree stump on the estate. Lord Glasgow begged that they not ‘spoil the plantation of young trees near it because that is the apple of my eye’. They reassured him that the stump would ‘fall on a sixpence’ (which essentially means that it would fall, quietly and precisely, at a determined angle) and cause zero damage as the quantity of explosive had been worked out precisely by the Colonel’s subaltern at 75 lbs.

E. Waugh wrote:

So soon they lit the fuse and waited for the explosion and presently the tree, instead of falling quietly sideways, rose 50 feet in the air taking with it ½ acre of soil and the whole of the young plantation. Lord Glasgow was so upset he walked in dead silence back to his castle and when he came within sight of it what should he find but that every piece of glass in the building had been shattered by the explosion. So Lord Glasgow gave a little cry and ran to hide his emotion in the lavatory and there when he pulled the plug of the washbasin the entire ceiling, loosened by the explosion, fell on his head. And the subaltern said Sir I made a mistake, it should have been 7½ lbs not 75.

This tale is currently being re-told to illustrate the circumstances of a certain referendum on leaving the EU, held on a certain island, nearly two years ago.⁶ After all, on one reading of the terms, it can be argued that Brexit equals innovation, and opportunity.

The disruptor disrupted

Let us consider a parallel between the explosion of the tree stump and the arrival of IA on the dispute resolution scene, followed by the considerable reach by IA in the past few decades. An innovative disruption in its own right, which has been said to result from a combination of the following factors:

[A] general liberalisation of national arbitration laws, leading to decreasing control of national courts and national laws over arbitral procedures and awards … accompanied by a creeping expansion of private justice systems into new territories, such as foreign investment, sports, competition matters, internet-related disputes.⁷

And now disputes related to climate change and blockchain.

Arbitral systems have become ‘more autonomous, more numerous, and have extended their reach, they have acquired a growing normative power, furthering the development of their own spheres of non-state normativity’.⁸ A noted school of thought considers arbitral systems to be autonomous, transnational legal regimes detached from any state legal system.⁹

The questions of the regulative quality of transnational arbitral regimes, and the quality of justice delivered by IA, used to be theoretical problematics that exercised scholars in the philosophy of law, not so much practitioners in the field. It is now an acknowledged phenomenon that international arbitration carries with it not only fact-finding and law-making functions, but also a governance function insofar as, to quote Professor Jose Alvarez, ‘arbitrators … can and do engage in autonomous normative action while still adhering to the rule of law’.¹⁰ Despite the unease of international lawyers with the norm-articulating nature of their role,¹¹ the necessity to address disruptive elements now forces us to pause, face the extent of practitioners’ role in a normative context and proactively delineate its contours. IA is the disruptor disrupted.

Let us phrase the question as follows:

Whether, heady on its nearly unbounded autonomy, on the vast deference granted to it by state courts and legislation, and assisted by the unparalleled ease of enforcement of its decisions afforded by the New York Convention, the current model of IA has overreached itself at the expense of quality of procedure and output.

Having asked that question, we need to choose the angle from which we will consider it, and search for an answer.

Seeing the world through the eyes of others

It has pithily been observed that, in this world of digitalisation, shifting power dynamics and rising nationalism, an essential skill for international lawyers is the ability to see the world through the eyes of others.¹²

The free-market nature of our field has allowed its unprecedented development into, and substantive contribution to, areas once considered to be non-arbitrable – competition issues, shareholders’ agreements, mass claims. Our continued success at clearing these hurdles has been remarkable, and even as we speak the IA process is being looked to as a template to assist areas further afield presenting difficult and complex cross-border disputes, such as insolvency and trusts. Whilst this is undoubtedly a success story, it has not come without consequences: (1) it has squeezed the square peg of the IA process into the round hole of some of these new areas, where the fit is uneasy; and (2) it has made us oblivious to some substantial blind spots, focused as we are on driving the IA chariot forward towards the next development.

