International Arbitration: The Entrepreneurial Justice System

Enrique Boone Barrera
April 7, 2016
An arbitrator careful to be faithful to the parties’ wishes will only resolve the narrow issue in dispute, writes CIGI post-doctoral fellow Enrique Boone Barrera. (Shutterstock Image)

Last week, the International Law Research Program (ILRP) attended and participated in the American Society of International Law (ASIL)’s 2016 Annual Meeting, which explores some of the most pressing international law topics of the day. In a three-part series, Global Rule of Law blog contributors will share some of the key policy questions that emerged from the meeting. 

The Honorable Ian Binnie, former Justice of the Supreme Court of Canada, delivered the keynote speech at the 13th Annual ITA-ASIL Conference. The topic of his presentation perfectly reflected the current anxieties that afflict international arbitration: "Should Arbitral Awards Always Be Right, or Just Enforceable?" 

The answer required an examination of what arbitration is and what it should be. The underlying assumption is, of course, that there is a disconnect between these two notions. The main cause for this disconnect was also succinctly expressed by the former Justice when he referred to international arbitration as “an entrepreneurial justice system.” The defining feature of such a system is giving certainty to the parties: predictability and finality take precedence over issues of justice. Whether an award is “right” or not then becomes just a matter of perspective. This perspective places extraordinary emphasis on the outcome (the award) obscuring the details of the process of arbitration. Obscurity, in turn, leads to new claims since nothing is really settled. The health of the “industry” is assured, but does it help the cause of justice?

In international arbitration, arbitrators are usually chosen by the parties and they need to perform in a way that assures recurring appointments. According to Binnie, this creates a twofold problem: the first is a tendency to reach middle-of-the-road, palatable, outcomes that leaves both parties somewhat dissatisfied. A thoroughly unsatisfactory outcome to one, or both, of the parties damages the chances of being selected again as an arbitrator. The second problem is a tendency to “fudge the rules” so that, even after deciding a case, the matter of law is still up in the air. This leaves much discretion for future arbitral tribunals to, again, have wiggle room for compromise.

This tension between a process that strives for legitimacy and parties that pursue a narrow goal was a very present during the first panel of this half-day conference. How should we conceive of arbitrators? Are they real adjudicators or service providers? The consequences of choosing one conception over the other were explored while addressing three different topics: immunity, the treatment of corruption, and the power to sanction counsel.  In what follows, I will address the first two.

In terms of immunity, the conclusions of the panel would appear paradoxical: as an adjudicator, arbitral immunity increases the autonomy of the Tribunal. Arbitrators may feel more confident applying rules and principles of law without fear of retribution from one, or both, of the parties.  In most instances, only bad faith and fraud are cause for sanction. As a service provider, in contrast, it may make more sense to subject the arbitrator to more detailed and rigorous standards to assure a higher degree of control of the process by the parties. A possible conclusion is that as immunity increases it reduces the free will of the parties. In contrast, less immunity gives more power to the parties to subject the arbitrator to their wishes at the expense of rule of law considerations.

It was the discussion on corruption, however, which illustrated the difficulty of distinguishing between a “right” and an “enforceable” award. As a service provider, the arbitrator’s only concern is to deliver an enforceable award and to deal with corruption only to the extent that bears on the case itself. An arbitrator careful to be faithful to the parties’ wishes will only resolve the narrow issue in dispute. However, a tainted award may be difficult to enforce. As an adjudicator the arbitrator is still subject to the same duty of delivering an enforceable award. Furthermore, the adjudicator must not allow the arbitral process to further an act of corruption. As a result, an award rendered after there was evidence of corruption could not be enforced in domestic courts.

There is a connection, after all, between an award being “right” and its enforceability. Fairness bears legitimacy which, in turn, facilitates the operation of the tribunal and compliance. The former justice is asking questions that strike at the heart of the investor state arbitration enterprise.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.

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