The Roles of Psychology in International Arbitration · 2001 to further his ... (Oxford University Press, 2015, 2nd edition ... on English Public Policy and Mandatory Rules in International

The Roles of Psychology in InternationalArbitration

International Arbitration Law Library

VOLUME 40

Editor

Professor Julian D.M. Lew QC has been involved with international arbitration formore than 40 years as counsel, as arbitrator and as an academic. He has held theposition of Professor and Head of the School on International Arbitration, Centre forCommercial Law studies, Queen Mary University of London since its creation in 1985.He is now an independent arbitrator at 20 Essex Street, London.

Introduction

Since its first volume published in 1993, this authoritative practitioner-oriented serieshas published in-depth and analytical works on niche aspects of international arbitra-tion, authored by specialists in the field.

Objective

This authoritative and established series covering in-depth analyses of niche areasappeals to both practitioners and academics.

Frequency

A volume is published whenever an interesting topic presents itself.

The titles published in this series are listed at the end of this volume.

The Roles of Psychology in InternationalArbitration

Edited by

Tony Cole

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Printed in the United Kingdom.

Editor

Tony Cole is a reader in Arbitration and Investment Law at the University of Leicester,United Kingdom and practices arbitration as Of Counsel at Gentium Law. He is a fellowof the Chartered Institute of Arbitrators, a member of the New York Bar, and prior toentering academia worked at White & Case as a member of its International ArbitrationPractice Group. Tony authored the monograph The Structure of Investment Arbitration,as well as a range of publications on arbitration appearing in leading internationaljournals, and in 2015 he delivered a report to the European Parliament’s Legal AffairsCommittee on arbitration across the European Union and Switzerland. He has beeninvited to speak on arbitration in jurisdictions around the world.

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Contributors

Charles W. Anderson III graduated Summa Cum Laude with a BA in Philosophy andPsychology from the University of Minnesota, USA, in 2000. He moved to Germany in2001 to further his education and learn the German language. He received his magisterfrom the Free University in Berlin in Philosophy and German linguistics in 2012. Hecurrently works as a psychologist in Berlin.

Adriana Aravena-Jokelainen is a Case Manager at the Arbitration Institute of theFinland Chamber of Commerce (FAI) in Helsinki, Finland. She graduated from the lawschool of the University of Concepción in Chile and was admitted as a lawyer in 2002.After moving to Finland, she has been involved in arbitration since 2005, first, asmember of a counsel team in an investment arbitration and assistant to internationalarbitrators, and, more recently, as case manager of domestic and international cases atthe Finland Arbitration Institute. She has published articles on arbitration in Finlandand the FAI.

Peter Ayton is a Professor of Psychology at City, University of London where he hasbeen in post since 1992. His PhD is from University College London. He has heldvisiting appointments at Carnegie-Mellon University; the University of California, LosAngeles; INSEAD; Princeton University; the University of Mannheim; and the MaxPlanck Institute for Human Development, Berlin. His research is concerned with theempirical investigation of human judgment and decision – particularly risk perceptionand decision-making under uncertainty. His publications frequently address appliedissues, including the impact of computerized advice on radiologists’ cancer screeningdecisions; magistrates’ bail decision-making; effects of emotion on stock traders’decisions; optimistic bias in convicted prisoners; and indirect effects of terrorist attackson human choices.

Ilias Bantekas is a Professor of International Law and Arbitration at Brunel UniversityLondon. He has held visiting or full-time posts at leading law schools, includingHarvard, Trier, Miami, SOAS, and others. He serves as arbitrator in transnational

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disputes. His key publications include Introduction to International Arbitration (Cam-bridge University Press, 2015); Commentary to the UNCITRAL Model Law on Interna-tional Arbitration (Cambridge University Press, 2018, with T. Cole, P. Ortolani et al.);International Law (Oxford University Press, 2015, 2nd edition); International HumanRights Law and Practice (Cambridge University Press, 2016, 2nd edition); and Sover-eign Debt and Human Rights (Oxford University Press, 2017).

Geoffrey M. Beresford Hartwell is a Chartered Engineer who has been in privatepractice as a Consulting Engineer since 1969. He was trained as a seagoing EngineerOfficer and has experience of Aeronautical and Nuclear Engineering. He was appointedfirst as arbitrator about forty years ago and has been active domestically and interna-tionally since. He taught for CIArb and in the Law Schools of Cardiff, Kingston uponThames, and Glamorgan (later South Wales) where he remains a Visiting Professor ofArbitration Law.

Stavros Brekoulakis is a Professor in International Arbitration and Commercial Law atQueen Mary University of London. His academic work includes the leading monographon Third Parties in International Commercial Arbitration (OUP, 2010), the bookArbitrability: International and Comparative Perspectives (Kluwer, 2009), and numer-ous publications in leading legal journals and reviews. He is currently writing a bookon English Public Policy and Mandatory Rules in International Arbitration: A CommonLaw Perspective (OUP, 2016). He is the Co-chair of the ICCA-Queen Mary Task Forceon Third-Party Funding, a member of the ICC Task Force on Emergency ArbitratorProceedings, and General Editor of the Journal of International Dispute Settlement.

Ula Cartwright-Finch is a solicitor-advocate specializing in international arbitration.She is dual-qualified in England and Wales and in Hong Kong, and is currently basedin London. Ula represents clients across a range of industry sectors, with particularexpertise in energy, finance, and telecoms disputes. She advises on both commercialand investment treaty matters and has acted in arbitrations under all of the majorinstitutional rules as well as in ad hoc proceedings. Ula is ranked in Who’s Who LegalArbitration – Future Leaders. Ula holds a PhD in Cognitive Psychology from UniversityCollege London and an MA (First Class) in Psychology from the University of StAndrews. She has published academic articles in the separate disciplines of psychologyand international arbitration, as well as the combined field of legal psychology. Shespeaks regularly on the topic of psychology and law, including lecturing on LLMprograms at Queen Mary University of London and Hong Kong University. Ula is amember of the ICC Task Force on Witness Evidence in International Arbitration and anaffiliate member of the Centre for Memory and Law at City, University London.

Mark A. Cymrot handles complex international arbitration and litigation, and is amember of esteemed international arbitration panels and a fellow at the CharteredInstitute of Arbitrators. He leads the BakerHostetler’s International Arbitration andLitigation team. He is an advisor to the American Law Institute, Fourth Restatement ofForeign Relations Law, Sovereign Immunity. He is ranked in Chambers USA and The

Contributors

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Best Lawyers in America© (International Arbitration) and is listed in Who’s Who inAmerica. He has published numerous articles on litigation and arbitration issues.