The blind spots have affected our ability to assess how the process is perceived by others. And by others, I mean not only other lawyers and users, but authorities, both governmental and judicial, and the general public. It has been observed quite perceptively that, whilst we as lawyers are used to interacting with fellow professionals, from in house lawyers to quantum experts, the digital revolution is putting us face to face with legaltech startups, bloggers, and serial entrepreneurs, all of whom see the law, legal thinking and legal practice, as nothing more than another set of data that can be accessed, processed, and made profitable. Jurisprudence is a database; legal culture and tradition are subordinated to statistical accuracy; even language as we humans speak it becomes redundant.¹³ The depth of these tectonic shifts is unprecedented, so it is no wonder we are left speechless.

The time has come to recognize, as indicated by Professor Alvarez, the norm-creating feature of arbitral decision-making. This is a context which places on us a duty to make the process intelligible to the world at large, and indeed the continued progress and legitimacy of international arbitration depends on this. In so doing, to borrow the words of Professor Koskenniemi:

[T]he effort to see the world "through others’ eyes" can only begin from a recognition of the limitedness of one’s own vision.¹⁴

I have singled out three areas – there are more – where ‘limitedness of vision’ in IA, aka the blind spots, can be found: a) diversity; (b) corruption allegations; and (c) artificial intelligence.

a) Diversity

Diversity is the first topic on my list of practical propositions. Current voices in scholarship posit that the above disruptive phenomena present an important opportunity to address shortcomings, and notably as regards the diversity in composition of panels, as a vector towards a better and more legitimate decision-making in investment and commercial arbitration.¹⁵

It is an area in which some strides have been made. OGEMID discussions, the work of ArbitralWomen, the initiative of ‘The Pledge’ have brought attention to the topic of gender, regional and social diversity in the composition of arbitral tribunals. On gender diversity, we have statistics:

• The ICC’s statistics for 2017 show that 16.7% female arbitrators were appointed overall. 45% female arbitrators where directly appointed by the ICC Court, 41% female were nominated by the Parties, 14% by co-arbitrators. As of 1 July 2018, for a three-year mandate, 176 members from 104 countries were appointed, representing gender parity of 88 women and 88 men. Consistent with the current term, the new composition of the Bureau of the Court will comprise 17 Vice-Presidents, which include nine women.¹⁶
• Recent statistics from the LCIA are to the effect that in 2017, 24% of all arbitrator appointments (97 of 412) were of women. The LCIA selected 34% female arbitrators of all arbitrators selected; whereas the Parties and co-arbitrators selected 17% of women.
• At ICSID, 19% of the 195 appointments made in 2017 to ICSID tribunals or ad hoc committees were women. This can be compared with 2016, where 13% of appointees were female. Of the 37 appointments of women in 2017, there were 18 different individuals who were nationals of a dozen different states, thus reflecting some regional diversity.
• The SCC reports 254 appointments for 2017, of which 18% were female. When the appointment was made directly by the SCC, 37% of the appointees were female. When made by the parties - 8%, when made by co-arbitrators – 0%. For regional diversity, 231 of the 254 appointments were from Europe, followed by Australasia and North America with 5 each, I from South America, 3 from Asia and 2 from Africa.
• The HKIAC reports 16.5% female arbitrators for 2017, as compared with 6.5% for 2016 and 7.1% for 2015. As for nationality and geographical origin, 66% of arbitrators were HK permanent residents and 78% HK based arbitrators, albeit within these figures one finds a diversity of countries of origin, with the UK, HK and Canada leading the tables (33%, 13.4% and 10.3% respectively), and Australia, Malaysia, Singapore, Austria, the US, Thailand and New Zealand also featuring in the list.
• The AAA/ICDR reports 1300 female arbitrators on their roster of 6300, namely 21%. In 2017, 78 new women and minority candidates were added to the roster out of a total of 215 new roster members, namely 36%. In 2017, 22% of the arbitrators appointed by the ICDR were female, up from 15% in 2016.

