Arbitration

This chapter details the process of the appointment of arbitrators. In modern usage, arbitration is binding, and anything else created by agreement is some form or another of what might generically be referred to as third-party assisted negotiation. This explains why arbitration contemplates an odd number of arbitrators; indeed, laws regulating arbitration frequently explicitly require it. It follows that the ‘odd’ arbitrator, i.e. the one whose voice will be decisive in the event of failure of unanimity, must be appointed jointly, or by a neutral mechanism agreed by the arbitrants. That is simple enough when the process calls for a sole arbitrator. However, if the tribunal is to be composed of three arbitrators, it is often agreed that each side may select anyone it wishes provided they satisfy minimal criteria—such as professional qualifications and the readiness to declare themselves independent and impartial. The chapter then considers the different appointment methods. It specifically evaluates the practice of unilateral appointments, which introduces an adversarial element into the very deliberation of the arbitral tribunal.

This chapter examines the concept and source of arbitral jurisdiction. In the context of arbitration, the term ‘jurisdiction’ typically refers to the ‘power’ or ‘authority’ of the arbitral tribunal to decide a dispute. A decision about whether a tribunal has jurisdiction will frequently be made by the tribunal itself, but that decision is not and cannot be a source of its jurisdiction, and cannot be a definitive determination of that jurisdiction, because the authority of that decision depends on the very question under review. A degree of deference may be given to the tribunal’s determination of these questions by national courts, but self-evidently a tribunal may not confer authority on itself. Thus, the ‘power’ of a tribunal comes more indirectly from two sources. First, the cooperation of national courts, which may readily recognize and enforce arbitral awards and may also act in support of arbitration in various other ways. Second, the potential reputational consequences of non-compliance with an arbitral award, which may lead a party to comply with it voluntarily. The legal framework for arbitration applied by most national courts is set out in the New York Convention 1958, and this remains a key basic source of the standards which are applied to determine when an arbitral tribunal is considered to have jurisdiction.

This chapter focuses on the three representations of international arbitration, which attempt to explain which state, or states, provides the relevant source of legitimacy and validity for the arbitration agreement, the arbitral process, and the ensuing award. Under the first representation, the source of legitimacy and validity of arbitration lies in a single national order, that of the seat of the arbitration. The second representation anchors international arbitration in a plurality of national legal orders where recognition or enforcement of an award is sought. Finally, the third representation recognizes an autonomous character to international arbitration, viewed as having generated an authentic and independent legal order: the arbitral legal order. The chapter then explains the basic principles underlying each of the three representations of international arbitration, as well as the consequences of each. It also analyses the evolution of the rules governing the conduct of the arbitral proceeding and the rules applicable to the merits of the dispute from a monolocal view to a transnational view. Despite attempts to deny the existence or convenience of an arbitral legal order, its existence as a transnational legal order—autonomous from all national legal orders—is being increasingly acknowledged.

This chapter discusses the relationship between arbitration and law. Three sets of questions present themselves with respect to the role of law in arbitration. The first relates to arbitration’s legal framework. The second relates to the specific procedures by which arbitration proceedings unfold, for example, in presenting evidence or organizing oral hearings. The third implicates the arbitrator’s evaluation of the merits of the disputes itself. Although separate, the three dimensions of law support each other in promoting the efficiency, fairness, and legitimacy of cross-border dispute resolution. Performance of the arbitrator’s function thus falls within a framework of cases, statutes, and treaties seeking balance between two goals: (i) to prevent disregard of an arbitration commitment; while at the same time (ii) to monitor the arbitral process for conformity to recognized notions of procedural fairness.

This chapter discusses the representation of arbitration in literature. Arbitration seems to receive little attention in literary works, as opposed to justice and the judge, which form the heart of the ‘law and literature’ movement. This disparity is likely due to the collective fascination with the judge as the embodiment of justice. The air of mystery that often surrounds arbitration can also be explained by the difference between the way in which it is presented in fictional texts and in modern law. Literature does not usually apprehend arbitration in the strict understanding of a private judge chosen by the parties, who adjudicates on a dispute by rendering a final and binding award which he cannot enforce without the assistance of state courts. Yet literature’s approximations in the treatment of arbitration are precisely what makes them interesting, in that they shed a welcome light on a justice that is both broader and more perennial than the justice that is rendered within the strict boundaries of the traditional court system. Works of literary fiction also provide many valuable stories about the value and reach of decisions rendered by arbitrators.