Richard Earle is a Senior Lecturer in Law at the Westminster Law School, Universityof Westminster, London (formerly a practicing solicitor). He is the creator and leader ofthe MA Conflict Prevention, Dispute Resolution course, and the LLM International &Commercial Dispute Resolution Law course at the Westminster Law School. He haspreviously published on issues in international commercial arbitration and interna-tional tax law.

Dieter Flader studied linguistics, German studies, philosophy, and psychoanalysis atthe University of Hamburg (PhD) (1973). He was then an assistant professor at theUniversity of Essen for the Department of Communication Theories and Linguistics(1974–1984). During this time, Dieter also trained as a Psychoanalyst (1976–1979).Dieter wrote his habilitation at the University of Essen on communication research andlinguistics (1979) before heading a research project on therapeutic discourse (1980).Since 1985, Dieter has been affiliated with the Free University of Berlin and was madean associate professor in 1996. Dieter was a visiting lecturer at the Graduate School forSocial Research at the Polish Academy of Science in the Institute of Sociology andPhilosophy in Warsaw lecturing on communication theories and psychopathology ofsocial institutions (1996–2001). Dieter was a Professor at the Institute of AppliedLinguistics at Warsaw University (2002–2007). He has been working with SophieNappert on a research project on the psychology of international arbitration(2008–2014). Dieter has worked for several companies in Germany and Poland as aconsultant for international companies on intercultural communication problems(since 2002). He was the recipient of a Fullbright Grant (1982–1983) and worked as avisiting professor at Vanderbuilt University (US). Dieter has been a visiting professor atseveral universities throughout the world including: Charles University (Czech Repub-lic), University of Salzburg (Austria), and University of Goettingen (Germany). He isalso the co-director of the Berlin Institute for Applied Humanities. He is a member ofthe International Academy for Intercultural Research (seat in Hawaii).

Geneviève Helleringer is a law Professor at Essec Business School and a fellow of theInstitute of European and Comparative Law, Oxford University. Geneviève’s interest inarbitration and mediation is both academic and practical. She is an ADR Groupaccredited mediator and is regularly appointed as a neutral. Geneviève holds a JD fromColumbia University, an MSc in Legal Sociology from Paris II University, as well as anMSc and a doctorate in Private Law from the Sorbonne University. She also completedan MSc at Oxford University in Experimental Psychology.

Jos Hornikx obtained his PhD from Radboud University Nijmegen (the Netherlands),where he currently is an Associate Professor of Communication and InformationStudies. His research interests focus on persuasive argumentation and the role ofculture, multilingual advertising, and cross-cultural adaptation in persuasive mes-sages. His research was published in outlets such as Argumentation, Argumentationand Advocacy, Communication Monographs, and Thinking and Reasoning.

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Daphna Kapeliuk is a partner at the Commercial and Litigation Department atGoldfarb Seligman & Co., Law Offices, and is considered the leading Israeli expert ondomestic and international arbitration. Prior to joining Goldfarb Seligman, Dr. Kape-liuk was an academic researching and lecturing on international commercial arbitra-tion and private international law. She has published numerous articles and a book andhas lectured on various topics in arbitration. She has extensive arbitration experiencewhich combines both her practical and her academic skills.

Ran Kuttner is an Associate Professor of Negotiation and Conflict Resolution at theUniversity of Haifa and serves as an academic advisor to Givat Haviva, an organizationthat aims at building a share society and dialogue among Jews and Arabs in Israel. Hiswork focuses on relational approaches to conflict resolution and he published articleson mediation, dialogue, leadership, negotiation, and conflict resolution pedagogy inleading academic journals. He is also a certified mediator and mediation teacher inIsrael.

Paul Levine is an international arbitrator and litigation attorney at BakerHostler. Hehas participated in arbitrations before numerous administrating bodies, including theInternational Chamber of Commerce, the International Centre for Dispute Resolution,the American Arbitration Association, and the Permanent Court of Arbitration. He hasalso litigated international disputes, including arbitration-related issues, before courtsin the United States, and has assisted with the successful challenge of arbitral awardsoverseas. Prior to working at BakerHostetler, he litigated on behalf of the United Statesat the Department of Justice, focusing on complex disputes. Paul also previouslyclerked for the United States District Court for the Northern District of Illinois inChicago Illinois.

Cornel Marian is a US-qualified attorney based in Sweden with a practice limited toenergy and international arbitration, including investor-state disputes. Mr. Marian hasexperience as counsel, arbitrator, and legal expert in international arbitration andcross-border disputes. As counsel, he has represented clients, including serving as afirst-chair, in commercial and investor-state arbitrations under the rules of the Arbi-tration Institute of the Stockholm Chamber of Commerce (SCC). Mr. Marian haspreviously been involved, in various capacities, in arbitrations under the AAA, ICAC,ICC, ICSID, and in ad hoc arbitration proceedings under UNCITRAL and Swedish courtrules. He has been appointed as a sole arbitrator in ICC proceedings and served as alegal co-expert for a foreign appellate court on issues concerning Swedish employmentlegislation. Industries covered include nuclear power stations, free economic zones(FEZ), real estate development, insurance, banking and various East-West disputesinvolving Russia, former Soviet Republics and South-eastern Europe. A former USFulbright Scholar to Romania, Mr. Marian has authored over a dozen articles oninternational arbitration in leading publications, including the Journal of InternationalArbitration, Arbitration International, and Global Arbitration Review.

Pietro Ortolani is a Senior Research Fellow at the Max Planck Institute Luxembourg forProcedural Law, where he specializes in arbitration. Pietro holds a PhD in arbitration

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from LUISS Guido Carli University, Rome. He is admitted to the Bar in Italy. In 2016Pietro won the James Crawford Prize, awarded by the Journal of International DisputeSettlement.

William W. (Rusty) Park is Professor at Boston University, teaching in the areas of taxand financial law. After Yale and Columbia, Park practiced in Paris until returninghome to Boston. Park is General Editor of Arbitration International and formerPresident of the London Court of International Arbitration. He served on the ClaimsResolution Tribunal for Dormant Swiss Bank Accounts and the International Commis-sion on Holocaust Era Insurance Claims. The United States appointed him to the Panelof Arbitrators for the International Centre for Settlement of Investment Disputes. Park’sworks include Arbitration of International Business Disputes; Craig, Park & Paulssonon ICC Arbitration; and International Commercial Arbitration (with Reisman, Craig,and Paulsson).