The 2018 Queen Mary/White & Case International Arbitration Survey shows a degree of ambivalence on the part of its respondents as regards the question whether there exists a causal connection between the diverse composition of a panel of arbitrators and the quality of that panel’s decision-making, or even whether this is a relevant enquiry to make.¹⁷ I would question, however, whether the search for better ‘decision-making’ (whatever it may mean) is even the right enquiry at a time where the legitimacy of IA is in crisis, and where, in the eyes of others, a more diverse tribunal is a more representative, and thus more legitimate, tribunal. Moreover from the prism of enhanced legitimacy the desirability for diversity in tribunal composition is undebatable.¹⁸ It will be a few years before we can assess if indeed more diverse tribunals provide better decisions – I would urge us to start gathering statistics now – no doubt one key aspect of this enquiry will be the concern not to sacrifice competence at the altar of diversity.

Given that it is the legitimacy of the process that is at stake, institutions have a powerful statement to make by enshrining diversity in their rules as a factor for consideration in the nomination and appointment of arbitrators, alongside and to the same extent as other credentials.

Taking this one step further, there is arguably no reason why diversity should not be elevated to the deference given to nationality, present in most modern rules as a factor driving or vetoing appointment. In the 21st century, nationality arguably counts as much as diversity towards ensuring legitimacy of process. The country of one’s birth often has little bearing on where one thereafter lives, studies, qualifies as a lawyer, or acquires citizenship, and therefore on where one’s allegiances might lie. From that standpoint, and in the context of enhancing legitimacy, diversity could and should be given more than lip service in the composition of tribunals. Institutional rules are the natural anchor for promoting this value in the eyes of others.

b) Corruption

The current landscape on the treatment of allegations of corruption in IA remains unsettled. Although the phenomenon is roundly condemned as a matter of principle, we are still debating questions such as the applicable standard for proving those allegations; whether the burden of proof should be shifted; whether there exists a sua sponte obligation on arbitrators to report to anti-corruption authorities; what sanctions to apply. As things stand we have no consensus on best practice.

As Professor Gaillard aptly put it in his recent article on the topic, arbitral tribunals pronouncing on corruption allegations have been oscillating between ‘displayed virtue [in condemning corruption] and practical inaction’.¹⁹ Then came 21 February 2017, and the Paris Court of Appeal’s annulment of an award as offending public order for having refused to probe allegations of money laundering in the case of Belokon v Kirghizistan.²⁰

The Belokon judgment is instructive in that it put the spotlight on the practice by certain tribunals of shielding behind a blanket statement that allegations of corruption or money laundering be proven to a higher degree than the balance of probabilities – the expression ‘concrete and decisive evidence’ was used by the tribunal in Belokon – whilst the reality is of course that corruption, by its very nature, thrives in the occult and the unsaid, and is particularly difficult to prove even at the usual civil standard, let alone at a more exacting level.²¹

The arbitral tribunal in Belokon had also relied on the host State having been unable, ‘notwithstanding its resources and powers’, to convince its own municipal courts that money laundering had taken place. The tribunal had concluded from this that it could not itself venture beyond the view of the host State’s courts and that ‘an international tribunal … cannot, in the absence of concrete and decisive evidence, consider identical allegations as proven by the host state’.

In considering a request for annulment premised on the violation of public order, which includes the prohibition of money laundering, the Paris Court of Appeal disagreed and decided that it was not subordinated to a prior criminal conviction for money laundering by the local courts, the test for the French court being that a party may not be allowed to benefit from criminal activities via the enforcement of the award. The Court then stated that, in that context, it was not bound by the evidence adduced before the arbitral tribunal nor by its appreciation thereof, and proceeded to examine the merits of the corruption allegations itself – thereby reopening the record - before finding that a number of ‘grave, precise and converging’ indicia of illegality existed in the instant case.

That a state court in a country famous for its respect for, and deference to, arbitration tribunals should consider it necessary to reopen the merits of a matter should be a cause for concern, and immediate action on our part, lest we are failing to put our house in order in the eyes of others. From ICCA to the IBA or to the ILA, and within institutions, we do not lack for fora where roundtables and working groups can undertake consensus-building initiatives on what has been a long-festering issue in the field.

c) Artificial intelligence

Over the past 18 months or so, I have spoken a lot about how intelligence (AI) will affect arbitral decision-making. This evening I would like to say a few words on the AI challenge from the perspective of the eyes of others.