This chapter studies the role of arbitration for offshore resources in disputed maritime areas. It is an observable fact that disputes over maritime boundaries are mostly caused by competing desires of states to exploit offshore natural resources, in particular oil and gas deposits. Indeed, it is well known that the law on maritime boundaries was developed precisely in order to allocate rights over offshore natural resources. However, it has also long been observed that the law on maritime boundary delimitation, as developed by international tribunals, ostensibly pays only scant regard to this underlying basis of the disputes at issue. Rather, the law purports to base itself on other principles. In particular, the unilateral activities of the parties are consistently rejected as being ‘relevant circumstances’ relevant to a boundary delimitation. However, if one looks at what tribunals do, instead of what they say they do, it seems that in fact the unilateral activities of the parties concerning the exploitation of offshore hydrocarbons play a rather larger role. Whenever tribunals have some discretion, they invariably choose a delimitation line that gives oil and gas deposits to those parties that have taken the initiative to drill them unilaterally, provided that this drilling has taken place at least within a plausible boundary of the state that issued the concession. Moreover, tribunals are extremely reluctant to draw boundaries over drilled deposits, thus avoiding making them shared as a result of the delimitation exercise.

This chapter offers a Law & Economics (L&E) perspective on international arbitration. L&E scholars tend to view dispute resolution as a market. They thus look at the supply and demand of such third-party adjudication, usually comparing litigation to arbitration. Predominantly, in the literature, there are two interrelated L&E perspectives on this: one is focused on the general welfare consequences of arbitration; the other is focused on why disputants choose one kind of third-party settlement over another. There are many ways of resolving disputes between contractual parties: arbitration is also in competition with mediation, conciliation, litigation, and other forms of resolving disputes, including so-called ‘extra-legal’, socially normative ones. Most literature has focused either on the choice between litigation and arbitration or on the influence of arbitration on negotiation and settlement between the parties. The chapter then addresses other disputant choices relating to third-party funding and arbitrator appointment. It also looks at the incentives and behaviour of arbitrators, including their cognitive abilities.

This concluding chapter presents a program for a more ‘contextual’ approach to the application of psychology to arbitration than has been adopted within arbitration scholarship thus far. It specifically examines the area of Contextual Behavioral Science (CBS), which focuses on the ‘act in context’, treating behaviour as inseparable from the circumstances that surround it. Such a context-sensitive approach allows new light to be shed on the psychology of arbitration, while also unifying the existing literature within a new epistemic framework that offers the advantage of not only predicting but also of potentially influencing the behaviour of interest in arbitration. While psychology can be applied to arbitration in many ways, the chapter focuses on arbitrator reasoning. It addresses the professional context of arbitration, scrutinizing how individual conceptions of the role of the arbitrator can influence reasoning. The chapter also considers the social context of arbitration, analysing the relations between the hierarchical character of the arbitration community and the existence of cognitive biases.

This introductory chapter provides an overview of the arbitration literature. Arbitration literature has a long history. So far, however, no attempt has been made to examine it and its evolution systematically and with a quantitative approach. The lack of investigation of this research question is, in and by itself, surprising. Clearly, the literature plays a strong role in shaping the thinking and making of international arbitration law. Moreover, literature—and scientific literature in particular—is a privileged conduit for the various actors in the social field of international arbitration. The chapter then looks at scientometrics. This field was first defined as ‘the quantitative methods of the research on the development of science as an informational process’. On the scientometrics market, the citation is the main currency. The rationale is that citation counts are positively associated with subsequent impact. Thus, arbitration literature can be measured in two ways. First, one determines which works are the most cited, in absolute terms and over time, for two different time windows. These are the works that likely have had the most impact on the knowledge in and about arbitration, where this knowledge is taken as a single, common whole. Second, one looks at what the co-citation network can reveal about the make-up of the world of arbitration literature.