Audley Sheppard QC is Co-head of the International Arbitration Group at CliffordChance LLP, based in London. He was appointed as Queen’s Counsel in 2015. Hespecializes in the resolution of major disputes arising out of infrastructure and energyprojects, and international trade and investment. He also sits as an arbitrator (overthirty appointments). He is currently Chairman of the LCIA Board and a VisitingProfessor at Queen Mary, University of London. He is a former Vice-President of theLCIA Court, Member of the ICC Court, Co-chair of the IBA Arbitration Committee, andRapporteur of the ILA Arbitration Committee. He graduated with LLB (Hons) andB.Commerce (VUW, NZ), and LLM (Cantab).

Donna Shestowsky is a Professor of Law at the University of California, Davis. Sheearned a JD and PhD (Psychology) from Stanford University, and a BA and MS(Psychology) from Yale University. She is the Principal Investigator of a researchinitiative, funded by the National Science Foundation and ABA, which examines howlitigants evaluate legal procedures. Her commentary has appeared in national sourcessuch as CNN, NPR, and the NYT.

Edna Sussman, www.sussmanadr.com, is an independent arbitrator and mediator ofcomplex commercial disputes and has served as an arbitrator in over 200 disputes inboth administered and ad hoc arbitrations. She serves as the Distinguished ADRPractitioner in Residence at Fordham University School of Law and co-chairs theannual Fordham International Arbitration and Mediation Conference. Formerly apartner at the firm of White & Case LLP, she serves on many institutional arbitrationpanels around the world and as President of the College of Commercial Arbitrators, onthe Board of the American Arbitration Association, chair of the AAA-ICDR Foundation,and Vice-Chair of the New York International Arbitration Center. Ms. Sussman haspublished widely on arbitration, mediation, energy and environmental matters and hasbeen recognized by Chambers International and Chambers USA, as well as otherpublications.

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Sean P. Wright received an MS in Biomedical Sciences from the Mount Sinai School ofMedicine, and an MA in Counseling from NYU. His most prominent publication inNature has been cited over 350 times. As Clinical Manager at Lutheran CommunityServices in Spokane, Washington, he provides evidence-based therapies to under-served individuals, and he is a consultant to the faculty of the Gonzaga UniversitySchool of Law, advising on the intersection of psychology, neuroscience, and law.

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Summary of Contents

Editor v

Contributors vii

Preface xxvii

PART IThe Decision-Making Processes of Arbitrators 1

CHAPTER 1Rules and Reliability: How Arbitrators DecideWilliam W. (Rusty) Park 3

CHAPTER 2Bias, Vested Interests and Self-Deception in Judgment and Decision-Making:Challenges to Arbitrator ImpartialityPeter Ayton & Geneviève Helleringer 21

CHAPTER 3Biases and Heuristics in Arbitrator Decision-Making: Reflections onHow to Counteract or Play to ThemEdna Sussman 45

CHAPTER 4Cultural Differences in Perceptions of Strong and Weak ArgumentsJos Hornikx 75

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PART IIArbitration and the Resolution of Disputes 93

CHAPTER 5The Arbitrator as Leader and FacilitatorRan Kuttner 95

CHAPTER 6Disputant Psychology in International Arbitration: What Can a Comparisonwith Domestic Arbitration Teach Us?Pietro Ortolani & Donna Shestowsky 113

CHAPTER 7The Potential Impacts of Psychology in the Resolution of Foreign DirectInvestment Disputes by International Investment ArbitrationRichard Earle 143

PART IIIArbitral Procedure 173

CHAPTER 8Going First Makes a Difference: Decision-Making Dynamics in ArbitrationMark A. Cymrot & Paul Levine 175

CHAPTER 9Human Memory and Witness Evidence in International ArbitrationUla Cartwright-Finch 199

CHAPTER 10Separate Awards for the Advance on Costs: Psychological PhenomenaThat Account for Biased Risk Assessment Generated by Early Victories andIdentify Methods for Legal Counsel to De-bias Risk AssessmentCornel Marian & Sean P. Wright 231

PART IVThe Role of the Arbitrator 265

CHAPTER 11Some Psychological Preconditions for the Process of InternationalArbitration: Preliminary Findings of a Research Project with a QualitativeApproachDieter Flader & Charles W. Anderson III 267

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CHAPTER 12Assessing Evidence, Constructive Mistrust and the Loneliness ofDecision-Making: ‘There’s No Art to Find the Mind’s Construction inthe Face’Geoffrey M. Beresford Hartwell 299

CHAPTER 13Dissents in International ArbitrationAudley Sheppard QC & Daphna Kapeliuk 313

PART VThe Context of International Arbitration 337

CHAPTER 14Systemic Bias and the Institution of International Arbitration: A NewApproach to Arbitral Decision-MakingStavros Brekoulakis 339

CHAPTER 15The Psychological Anthropology of International ArbitrationIlias Bantekas 375

CHAPTER 16Balancing the Triangle: How Arbitration Institutions Meet the PsychologicalNeeds and Preferences of UsersAdriana Aravena-Jokelainen & Sean P. Wright 391

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Table of Contents

Editor v

Contributors vii

Preface xxvii

PART IThe Decision-Making Processes of Arbitrators 1

CHAPTER 1Rules and Reliability: How Arbitrators DecideWilliam W. (Rusty) Park 3

§1.01 Problematic Distinctions 3§1.02 “Soft Law” Influences on Decision-Making 4

[A] The Nature of Soft law 4[B] Three Illustrations 7

[1] Tribunal Composition and Reasoned Award 7[a] One or Three? 7[b] Time and Truth 8

[2] Document Production 10[3] Who Asks the Questions? 10

§1.03 “Hard Law” Constraints 13[A] Contract Interpretation 13[B] Allocation of Costs 14

§1.04 Splitting the Baby and Social Engineering 15[A] Urban Legends 15[B] Fidelity to the Parties’ Expectations 17

§1.05 Why Reliability Matters 19

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CHAPTER 2Bias, Vested Interests and Self-Deception in Judgment and Decision-Making:Challenges to Arbitrator ImpartialityPeter Ayton & Geneviève Helleringer 21

§2.01 Introduction 21§2.02 Independence as a Proxy for Arbitrators’ Impartiality 24

[A] The Legal Framework 24[B] Assessment from a Psychological Standpoint 26

[1] Legal Requirements to Warranty Impartiality AreLegitimate 26

[2] Could Impartiality Be Achieved by ArbitratorsNot Meeting Independence Criteria? 33

§2.03 Disclosure as a Tool to Monitor Arbitrators’ Impartiality andIndependence 35[A] Legal Framework 35[B] Assessment from a Psychological Standpoint 37