There are profound and immediate issues presented by the presence of AI in the arbitral process. I am not naturally given to hyperbole, but believe me when I say that it is now urgent that we look at questions such as the understanding by jurists of how algorithms come to their decisions; where the boundary lies between the machine’s capacity for predictive and prescriptive analysis and the human decision-making mind; the public policy implications of robot-assisted justice and how these awards are reviewed by state courts, notably under Article V (on courts’ refusal to recognition and enforcement of awards) of the New York Convention , a 60-year-old instrument devised well before the advent of technology. In this year of celebration of the Convention, this should be a topic of priority.

In that respect and in the context of my previous point, one area of very practical importance is the assistance that can be derived from AI in considering and deciding allegations of corruption. What about drawing assistance from an algorithm programmed to recognise red flags in a given set of factual circumstances, and to determine the percentage chance of corruption being, or not being, present? Something along those lines has already been conceived by researchers at the University of Cambridge, who developed a series of algorithms that mine public procurement data for signs of the abuse of public finances (e.g. an unusually short tender period; low number of bidders in a competitive industry; unusually complex or inaccessible tender documents).²²

Scientists and suppliers of algorithms are currently warning litigation and arbitration users that human decision-making as we exercise it on a daily basis is no better than a lottery. In addition to being costly, time-consuming, and resource-depleting, it is unpredictable and inevitably subject to bias.

Why pay for this, they say, when users can instead invest in a predictive and prescriptive algorithm that will offer speed and reliability of output on the disputes arising in a given industry, and suggest commercial solutions, so that those disputes will likely not reoccur?

This is how the AI challenge presents itself to us in the eyes of others: as a contest for a lucrative market. I have not yet seen numbers on the potential savings that can be made in litigation and arbitration costs, but I am willing to bet that these numbers will speak powerfully to users. The new international courts that are being set up will take up this challenge and put a State’s resources behind it.

I would encourage arbitral institutions proactively to dialogue with AI scientists and providers to ascertain in an ethical manner, how lawyers are made to understand the way algorithms work, how exactly machine speak translates into the human language, and how we can carry on selling the human values underpinning decision making, so that we have an economically competitive and intelligible answer to give to scientists, suppliers of algorithms, and users.

Concluding words

I opened my talk with the statement that disruptive innovation is currently the poster child for progress. It is a sign of the turbulent times in which we live that even the notion of what constitutes progress has to be revisited. Progress has historically been viewed in terms of the twin concepts of directionality (forward movement) and betterment of human condition (improvement), which were seen as self-evident. In our chaotic world and current geopolitical landscape, faith in these concepts, and thus in progress, has understandably come under strain.²³ For the international arbitral process to pick up that gauntlet requires a recalibration of our values and more than a statement of principle – a proactive, practical, workable construct of the peaceful resolution of disputes by ad hoc tribunals that will make sense when seen through the eyes of others.

I have frequently referred to institutions in this Lecture, because in many significant ways they are the repository of those values on which IA is founded, and which it promotes. The time has come to recognize that the force for meaningful change comes not from individual arbitrators, not even from law firms, but from all of us as we gather in those institutions that administer and stand at the forefront of the process. Arbitral institutions are, and have long been, governed by ourselves. Most of them, if not all, have a Board, Court or Steering Committee composed of arbitrators and practitioners. This state of affairs is sometimes seen, in the eyes of others, as too close for comfort. If we show that this closeness can deliver the benefit of building consensus on best practice and policing our own terrain in a forward-looking manner, we will make strides towards the continued legitimacy and relevance of IA in the face of disruption.

In this Lecture I have sought to look disruption in the eye, so to speak, and how IA has gone from being the disruptor of the dispute resolution world to its disruptee. Via a small number of examples where I posit that it is pressing that we (practitioners) heed the counsel of looking at IA through the eyes of others, I have attempted to put forward practical avenues for addressing the disruptive elements in these areas.

There are those who will say that current circumstances will blow over and that the pendulum always swings back. It may be, in the grander course of history that it will. Still, the grander course of history is a long time, and I am sure that this generation does not want to be remembered as the chariot drivers who were unable to deal with blind spots.

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