This chapter assesses the introduction of artificial intelligence in international arbitration. The contention is that it would not only reinstate confidence in the arbitral system—from the perspective of the parties and the general public—and participate in the development of the rule of law, but also engage with broader systemic considerations in enhancing its legitimacy, fairness, and efficiency. Yet, before addressing the why, what, and how of this proposition, a definition of artificial intelligence is warranted. It should be noted at the outset that this concept has a variety of meanings. Despite the lack of consensus on its meaning, the chapter will thus treat artificial intelligence as encompassing both semi-autonomous and autonomous computer systems dedicated to assisting or replacing human beings in decision-making tasks. It presents the conclusions of two extensive research programs respectively dealing with the performance of statistical models and naturalistic decision-making. From that behavioural analysis, the introduction of artificial intelligence in international arbitration be discussed against the general considerations of international adjudication and the specific goals pertaining to international arbitration.

This chapter discusses the role of civil society in international investment arbitration. Much of the civil society focus on international arbitration has been on the investor–state dispute settlement (ISDS) process included in many international investment agreements. However, the historical role of commercial arbitration as the progenitor of investment treaty arbitration and the procedural and structural links between ISDS and commercial arbitration are important for the discussions on civil society engagement. Civil society recognized early on the problems of using a commercial arbitration model for investment arbitration, which involves public law matters, and concluded that this created a misappropriation of a tool that up to that time had only been used for private commercial purposes or very well-defined state-to-state purposes. The crossing of these purposes and actors to create public law arbitration between investors and states is what created this sense of misappropriation and led to a spotlight being shone on the regime by civil society. The chapter then looks back at the beginnings of civil society engagement with international arbitration through the experience with investment treaties, including the advancement of transparency and the ability to submit amicus curiae briefs.

This chapter examines international courts and arbitral tribunals as bureaucratic bodies controlling the social reality created by the definitional categories of international law. In performing their wide variety of functions, international courts and arbitral tribunals not only make use of the social reality created by international law but also exert control over it. This control over the social reality created by the definitional categories of international law is approached as a form of control over knowledge and, it is argued, constitutes a feature of bureaucratic processes. In contending that international courts and arbitral tribunals control knowledge in this way, the chapter projects an image of international dispute resolution processes as bureaucratic sites of the exercise of power. The chapter then identifies the type of knowledge that falls within the ambit of the control of international courts and arbitral tribunals, as well as the modes of control they use to control knowledge.

The settlement of disputes between States is generally not regulated by municipal law and municipal courts but by international law regulated by treaty. Because States are not subject to the jurisdiction of international tribunals absent express consent, an important function of dispute settlement clauses in treaties is to indicate whether such consent is granted and, if so, with respect to which disputes before which tribunals. This chapter discusses the following: the obligation of states to settle disputes peacefully; the duty to arbitrate or adjudicate disputes under the United Nations Convention on the Law of the Sea (LOSC); choice of forum for compulsory settlement of LOSC disputes; nature of dispute; procedural and substantive limitations on jurisdiction under Section 2 of Part XV of the LOSC; and institutional constraints on the exercise of jurisdiction.

The settlement of disputes between States is generally not regulated by municipal law and municipal courts but by international law regulated by treaty. Because States are not subject to the jurisdiction of international tribunals absent express consent, an important function of dispute settlement clauses in treaties is to indicate whether such consent is granted and, if so, with respect to which disputes before which tribunals. This chapter discusses the following: the obligation of states to settle disputes peacefully; the duty to arbitrate or adjudicate disputes under the United Nations Convention on the Law of the Sea (LOSC); choice of forum for compulsory settlement of LOSC disputes; nature of dispute; procedural and substantive limitations on jurisdiction under Section 2 of Part XV of the LOSC; and institutional constraints on the exercise of jurisdiction.