§2.04 Conclusion 43

CHAPTER 3Biases and Heuristics in Arbitrator Decision-Making: Reflections on Howto Counteract or Play to ThemEdna Sussman 45

§3.01 Introduction 45§3.02 Unconscious Blinders 49

[A] Informational Blinders: Inadmissible Evidence 49[1] The 2012 Arbitrators Survey 49[2] The Empirical Studies 50[3] Implications for Arbitration 50

[B] Cognitive Blinders: Heuristics 53[1] Hindsight Blinder 53

[a] The Empirical Study 53[b] Implications for Arbitration 53

[2] Anchoring Blinder 54[a] The 2012 Arbitrator Survey 54[b] The Empirical Studies 54[c] Implications for Arbitration 55

[3] Framing Blinder 56[a] The Empirical Studies 56[b] Implications for Arbitration 56

[4] Coherence and Ego-Centricity Blinders 57[a] The 2012 Arbitrator Survey 57[b] Empirical Studies 57[c] Implications for Arbitration 58

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[5] Confirmation Blinder 59[a] 2012 Arbitrator Survey 59[b] Empirical Studies 60[c] Implications for Arbitration 60

§3.03 Attitudinal Blinders: Background and Experience 63[A] Empirical Studies 63[B] Implications for Arbitration 64

§3.04 Improving Arbitrator Decision-Making 65§3.05 Advice for Arbitration Counsel 69

[A] How Many Arbitrators 70[B] Tapping the Social Scientists 70[C] Enhanced Arbitrator Interviews 71


CHAPTER 4Cultural Differences in Perceptions of Strong and Weak ArgumentsJos Hornikx 75

§4.01 Introduction 75§4.02 Quality and Strength of an Argument 76

[A] Formal Perspective on Argument Quality 77[B] Informal Perspective on Argument Quality 78[C] Are High-Quality Arguments Also Stronger Arguments? 80

§4.03 Does Culture Affect Argumentation? 82§4.04 The Influence of Culture on the Evaluation of Argument Quality 84§4.05 Conclusions on Cultural Differences in Argument Quality Perceptions 89

[A] Limitations 89§4.06 Applications of the Reviewed Literature to International Arbitration 91

PART IIArbitration and the Resolution of Disputes 93

CHAPTER 5The Arbitrator as Leader and FacilitatorRan Kuttner 95

§5.01 Introduction 95§5.02 On the Unique Setting of International Arbitration 96§5.03 Authoritarianism as a Barrier to Dialogue, Negotiation and Mutually

Satisfactory Resolution 100§5.04 A Facilitative Approach to the Arbitrator’s Leadership Role 105§5.05 The Arbitrator as Leader and Facilitative-Facilitator 107§5.06 Conclusion 111

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CHAPTER 6Disputant Psychology in International Arbitration: What Can a Comparisonwith Domestic Arbitration Teach Us?Pietro Ortolani & Donna Shestowsky 113

§6.01 Introduction 113§6.02 The Case for Comparing Domestic and International Commercial

Arbitration 114[A] Is It Possible (and Meaningful) to Compare Domestic and

International Arbitration? 114[B] What Is International Arbitration? The Current Debate 115[C] The Arbitration Continuum 117[D] Reasons for the Comparison 118[E] Scope of the Comparison 119[F] Methodology of the Comparison 119

§6.03 Points of Comparison 120[A] Party Autonomy and Applicable Substantive Rules 120

[1] Analysis of the Proposition from the Point of View ofInternational Arbitration 120

[2] Comparison with US Domestic Arbitration 122[3] Analysis 124

[B] Dispute Resolution Preferences of Repeat Litigants 125[1] Analysis of the Proposition from the Point of View of

International Arbitration 125[2] Comparison with US Domestic Arbitration 127[3] Analysis 129

[C] Prevalence of Pre-dispute Agreements 130[1] Analysis of the Proposition from the Point of View of


[D] Voluntary Compliance with the Award 135[1] Analysis of the Proposition from the Point of View of


§6.04 Policy Implications 138§6.05 Our Analysis 141

CHAPTER 7The Potential Impacts of Psychology in the Resolution of Foreign DirectInvestment Disputes by International Investment ArbitrationRichard Earle 143

§7.01 Introduction 143

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§7.02 The Regional Background of the Americas 146[A] Colonisation, Hegemony, and Liberation 146[B] The Washington Convention is not the Washington Consensus 147[C] Thinkers Who Influence Latin America 148

§7.03 More on Regional Oppression and Liberations 149[A] South of the Border 149[B] Caging by the US 150[C] The End of the US-Led Free Trade Area of the Americas 151[D] Ecuador’s New Constitution 151

§7.04 The Occidental v. Ecuador Investment and Arbitration 152[A] The Parties, the Investment, and the Transfer 152[B] The Need for Permission, and the Unapproved Transfer 153[C] The Value Added Tax Arbitration 153[D] Political Tensions, and Caducidad 154[E] The Claim and OEPC’s Breach 154[F] The Counterargument Based on Proportionality 155[G] Contributory Errors by OEPC 155[H] Evaluation of the Loss 156[I] The Award and the Annulment Decision 156

§7.05 Legal Issues: Legal Rights and Vesting 156[A] State Responsibility 157[B] Primary and Secondary Rights in International Law 158[C] The Role of Bilateral Treaties 159

§7.06 Legal Issues: Substantive Laws 159[A] Article 42:1 Washington Convention 160[B] Switching the Issue 161[C] Characterisation and Interpretation 161

§7.07 Psychological Issues: Unconscious Bias and Cultural Intelligence 163[A] The Profile of the Occidental v. Ecuador Tribunal 163[B] Unconscious Priming 164[C] Associative Memory 164[D] Anchoring 165[E] The Halo Effect 165[F] Disclaimer 166[G] Cultural Intelligence (CQ) 166[H] Combining Risks 166

§7.08 Moving from ICSID Convention to UNASUR Arbitration 167[A] Weaknesses with the Washington Convention 167[B] UNASUR Arbitration 169

§7.09 Conclusions 170

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PART IIIArbitral Procedure 173

CHAPTER 8Going First Makes a Difference: Decision-Making Dynamics in ArbitrationMark A. Cymrot & Paul Levine 175

§8.01 The Psychological Benefits of First Impressions 176[A] Primacy and Recency Effects 179[B] Prospect Theory and Anchoring 180[C] Prospect Theory and Framing 183

§8.02 Power of Oral Advocacy 185[A] Does Oral Advocacy Matter in International Arbitration? 185[B] The Psychological Impact of Oral Hearings 188

