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( Source of the document: ICC Digital Library )
The topic of this contribution is one dear to John Beechey, who, as much as anyone, appreciates arbitration's noble past, contributes to its present dynamism, and contemplates its future. I do not dwell here on the past. Historians of arbitration point to precursors in the practices of ancient times, medieval times and more recent centuries, all of which left a legacy upon which modern-day international arbitration has been built. Historians find in all periods what can only be described as surprisingly extensive reliance for the resolution of disputes on private adjudication rooted in the consent of the parties 2 The historical account also demonstrates something we already know - that, while international arbitration is today mostly tied to the resolution of private international disputes, it has a deeply distinguished pedigree in the resolution of disputes between states as well.
But international arbitration in its current incarnation is a relatively recent phenomenon, and its ascension is nothing short of dramatic. The prominence of arbitration in international dispute resolution is undeniable. Simply put, international commercial arbitration is a thriving phenomenon, becoming over recent decades the premier method for the resolution of international commercial disputes.
Among the most dynamic species is of course investor-state arbitration which falls within or outside the notion of commercial arbitration depending on how one defines 'commercial'.3 But the story of investor-[Page60:]state arbitration - which of course has its foundation in treaty rather than contract - is a highly distinctive one. There is scarcely any account of investor-state arbitration that disengages the arbitration of international investment disputes, as procedure, from the substance of the investor protection law and policy that is applied to those disputes. By contrast, it is possible - and common - to examine the health of international commercial arbitration, as a dispute resolution mechanism, without becoming deeply enmeshed in the content of the substantive law that is applied to the underlying disputes.
The present picture of international commercial arbitration is mostly a healthy one. In terms of volume, we clearly continue to witness growth.4 The caseload statistics of the leading international arbitration institutes readily attest to that fact. The city in which my university is situated - New York City - exemplifies the situation. In the past few years, New York City has seen the establishment of the New York International Arbitration Center (NYIAC) and the inauguration by the International Chamber of Commerce of an office to administer ICC arbitrations and promote ICC dispute resolution in North America. The London-based Chartered Institute of Arbitrators very recently created a New York Branch, with ambitious programming of its own. In this same brief period, a pair of the City's leading law schools - Columbia and NYU - have launched Centers specifically devoted to study, research and programming in the international arbitration field. Each month sees well-attended meetings not only of the New York City Bar International Dispute Resolution Committee but also of a new and highly energetic International Arbitration Club of New York. What we observe in New York is also happening in other locations around the world: Paris, London, Stockholm, Geneva, Singapore and Hong Kong. Even within the US, the activity is widely dispersed, with energetic activity in such cities as Washington DC (due largely to the advent of treaty-based investor-state arbitration), Houston, Miami, Los Angeles, Chicago and Atlanta.
One needs of course to exercise caution in interpreting developments such as these. While they doubtless reflect international arbitration's high level of appeal, they also reflect the international arbitration community's extraordinary appetite for self-celebration. One must wonder whether the volume of arbitration cases, though great, is commensurate with the plethora of professional programming that surrounds international arbitration these days. One must equally wonder whether the volume of arbitration cases is commensurate with the droves of would-be arbitrators - young and old alike - entering the field, and whether it can possibly satisfy the enormous supply of talent and energy that will enter the market in the years ahead.
Still, even discounting for hyperbole and hyperactivity in the international arbitration field, we are witnessing a decades-long flourishing of international arbitration, which shows no signs of abating.
This is not to suggest that contemporary international arbitration is without its shortcomings. Critiques of international arbitration come in three basic species, each of which warrants our attention.
A first species reflects nothing more or less than users' disappointment with arbitration in light of some of the advantages that its advocates had promised. It is widely suggested that international arbitration is not delivering on its promises of speed and economy, or avoidance of the formalities associated with procedures in courts of law.5 These are justifiable critiques that need to be, and are being, addressed.