This chapter explores the creation of investor–state arbitration. There is no shortage of antecedents for investor–state arbitration. So why is it perceived as ‘dramatically different’ from what had gone before? In the second half of the twentieth century, consent to investor–state arbitration was provided prospectively (before disputes arose) and pursuant to generalized jurisdiction (for any treaty breach); this is profoundly different from previous practices. Two institutional developments were crucial for creating prospective, generalized consent. First, the ICSID Convention emerged. Second, provisions providing consent to investor–state arbitration were added to investment treaties. The chapter then focuses on these two developments. It reconstructs the choices that officials faced, their constraints, and the reasons why they made the choice for investor–state arbitration against other alternatives. To do so, it uses primary documents from five archives: the American, British, German, and Swiss national archives as well as the World Bank archives.

This chapter focuses on the value of efficiency in international arbitration. It also briefly discusses the tension between party autonomy and the desire of various authors to attribute to arbitration systemic qualities and features of private ordering. While efficiency did not feature as a typical feature of international arbitration some twenty odd years ago, serious concerns were expressed about the cost and length of proceedings. Paradoxically, at the same time, arbitration was seen as a method of dispute resolution which saves money and time for the users. However, in the last ten years, or perhaps a bit longer, there has been a marked awareness and indeed demand for a higher level of efficiency in the arbitral process. The chapter looks at the origins of the quest for efficiency in international arbitration and its establishment as a value of international arbitration, before exploring the role of arbitrators and arbitral institutions in ensuring efficiency.

This chapter surveys the existing empirical literature on international arbitration. It focuses on quantitative rather than qualitative empirical studies, and covers studies both of international commercial arbitration and international investment arbitration. The chapter first describes empirical research on the use of arbitration to resolve transnational disputes—in particular, the extent to which parties use arbitration clauses in international contracts, why they do so, and the frequency of international commercial and investment arbitration proceedings. Empirical studies have also examined an array of topics about the procedures in international arbitration. The empirical evidence typically comes from surveys or observational studies of commercial and investment arbitration proceedings. The chapter then considers empirical insights on selected topics such as the cost and length of arbitration proceedings, the size of arbitral tribunals, interim measures, multi-party disputes, challenges to arbitrators, the role of tribunal secretaries, and the use of mediation. It also looks at empirical studies on the applicable law in international commercial arbitration; the demographics of international arbitrators; and compliance with and enforcement of international arbitration awards.

This chapter addresses enforcement in international arbitration. The ready enforceability of arbitral awards is the single strongest component of the architecture that undergirds international arbitration. Two conventions are the primary mechanisms ensuring that enforceability: the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, colloquially known as the New York Convention; and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, colloquially referred to as the ICSID Convention or the Washington Convention. The regime for enforcement of arbitral awards is based on a structure that prioritizes enforcement so long as awards are rendered pursuant to certain largely procedural safeguards. This approach is an attempt to balance the principle of party autonomy with concern on the part of national courts that they not be co-opted into enforcing awards not consistent with at least rudimentary principles of fair play. Judgment debtors can thus resist enforcement should the arbitration have failed to comport with fundamental notions of due process. In the case of the New York Convention, two other grounds for resisting enforcement have to do with policy considerations in the enforcing state.

This chapter describes the relationship between investment arbitration and the environment. Most view investment arbitration as a threat to environmental regulation, and examine whether sufficient safeguards have been built into treaty texts and arbitral practice to preserve regulatory space for states to advance environmental objectives. However, states are at liberty to choose the objectives that they pursue and set their own priorities between various competing objectives. There is no reason to assume that host states always accord the highest priority to environmental objectives. In some instances, host states may be keen to pursue economic or other objectives at the cost of the environment. Investors in some sectors, such as renewable energy, would find some or all of the host state’s measures for environment protection commercially profitable. On the other hand, there would be sectors where investors would stand to lose from environmental measures. Thus, whether a foreign investor’s interests align with a host state’s interest to protect its environment depends on a number of factors including the sector of investment and the nature of the environmental measure. The chapter then looks at how investment arbitrators have acted, and are likely to act, when faced with issues related to the protection of the environment.