§8.03 Strategies to Address the Current International Arbitration ProceduralFramework 190[A] Recognize the Role of Cross-Examination 190[B] Framing the Issues: A Strategy for Both Respondent and

Claimant 192§8.04 Conclusion 197

CHAPTER 9Human Memory and Witness Evidence in International ArbitrationUla Cartwright-Finch 199

§9.01 Introduction 199§9.02 Witness Evidence in International Arbitration 201

[A] What Is Witness Evidence and How Is It Used in InternationalArbitration? 201

[B] How Is Witness Evidence Typically Prepared in Practice? 203§9.03 Research on Human Memory 206

[A] The Misinformation Effect 207[1] Background and Origins 207[2] Demonstrations of the Misinformation Effect 209[3] Factors Affecting the Misinformation Effect 211[4] False Memories: An Extreme Example of the

Misinformation Effect 212[B] Memory Conformity 215

[1] Background and Origins 215[2] Early Studies on Social Contagion of Memory 216[3] Studies on Memory Conformity 217[4] Factors Affecting Memory Conformity 218

§9.04 Implications of Post-Event Information Effects for Witness Evidencein International Arbitration 221[A] Critical Evaluation of the Scientific Studies 221

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[B] Application to Witness Evidence in International Arbitration 223[C] Mitigating Post-Event Information Effects in Witness Evidence 225

§9.05 General Conclusion 228

CHAPTER 10Separate Awards for the Advance on Costs: Psychological PhenomenaThat Account for Biased Risk Assessment Generated by Early Victoriesand Identify Methods for Legal Counsel to De-bias Risk AssessmentCornel Marian & Sean P. Wright 231

§10.01 Introduction 231§10.02 On the Actors in International Arbitration, Separate Awards and the

Suitability of Heuristics and Biases Methodology to Resolve CognitiveDeviations 232[A] Actors and Users in International Arbitration 232[B] Why Separate Awards for the Advance on Costs? 233[C] Heuristics and Other Psychological Processes and International

Arbitration? 236§10.03 Distortion Associated with Separate Awards and the Issues Arising

Therein 239[A] The Purpose of Special Awards 239[B] Separate Awards as Early Victories 240[C] Problems in the Enforcement of the Separate Awards 240[D] Clients Differ from Counsel in Their Interpretation of an

Advance Award and Overconfidence Emerges 242§10.04 Cross-Disciplinary Examination of Prevailing Biases with Separate

Awards 243[A] Prevailing Assumptions 243[B] Normative Practices and Evolutionary Perspectives on

Overconfidence 243[C] Decision-Making Biases Activated by the Advance Award Lead

to Overconfidence 245[D] Biases in Social Cognition Exacerbate Overconfidence 245[E] FTT Explains Overconfidence as an Inaccurate Gist-Based

Representation of Risk 247§10.05 Suggested Techniques to De-bias Risk Assessment and Mitigate the

Impact of Other Cognitive Biases 248[A] Early Case Assessment and Other Techniques in Use for

De-biasing Risk 248[B] Applying Psychological Principles to De-bias Overconfidence 250

[1] Gist-Based Metaphors 250[2] Gist-Based Visual Displays 253[3] Combining SDT and FTT for the Accurate

Categorization of Risk 255

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[4] De-biasing Sunk-Cost and In-Group Biases ThroughMindfulness and Other Techniques 260


PART IVThe Role of the Arbitrator 265

CHAPTER 11Some Psychological Preconditions for the Process of International Arbitration:Preliminary Findings of a Research Project with a Qualitative ApproachDieter Flader & Charles W. Anderson III 267

§11.01 Our Qualitative Approach to Psychological Research 267[A] Brief Outlines of the Qualitative Approach to Scientific Research 267[B] What Our Project Is About: Its Goals, First Categories and the

Project’s Significance 269§11.02 Methodology 270

[A] The Role of Methods in Science 270[B] Methods in our Research Project 273

§11.03 First Findings of Our Research 277[A] Pilot Study I: The Questionnaire 277[B] Pilot Study II: Interviews 279

[1] How Pilot Study II Is Related to Pilot Study I 279[2] Our Approach to Analyzing the Interviews 281[3] Some First Findings 283[4] The Cooperative Strategy of International Arbitration:

Another First Finding in Pilot Study II 285§11.04 The Global Transformation of the Traditional Paternal Authority to

Modern Experts in the Western World: A Topic of the Psychologyof the Psychic Unconscious of Arbitration 287

§11.05 Outlook for Further Research 290Bibliography 291

CHAPTER 12Assessing Evidence, Constructive Mistrust and the Loneliness ofDecision-Making: ‘There’s No Art to Find the Mind’s Construction inthe Face’Geoffrey M. Beresford Hartwell 299

CHAPTER 13Dissents in International ArbitrationAudley Sheppard QC & Daphna Kapeliuk 313

§13.01 Introduction 313

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§13.02 The Occurrence of Dissents 314[A] Dissents in Common Law Court Proceedings 314[B] Civil Law Court Proceedings 315[C] Dissents in International Courts and Tribunals 316[D] Dissents in International Commercial Arbitration 317[E] Dissents in Investment Treaty Arbitration 319

§13.03 Some Well-Known Dissents 320[A] England 320[B] United States of America 321[C] Commercial Arbitration 322[D] Investment Treaty Arbitration 323

§13.04 Pros and Cons of Dissents 324§13.05 Psychology of Dissents Within the Tribunal 328§13.06 Psychology of Dissents on the Parties 334§13.07 Conclusion 336

PART VThe Context of International Arbitration 337

CHAPTER 14Systemic Bias and the Institution of International Arbitration: A NewApproach to Arbitral Decision-MakingStavros Brekoulakis 339

§14.01 Introduction 339§14.02 Revisiting the Legal Concept of Bias 344

[A] The Importance of Systemic Bias 344[B] The Importance of Implicit Bias 347

§14.03 Assessing Empirical Studies on Arbitral Decision-Making 349§14.04 An Institutional Approach to Decision-Making 358

[A] The Institution of National and International Judiciaries 360[B] The Institution of International Arbitration 365

[1] Procedural Design of International Arbitration 365[2] Implicit Institutional Structures of International

Arbitration: Looking into Future Research 367§14.05 Conclusion 371

CHAPTER 15The Psychological Anthropology of International ArbitrationIlias Bantekas 375

§15.01 Introduction 375§15.02 The Potential Impact of Anthropology on Arbitration: Lessons from