A second species of critique targets not arbitration's practice, but its aptness - or inaptness - for the resolution of certain categories of disputes. Voices still lament the submission to arbitration of disputes that, while nominally between private parties, are seen as implicating important public interests; arbitration's aptness for the resolution of consumer disputes thus comes in repeatedly for criticism,6 though consumer disputes form a trivial part of international disputes submitted to arbitration and even though the proposition that consumers are in fact disserved by arbitration remains a contested thesis.7 The US Supreme Court, it is argued in some quarters, has simply embraced arbitration a bit too enthusiastically, treating virtually all categories of disputes as arbitrable.8 Congress, it is argued, has also been derelict in the matter, paying too little attention to the suitability of arbitration for certain statutory causes of action and failing to adopt proposed legislation that would more generally shelter consumer, employment or civil rights claims from mandatory arbitration.9
A third species of critiques aims not so much at arbitration as practised, or at arbitration's suitability for certain kinds of disputes, as at the broader context in which arbitration is conducted. The questions raised in these critiques are particularly far-ranging. Has international arbitration remained too long the preserve of a small cadre of individuals having certain age, gender, race and other characteristics? Has it remained underdeveloped for too long in parts of the world? Does the level of transparency that prevails in international commercial arbitration allow counsel to select arbitrators knowledgeably and [Page62:] serve to awaken in arbitrators a sense of accountability? Do arbitrators have available to them adequate guidance in confronting the serious ethical issues that their activities raise? These are issues of a political and social dimension that are presently generating ferment within the international arbitration community, as well they should.10 At the same time, demographics are changing, reflecting a growing diversity among those entering the profession and the emergence of regional arbitration centres in places where arbitration has yet to establish a strong foothold.
Why, then, notwithstanding these warning signs, am I able to contemplate international arbitration's future with equanimity, as I admittedly do? To put the matter differently, how and why, despite the steady flow of criticism, is international arbitration likely to prosper?
To be sure, the positive virtues of arbitration do not fully explain its success. A point seldom made, but doubtless true, is that even if international arbitration has not fully met the expectations created for it, it still strikes users as generally preferable to its principal alternative, which is of course litigation in a national court. Despite important civil practice reforms in certain jurisdictions,11 we have relatively little to suggest that national court litigation has become substantially less costly or time-consuming over time, or less procedurally cumbersome; depending on the jurisdiction, it may well have become more costly and time-consuming. Nor is that likely to change radically in the years ahead. To the extent that is so, the 'advantage gap' of arbitration over litigation will simply not have lessened, enabling arbitration to continue presenting itself as the preferred alternative. As international disputes grow larger in magnitude and complexity, the gap in favour of arbitration over litigation may become only more pronounced. Arbitration may benefit from the inconveniences associated with national court litigation, but it cannot of course take credit for them.
However, for much of its resilience, international arbitration itself can take credit. Here again we may point to three sets of factors that reflect well on arbitration as a means of international dispute resolution: (a) credit for positive features of arbitration that, while longstanding and well-established, have not receded in value or importance over time; (b) credit for not allowing risks that have in some measure, rightly or wrongly, been associated with arbitration to become realized; and (c) credit for yielding benefits that arbitration was not consciously expected to yield, but has yielded.
I start with certain advantages associated with international arbitration that, unlike speed and economy, have in fact been reaped and that strengthen arbitration's appeal as much as they ever did. A first such advantage that international arbitration importantly retains is neutrality - neutrality that stems from the simple fact that international arbitral tribunals belong neither to the state of the claimant nor to the state of the respondent. A tribunal does not 'belong' to any state, including the state of the arbitral seat, even though it is subject to the mandatory rules of arbitration of that state and even if its awards are susceptible to annulment in that state's courts. Unless the enforceability of an arbitration clause itself is called into question, arbitration should largely eliminate competition among national courts for jurisdiction over international disputes, and the parallel and multiple litigation scenarios thereby engendered. Within the arbitral process itself, neutrality is fostered by strict obedience to, and enforcement of, standards of independence and impartiality12 and, though infringements may on occasion occur, 13 these requirements are predominately respected.
Confidentiality rules are in flux and no longer as categorical as they once were,14 but they nevertheless work to arbitration's advantage.15 Some institutions may be changing their 'default rule' from confidentiality to non-confidentiality, but that does not mean that user preferences have changed in this regard. On the contrary, all evidence suggests that international arbitration's commitment to confidentiality continues to be prized.
