Arbitration in its Psychological Context

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.

Arbitration and Literature

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.

Arbitration from a Law & Economics Perspective

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.

Inter-State Arbitration in Historical Perspective

This chapter identifies the principal moments when the definition of arbitration and the institutions and techniques associated with it underwent major changes. It specifically highlights inter-state arbitration, yet its proposed historical lessons illuminates the entire field of international dispute settlement. This history can be divided into five distinct moments. The first, which could be described as the ‘Greek moment’, refers to the systematic use of arbitration by Greek cities to resolve their conflicts. The second, covering the period between 1200 and 1400 ad, witnessed the emergence of the first arbitration procedures under the influence of canonical law and acknowledged the growing power of the popes in the settlement of disputes between states. The third, marked by the Jay Treaty of 1794, initiated a major turning point in the history of arbitration, as it confirmed the role of diplomatic commissions in the peaceful resolution of disputes. The fourth moment, which began with the Alabama case (1871), saw the establishment of the first impartial and independent tribunal. Finally, the fifth moment began with the setting up of the Permanent Arbitration Court in 1899 and the harmonization of arbitration procedures.

International Commercial Arbitration

This chapter traces the development of international commercial arbitration, which is often presented as a response to the demand for law and dispute resolution created naturally by an increase in transnational commerce and investment. Indeed, the International Chamber of Commerce (ICC) in Paris was relatively marginal from its establishment in 1923 until the increase in global trade and commerce that came in the 1970s and 1980s. The demand naturally created the supply. Based on the recognition that this market was not inevitable, it has been argued that the rise of international commercial arbitration depended on institutional entrepreneurs around the ICC. The chapter then looks at how the relatively marginal group around the ICC that Sgard studies gained credibility and acceptance from both multinational enterprises and developing countries.

The Arbitral Legal Order

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.

International Arbitration

This chapter discusses international arbitration as a crucial part of the legal framework that has progressively enabled the contemporary neo-liberal orientation of global governance. As such, it presents the perspective of critical private international law. If the latter discipline constitutes a significant viewpoint in this respect, it is precisely because it provided the foundational legal tools and discourse by means of which international arbitration attained such astounding success as a cornerstone of cross-border trade and investment regimes. The specific contention here is that in sanctifying freedom of contract to an unprecedented degree, including unrestricted party choice of law and forum, it has deactivated the regulatory constraints to which private actors are subject in a domestic setting and, involuntarily thereby, sealed the ‘loss of control’ by nation-states of various crucial aspects of the global economy. The chapter then explores the grievances generally addressed to arbitration as emblematic of the privatization of global governance, understood alternatively as a confiscation of power in the hands of a happy few individuals or as the subordination of public concerns to private interests.

Arbitration and Offshore Resources in Disputed Maritime Areas

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.

International Arbitration as Private and Public Good

This chapter addresses the private and public nature of international arbitration. International arbitration is often characterized as an exclusively private dispute resolution mechanism, sharply distinguished from litigation, which is viewed as public because it is provided by the state. This is clearest for commercial arbitration. Commercial arbitration is initiated on the basis of a private arrangement: a party cannot be subjected to arbitration unless they agreed to it previously. Investment arbitration is a little more difficult to categorize, given its emergence from public international law, its involvement of states as parties, and the frequency with which it deals with public law measures. Indeed, significant differences exist between commercial and investment arbitration. Nevertheless, it too is characterized as a private dispute resolution mechanism at least in the sense that it is resolved by institutions other than state courts. The chapter then evaluates whether arbitration is a private or public good. It also demonstrates the ways in which adjudication by courts combines elements of private and public goods, before finding a parallel combination of private and public good aspects in international arbitration.

Transnational Public Policy in International Arbitration

This chapter focuses on the role of transnational public policy in international arbitration. Public policy is a key concept for international arbitration because it has provided the underpinning foundations for the development of theories on transnational autonomy of arbitration. Moreover, it is enshrined in the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards as well as almost all national laws as a ground to resist enforcement of arbitral awards. The chapter then traces the historical evolution of transnational public policy and provides an overview of its legal function and rules and principles. The clear distinction between legal and non-legal conceptions of transnational public policy matters because it has important implications on the judicial function of tribunals in international arbitration.