Criminal Justice 377§15.03 Piecing Together Anthropological Evidence 378

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§15.04 Anthropology in the Service of Business and Arbitration: SomePossibilities 380

§15.05 A Cultural Relativism for Arbitration 381§15.06 Expectations and Myths 386§15.07 Conclusion 389

CHAPTER 16Balancing the Triangle: How Arbitration Institutions Meet the PsychologicalNeeds and Preferences of UsersAdriana Aravena-Jokelainen & Sean P. Wright 391

§16.01 Introduction 391[A] The Rise of Arbitration Institutions 392[B] Perceived Advantages of Arbitration and Benefits of

Institutional Arbitration 393[C] Criticisms of Arbitration Generally and Institutional Arbitration

in Particular 395§16.02 Procedural Justice in Arbitration 397§16.03 Arbitration Institutions Balance the Triangle 401

[A] Efficiency 401[B] Due Process 403[C] Party Autonomy 404[D] Considerations in Appointment of Arbitrators 406

[1] Nationality 406[2] Quality 407[3] Diversity 407[4] Impartiality and Independence 409

§16.04 Recommendations for Strengthening Institutional Arbitration 411[A] Knowing the Users and Soliciting Feedback 411[B] Clarifying Misconceptions 414[C] Addressing Enforceability and Compliance with Awards 416


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Preface

It can hardly be described as a ground-breaking claim to argue that the study ofpsychology can provide useful insights for the practice of international commercialarbitration. After all, mental processes are central to arbitration in various ways,whether in terms of the reasoning of arbitrators, the presentation of evidence, thestructuring of arguments by counsel, or the evaluation by parties of both the arbitralprocess and the final decision. Indeed, any successful arbitration practitioner neces-sarily operates as a sort of “amateur psychologist,” constantly making evaluations ofhow certain modes of presentation will affect the arbitrators, how best to get a witnessto reveal something they are attempting to hide, how to draft an award so that it willbe acceptable to the parties, and so on.

No book on arbitration and psychology, then, can claim to be bringing afundamentally new topic to the study of arbitration, as though by finally consideringthe insights available from psychology, arbitration will be revolutionized and achievegoals it has hitherto failed to achieve. Instead, any serious study of arbitration andpsychology needs to build from two directions, importing expertise from psychologythat can provide insights into issues of particular relevance to arbitration, while alsobenefiting from the already-existing “amateur” psychological expertise of arbitrationpractitioners.

The current book represents a particular take on how to approach this problem.Rather than simply collecting a set of independently written chapters that eachattempts to combine arbitration with psychology, the book was instead constructedthrough a fundamentally collaborative process. This book, that is, is based on arejection of the notion that expertise is fundamentally a matter of knowing certainfacts, such that if an expert in one field merely takes the time to read some researchfrom another field, that will suffice to allow her to discuss that research as though shewere now an expert in both fields. Instead, this book reflects the view that expertise isdomain-specific: merely reading a few papers on psychology, or on arbitration, doesnot equip anyone, no matter how intelligent, with the ability to discuss that researchwith the insight and depth of understanding that characterizes the work of a trueexpert. Work based on interdisciplinary reading is certainly not worthless, and themore those of us who specialize in arbitration are willing to engage with other fields,

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the richer our own understanding of arbitration will become. But such work can neverbenefit from the broader contextual understanding that true expertise provides.

Of course, once one accepts that expertise is domain-specific, the difficultybecomes identifying how high-quality interdisciplinary work can be undertaken. Afterall, such work requires the combination of two or more disciplines, but the domain-specific nature of expertise means that expertise in a new field of research will alwaystake years to develop. The present book is what has resulted from one particularattempt to solve this problem, by bringing together experts in a process designed tofacilitate genuine collaboration.

The project underlying this book saw its initial outlet in a three-day conference inMay 2013 at Brunel University, co-funded by Brunel University and by TransnationalDispute Management. This conference included twenty-two presentations, from inter-national commercial arbitration practitioners, from academics who work on arbitra-tion, and from experts in psychology, statistics, mediation, and cross-cultural commu-nication. No previous knowledge of arbitration was required of non-arbitrationspecialists, and arbitration specialists were not expected to contribute more psycho-logical expertise than the “amateur” psychological insights they had already devel-oped. This was because while formally structured around a series of presentations, theconference was actually designed to operate as a workshop in which, over the courseof three days, a reasonably stable group of individuals would work together to exploreways that their own perspectives and expertises could be combined. The widely sharedfeeling that this approach had been successful, and real insights developed, lay behindthe decision to push this collaboration further, into the development of the presentbook.

This book, however, is also not merely a collection of independently authoredpapers, and has instead attempted to incorporate the collaborative approach thatproved so beneficial at the initial conference. It was, therefore, expressly developed asa collaborative enterprise, providing a forum in which individuals with expertise fromeither psychology or arbitration could benefit from the expertise of other participants inthe project. While each author or team of authors ultimately had responsibility for theirown contribution, each chapter was distributed to at least two other authors forcomment, the commentators being selected to ensure complementary expertise to thatof the original author(s). In this way, an author who specialized in arbitration wouldreceive comments from at least one specialist in psychology, and a specialist inpsychology would receive comments from at least one specialist in arbitration. Thegoal of this process was to reflect the reality, described above, that expertise is by itsnature domain-specific, and that as a result attempts by any individual to attain dualexpertise will rarely be the most effective way to pursue interdisciplinary work.Instead, effective collaboration is far more likely to produce genuinely insightfulresults.

Of course, this book is in no way intended to be the last word on how psychologyand arbitration can be combined, and that should come across clearly from the way thebook is structured. There was no attempt to make the book a systematic treatment ofthe application of psychology to international arbitration, in which important topicswere identified, authors assigned to write on a specific issue, and then a book compiled

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that could be used as a standard reference handbook on the topic. Handbooks of thistype are only appropriate once a topic has been the subject of serious study for asustained period, at which point it becomes possible to produce an overview of theresults that have been produced.

Rather, the approach adopted for this book reflects the early stage at which thecombination of arbitration and psychology remains. Authors were invited to contributeon topics of particular interest to them personally, while the editor attempted to ensurethat the book as a whole evidences a suitably broad range of ways in which attendingto psychology can provide insight into international arbitration.

This book, then, is best understood as an exploration of ways that insights frompsychology can be used to develop an understanding of international arbitration thatextends beyond the “amateur psychologist” observations that practitioners alreadymake. Ideally, then, it will serve two purposes. On a practical level, the quality of theauthors involved in this book should provide assurance that it will contain a variety ofuseful insights for arbitration practitioners, which can be used to refine and improvearbitration as a dispute resolution process. Perhaps more importantly, however, thisbook will hopefully also demonstrate the benefits to be gained from genuinelycollaborative interdisciplinary work, and will thereby provide a model to be furtherrefined by others in their own attempts to get beyond the domain-specific nature of trueexpertise.