Other advantages associated with international arbitration inhere in the tribunal itself. I think of the satisfaction that parties derive from being able to nominate one member of a tripartite arbitral tribunal and to participate indirectly in the designation of the chair, as well as to select a panel that brings greater commercial or technical expertise to the case at hand than a generalist national court judge.
The advantages of neutrality, confidentiality and party autonomy in arbitrator selection do not of course exhaust the sources of international arbitration's appeal. To those sources mentioned must be added both the value of finality in adjudication and the relative ease by which awards are recognized and enforced. Users of arbitration by and large favour the fact that awards, unlike national court judgments, are in principle sheltered from review on the merits in national appellate [Page64:] courts.16 Also, international arbitration agreements and international arbitral awards stand a far more solid chance of being enforced on a worldwide basis than their counterparts in the litigation context.17 The advantage of arbitral awards over national court judgments in this regard is especially pronounced. To be sure, arbitration owes this advantage in turn to the network of international treaties that states have chosen to produce and to which they have chosen in exceptionally large numbers to subscribe. But the treaty-based enforceability of arbitral agreements and awards goes far enough back in time to be viewed, practically speaking, as if it were a feature of international arbitration itself. International arbitration's reputation, in other words, profits from the international treaty regime established in order to support it.
None of the virtues associated with international arbitration - international arbitration's neutrality, confidentiality (at least in the commercial as distinct from the investment variety), the opportunity for parties to influence the composition of the tribunal, the relative finality of awards, and arbitration's recognition and enforcement advantages - comes unexpected. They are all part of international arbitration's original promise and its original appeal. The point is that they have proved their worth, have not lost their appeal with the passage of time,18 and are unlikely to do so down the road.
I turn, secondly, to the credit that arbitration derives from the bare fact that certain risks that might be associated with arbitration simply do not appear to have materialized. One of the fears expressed as arbitration gained ground as a form of international dispute resolution has been captured by the question 'is arbitration lawless?'. Alleged 'unlawfulness' may stem from any number of sources, both procedural and substantive. Procedurally, might arbitrators cut procedural corners, lowering arbitral adjudication below the threshold of fundamental due process? Does arbitration suffer unduly from the absence of ordinary appellate review and the corrective function it performs? Substantively, will arbitrators faithfully apply the law the parties designated as applicable to the merits of their transaction, or instead resort to an ill-defined body of norms such as lex mercatoria, adjudication ex aequo et bono or, worse yet, sheer compromise? While we lack sufficient empirical evidence to dispel all fear of these worrisome scenarios, neither do we have positive evidence that they have come to pass.
The two forms of credit I have mentioned ( credit for advantages realized and disadvantages averted - are reassuring. It has to be of comfort that many of arbitration's putative benefits, compared to [Page65:] litigation, continue to be realized. It has to be of further comfort that the worst dangers one might have associated with arbitration, again as compared to litigation, have not materialized.
But there is something more affirmative to be said for international arbitration - that is, something over and above the conscious hopes that arbitration has traditionally raised. To complete the picture, one may also ask what benefits has it brought that were quite simply unexpected or insufficiently anticipated at the outset.
Prominent in this respect, and too seldom recognized, is international arbitration's record of procedural adaptation and reform over time. Its record in this regard cannot be matched by that of any national court system known to me. How many judicial systems revisit their procedural regimes with the frequency and regularity with which legislatures revisit and revise their arbitration laws and arbitral institutions revisit and revise their rules? I can think of few fields of law that undergo the constant reexamination and reform that arbitration, and arbitral procedure in particular, undergo almost as a matter of course. From my vantage point, the rate of procedural experimentation and innovation exhibited by arbitration law and practice, of which the emergency arbitrator is only the latest example,19 is nothing less than remarkable. That this pattern is mostly driven by keen competition among states and arbitral institutions for arbitration business does not diminish the fact that the functionality of arbitration has been under constant review and has constantly improved as a result. This augurs well for international arbitration's future.