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CHAPTER 16

Balancing the Triangle: How ArbitrationInstitutions Meet the Psychological Needsand Preferences of Users*

Adriana Aravena-Jokelainen & Sean P. Wright

§16.01 INTRODUCTION

Arbitration has been used throughout history as an ADR method to litigation. Itspopularity has grown substantially in recent years. Surveys of corporate attitudessuggest that among a wide range of industries arbitration is increasingly being relied onas the preferred dispute resolution mechanism for resolving commercial disputes,1

which is evidenced by the mostly steady or increased caseload of many arbitrationinstitutions. The growth in popularity of both international commercial and ISDSarbitration can be attributed to different factors. Systemic factors contributing to thisgrowth include the continuous development of a global legislative framework support-ive of arbitration, arbitration friendly reforms at the judicial and legislative level in

* Disclaimer: The views set forth in this article represent the personal views of the authors. They donot necessarily represent those of the FAI or any other arbitration institution. Accordingly, theyshould not be interpreted as binding on the FAI or any other arbitration institution.

1. School of International Arbitration at Queen Mary University of London & PricewaterhouseCoo-pers, 2013 International Arbitration Survey: Corporate Choices in International Arbitration 1, 4–8(PwC 2013) (reporting that international arbitration is the preferred dispute resolution mecha-nism for cross-border disputes with a popularity varying from industry to industry; however, thestudy concludes that there is a general consensus that arbitration would be well suited to each ofthe industry sectors.); see also School of International Arbitration at Queen Mary University ofLondon & White and Case LLP, 2015 International Arbitration Survey: Improvements andInnovations in International Arbitration 1, 2–5 (White & Case 2015) (reporting, amongst otherthings, that international arbitration remains the preferred method of resolving cross-borderdisputes. The study concludes that the strong preference for international arbitration shows thatarbitration better meets the users’ demands than other available options, such as commerciallitigation.).

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different jurisdictions, and a recognition of the advantages of arbitration by end users.2

It has also been driven by the efforts of practitioners who enjoy the practice ofinternational arbitration over litigation and have developed their careers as counsel ininternational arbitration and/or as arbitrators. Some of them teach arbitration at lawschools or LLM programs across the world, thereby inspiring the next generation of lawpractitioners.3 Last, but not least, arbitration institutions have played a key role in thisdevelopment, working hard to keep abreast of the needs and demands of arbitrationusers. This chapter will explore how arbitration institutions manage the perceptionsamong users of arbitration, i.e., arbitration practitioners and parties or potential partiesin institutional arbitration.

Establishing an alternative to litigation that is perceived as legitimate and efficientby users is not a trivial endeavor. After briefly reviewing the rise of arbitrationinstitutions, this chapter explores the subtle ways that institutional arbitration has beendesigned to meet the psychological needs of users.

[A] The Rise of Arbitration Institutions

The first arbitration institutions were founded as early as the second half of thenineteenth century.4 Their number increased rapidly and substantially during thetwentieth century, which likely reflected the perception of the value of professionalassistance to parties in the appointment of arbitrators and administration of arbitrationcases. A survey conducted by the School of International Arbitration at the Queen MaryUniversity of London reported that among corporate counsel, institutional arbitrationis significantly preferred over ad hoc arbitration (i.e., arbitration that is organized bythe parties themselves, without administration of an arbitral institution).5

Arbitration institutions are present in most countries of the world. Most of themhave websites, often in more than one language, which give them global web presenceand reach. Their statistics show a steady or growing caseload, indicating the sustainedappeal of arbitration as a method of dispute resolution into the twenty-first century.Arbitration institutions continue to evolve as evidenced by modifications in their rulesof arbitration, which are revised periodically in order to reflect changes in arbitralpractice and stay synchronized with arbitration users’ needs.

2. See, e.g., Gary Born & Wendy Miles, Global Trends in International Arbitration, http://www.wilmerhale.com/uploadedFiles/WilmerHale_Shared_Content/Files/Editorial/Publication/GlobalTrends_InternationalArbitration.pdf (accessed November 29, 2015). See also IBA Arb 40Subcommittee, The Current State and Future of International Arbitration: Regional Perspectives(International Bar Association 2015).

3. See, e.g., Mark Kantor, How to Break into Arbitration: Useful Resources for Students and YoungPractitioners, 2010 Revision, http://www.cisg.law.pace.edu/cisg/moot/Useful_Resources.html(accessed August 13, 2016). See also, Sebastian Perry, Mastering the Trade, 7 Global Arb. Rev. 13(2012)(reporting the results of a survey about the impact of LLM degrees specifically inarbitration).

4. The LCIA is recognized as the oldest arbitration institution, dating back to 1892.5. School of International Arbitration at Queen Mary University of London & PricewaterhouseCoo-

pers, 2008 International Arbitration Study: Corporate Attitudes and Practices §8,15 (PwC2008)(reporting that “86% of awards that were rendered over the last 10 years were under therules of an arbitration institution, while 14% were under ad hoc arbitration”).

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The Arbitration Institute of the Finland Chamber of Commerce (hereinafter“FAI”), the subject of our case study, was founded in 1911 in Helsinki. Its rules wererevised most recently in 2013 in order to meet the current needs of internationalbusiness as well as implement the current highest standards of arbitration practice. Asone of the oldest arbitration institutes in the world, the FAI has a long tradition inresolution of business disputes in Finland, and its caseload includes both domestic andinternational arbitration cases; as such, it is representative of a number of arbitrationinstitutions that are considered experienced and reputable among dispute resolutionservice providers.6

From a global perspective, the popularity of arbitration and the preference to useinstitutional arbitration over ad hoc arbitration suggests that institutional arbitrationmay have a functional purpose of meeting the psychological needs of its users. Thevariations in the procedures of different arbitration institutions may reflect different(and perhaps even superior) strategies to meet these psychological needs.

[B] Perceived Advantages of Arbitration and Benefits of InstitutionalArbitration

The generally perceived advantages of arbitration have been identified as speed andefficiency in both academic7 and professional8 literature. In addition, the expertise ofthe chosen arbitrators is another perceived advantage9 of arbitration over litigation.