A closely related manifestation of international arbitration's adaptability is its embrace of new technologies - electronic or otherwise - for the adjudication of disputes. There is nothing to suggest that the arbitration community's appetite for technological innovation in the conduct of arbitration will lessen.20 On the contrary, the very recent launch of a specialized journal, the Journal of Technology in International Arbitration, has created considerable buzz. It is rare for a national judicial system to take technological innovation on board with the ease and alacrity with which international commercial arbitration does. One need only compare the technological apparatus on view in the typical international arbitration hearing room with that of a typical courtroom in a court of first instance virtually anywhere in the world. Looking forward, I expect that the pace of technological progress in arbitral adjudication will only accelerate.
What also could not have been predicted at the outset is the emergence of the dense and highly networked international arbitration community that we have come to know but, by this time, mostly take for granted. [Page66:] This community lies behind much of what I have just mentioned - namely, the reform of arbitration statutes and the amendment of procedural rules, by legislatures and arbitral institutions respectively. But it also pursues innovation and reform of its own design, at its own initiative, and through the work of its own professional associations. A good measure of this activity is the volume of arbitration 'soft law' produced by these institutions,21 of which the International Bar Association - producer of soft law on evidence-taking,22 conflicts of interest23 and party representation,24 among other subjects ( is perhaps only the most notable example. The importance of this soft law in the arbitration field cannot be overestimated. Both the 'hard law' New York Convention25 and Federal Arbitration Act26 are in need of reform, the latter dramatically so. In this setting, soft law is and will continue to be a vital gap-filler. So too will the equally 'soft' ALI Restatement of the US Law of International Commercial Arbitration27 - itself very much a product of intensive collective deliberation by all segments of the international arbitration community.
That this pattern likewise is driven largely by the enlightened professional self-interest of the community's members does not diminish the fact that the functionality of arbitration has been under that community's constant review as well, and that it has constantly improved as a result. It has not hurt that international organizations, such as UNCITRAL - the United Nations Commission on International Trade Law - have made international arbitration and its improvement a conspicuous priority.28
Although the impressive activity level of participants in international commercial arbitration has been highly beneficial, it also presents important challenges. As we contemplate international arbitration's future, we must recognize that this field of endeavour is a mostly unregulated one, which means it is one in which self-policing prevails. Thus, international arbitration is played out today in a landscape populated by a plethora of actors, including institutions, whose own interests and the interests of arbitration itself are conflated, all the more so because they rely on arbitration's becoming and remaining [Page67:] the foremost means of private international dispute resolution. The investment that arbitration practitioners make in the profession brings them rewards, financial and otherwise, even as it moves international arbitration further in the direction of progress. This strong coincidence of interest between that of the profession, on the one hand, and of its practitioners, on the other, is of course by no means unique to international arbitration. There are many other professions in which their practitioners, rather than either their users or their regulators, largely establish the norms by which they are governed and police compliance with those norms. But in international arbitration, this pattern is pronounced.
The stewardship of the arbitration profession by its practitioners appears on the whole to have been sound and productive, and not unduly influenced by narrow professional interests. Going forward, however, the profession must remain alert: alert to the risk that, by action or inaction, it may jeopardize international arbitration's well-deserved reputation not only for efficiency, but for legitimacy and integrity. Just as individual arbitration practitioners are admonished to avoid both the reality and appearance of impropriety in their practice, so too must the profession as a whole.
Jean Monnet Professor of EU Law, Walter Gellhorn Professor of Law, and Director, Center for International Commercial and Investment Arbitration, Columbia Law School, USA; firstname.lastname@example.org.
See R. David, Arbitration in International Trade (1985); E. Wolaver, 'The Historical Background of Commercial Arbitration' (1934-1935) 83 University of Pennsylvania Law Review 132; H. Fraser, 'A Sketch of the History of International Arbitration' (1925-1926) 11 Cornell Law Quarterly 179. For a short account and many references, see G. Born, International Commercial Arbitration, 2d ed. (Alphen aan den Rijn: Kluwer, 2014) at 24(61.
Although it is common to distinguish between contract-based commercial arbitration and treaty-based investment arbitration, the latter obviously has a commercial character. Thus, for example, the American Law Institute's Restatement of the US Law of International Commercial Arbitration has a chapter on investor-state arbitration.
See Queen Mary, University of London, 2013 International Arbitration Survey: Corporate Choices in International Arbitration: Industry Perspectives (2013) at 6.
L. Reed, 'More on Corporate Criticism of International Arbitration', Kluwer Arbitration Blog, July 16, 2010.
See e.g. J.R. Sternlight, 'Is the US out on a Limb? - Comparing the US Approach to Mandatory Consumer and Employment Arbitration to That of the Rest of the World' (2001-2002) 56 University of Miami Law Review 831.
See C. Drahozal & S. Zyontz, 'An Empirical Study of AAA Consumer Arbitrations' (2010) 25 Ohio State Journal on Dispute Resolution 843.
See M. Moses, 'Statutory Misconstruction: How the Supreme Court Created a Federal Arbitration Law Never Enacted by Congress' (2006) 34 Florida State University Law Review 99.
See S. Bennett, 'The Proposed Arbitration Fairness Act: Problems and Alternatives' (2012) 67 Dispute Resolution Journal 32.
See C. Buys, 'The Tensions between Confidentiality and Transparency in International Arbitration' (2003) 14 The American Review of International Arbitration 121. For a classic critique, see Y. Dezalay & B. Garth, Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order (Chicago: University of Chicago Press, 1996).
See, in the case of the United Kingdom, K. Vorrasi, 'England's Reform to Alleviate the Problems of Civil Process: A Comparison of Judicial Case Management in England and the United States' (2003-2004) 30 Journal of Legislature 361; Lord H. Woolf, 'Civil Justice in the United Kingdom' (1997) 45 American Journal of Comparative Law 709.
See S. Lutrell, Bias Challenges in International Arbitration: The Need for a 'Real Danger' Test (Alphen aan den Rijn: Kluwer, 2009); A. Berlinguer, 'Impartiality and Independence of Arbitrators in International Practice' (1995) 6 The American Review of International Arbitration 339.
See M. Calvo, 'The Challenge of the ICC Arbitrators: Theory and Practice' (1998) 15:4 Journal of International Arbitration 63.
See B. Cremades. 'Can Secrecy, Disclosure and Confidentiality Survive?' (2002) 18 Euro Lawyer 46.
See M. Collins, 'Privacy and Confidentiality in Arbitration Proceedings' (1995) 11 Arbitration International 321.
C. Drahozal & S. Ware, 'Why do Businesses Use (or Not Use) Arbitration Clauses?' (2010) 25 Ohio State Journal on Dispute Resolution 451 at 452.
Ibid. at 455.
See Queen Mary, University of London, 2013 International Arbitration Survey: Corporate Choices in International Arbitration: Industry Perspectives (2013) at 6.
See E. Collins, 'Pre-Tribunal Emergency Relief in International Commercial Arbitration' (2012) 10 Loyola University Chicago International Law Review 105.
See G. Kaufmann-Kohler & T. Schulz, 'The Use of Information Technology in Arbitration', Jusletter 5 December 2005, http://www.lk-k.com/data/document/the-use-information-technology-arbitration-jusletter-5-december-2005-available-http-www.pdf (last consulted 30 May 2015).
See S. Newman & M. Radine, Soft Law in International Arbitration (Huntington, NY: Juris, 2014).
IBA Rules on the Taking of Evidence in International Arbitration (2010).
IBA Guidelines of Conflicts of Interest in International Arbitration (2012).
IBA, Guidelines on Party Representation in International Arbitration (2013).
United Nations Treaty on the Recognition and Enforcement of Foreign Arbitral Awards ('New York Convention'), 330 U.N.T.S. No. 4739 (1958).
Federal Arbitration Act, 9 U.S.C. §§ 1(16, 201(208.
American Law Institute (ALI), Restatement of the Law, The US Law of International Commercial Arbitration, approved by the ALI membership in the form of Tentative Draft No. 2 (16 April 2012), Tentative Draft No. 3 (16 April 2013), Tentative Draft No. 4 (17 April 2015).
Among the key instruments produced by UNCITRAL (United Nations Commission on International Trade Law) are the UNCITRAL Model Law on International Commercial Arbitration (1985, as amended in 2006); the UNCITRAL Arbitration Rules (2010); and the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (2014).