Arbitration is generally faster than litigation: whereas court decisions are oftensubject to lengthy appeals, arbitral awards are final and have limited scope for theirchallenge. Moreover, compared to litigation, parties in arbitration have a large degreeof autonomy and flexibility, with the freedom to choose the following: (i) between adhoc and institutional arbitration (and the arbitration institution, if any), (ii) choose therules of the arbitral proceedings, (iii) select the legal place of arbitration (seat),(iv) select the language of the arbitration, (v) select the substantive law, (vi) choose thenumber of arbitrators, and (vii) choose the arbitrators. Parties may select arbitratorswith optimal expertise, experience, and other qualifications to resolve a specificdispute. This autonomy of the parties fosters the ability to design the format of thearbitration to promote speed, efficiency, and cost control if these characteristics areimportant to the parties.

6. For detailed information on the FAI and the 2013 FAI Rules, see Mika Savola, Guide to the FinnishArbitration Rules (Helsingin Kamari Oy 2015).

7. See, e.g., Rebecca Hollander-Blumoff & Tom R. Tyler, Procedural Justice and the Rule of Law:Fostering Legitimacy in Alternative Dispute Resolution, 2011 J. Disp. Resol. 1, 8 (2011).

8. See, e.g., Kate Davies, Meeting the Challenge: Efficiency and Flexibility in International Commer-cial Arbitration in Global Legal Group, The International Comparative Legal Guide to: Interna-tional Arbitration 2011, 1, 1–7 (Global Legal Group 2011).

9. Richard W. Naimark & Stephanie E. Keer, What Do Parties Really Want From InternationalCommercial Arbitration?, 57 Disp. Resol. J. 78, 80 (2003).

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In international disputes, neutrality in the seat of arbitration is also a reportedadvantage.10 Particularly in cross-border transactions, parties are usually reluctant toagree to litigate any resulting disputes in the courts of the other party’s homejurisdiction. International arbitration seated in a third country with no connection toeither party is intended to ensure the perception of fair and equal treatment of theparties and to secure their due process rights.

Although subject to some limitations, confidentiality of the proceedings isperceived as an important (but not always essential) advantage of arbitration.11 Partieswant to get a resolution of their business disputes in a manner that does not attractmedia attention and negative publicity for them. To this end, arbitration may bepreferable to litigation for parties who hope to preserve the commercial relationship inthe future; they want to prevail in the specific dispute but not sever what may beimportant business interactions.12

Finally, the finality and enforceability of an arbitral award are other advantagesto litigation. An arbitral award constitutes a legally enforceable decision. It is bindingon the parties to the arbitration, and cannot be appealed on its merits. Pursuant to theNew York Convention of 1958, arbitral awards are recognized and enforced in mostcountries in the world. Indeed, in the 2015 survey by the Queen Mary School ofInternational Arbitration, respondents reported that “enforceability of awards” wasarbitration’s most valuable characteristic, followed by “avoiding specific legal sys-tems,” “flexibility,” “selection of arbitrators,” “confidentiality and privacy,” “neutral-ity,” “finality,” “speed,” and “cost.”13

For its part, institutional arbitration offers specific advantages compared to adhoc arbitration. These advantages include: (1) the availability of pre-establishedarbitration clauses, arbitration rules and procedures;14 (2) the assistance concerningthe administration of the case; (3) the assistance with regard to the constitution of thearbitral tribunal (e.g., the appointment of arbitrators and decisions regarding chal-lenges of an arbitrator); (4) the determination of the arbitrators’ fees and setting of timelimits by some arbitration institutions; (5) a direct or indirect quality control of thearbitration; and (6) the national and international recognition of an arbitrationinstitution, which will facilitate enforcement of the award.

The finding in the 2008 survey by the Queen Mary School of InternationalArbitration that “corporations indicated that the main reason for using institutional

10. School of International Arbitration at Queen Mary University of London & White and Case LLP,2010 International Arbitration Survey: Choices in International Arbitration 1, 2 (White & Case2010).

11. Ibid. at 3.12. Naimark & Keer, supra n. 9, at 80.13. 2015 International Arbitration Survey, supra n. 1, at 6.14. This advantage applies in the event of ad hoc arbitrations purely under national arbitration laws,

which normally have limited provisions on the procedure to be followed. However, some ad hocarbitrations have pre-established arbitration rules and assistance with the constitution of thearbitral tribunal. In this respect, there is an important distinction to be made between ad hocarbitrations under national laws and ad hoc arbitrations under the UNCITRAL Rules. See thedistinction, e.g., in Latham & Watkins, Guide to International Arbitration, 12–14 (Latham &Watkins 2014).

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arbitration was the reputation of the institutions and the convenience of having thecase administrated by a third party” demonstrates that corporate counsel are aware atleast in a general sense of the advantages of institutional arbitration, which couldexplain the six-fold preference over ad hoc arbitration.15 These results were replicatedin the most recent survey on international arbitration: arbitration users’ preferences forcertain institutions are predominantly based on an assessment of the quality of theiradministration and their level of internationalism. Respondents will select an institu-tion because of its reputation and their previous experiences of that institution.16

[C] Criticisms of Arbitration Generally and Institutional Arbitration inParticular

Notwithstanding the perceived advantages of arbitration, vocal criticism of arbitrationhas also been reported in recent years. The finality of the arbitral award, although itpromotes predictability in the timing and cost of arbitration, has been criticized for thenarrow conditions in which it can be appealed.17 Also, although arbitration promisesincreasing speed, informality, and cost savings, concerns have been reported thatarbitration proceedings have increasingly been conducted in the manner of litigation,which has negated the advantages that are specific to arbitration.18 For example, a 2010survey by the CCIAG (Corporate Counsel International Arbitration Group), “an allianceof more than 90 in-house attorneys from multinational companies interested inimproving the way international arbitration is conducted” found overwhelming agree-ment that international arbitration takes too long and costs too much.19 This concernwas voiced again in the Queen Mary University 2015 survey.20

Further, although confidentiality remains a key feature for some parties choosingto arbitrate, arbitration has been criticized for lack of transparency.21 Arbitration users

15. 2008 International Arbitration Survey, supra n. 5, at 15.16. 2015 International Arbitration Survey, supra n. 1, at 13.17. William H. Knull, III & Noah D. Rubins, Betting the Farm on International Arbitration: Is It Time

to Offer an Appeal Option?, 11 Am. Rev. Intl. Arb. 531 (2000). Alejandro I. Garcia, Is the Principleof Finality “Losing its Appeal”? Kluwer Arbitration Blog, http://kluwerarbitrationblog.com/blog/2011/05/18/is-the-principle-of-finality-losing-its-appeal/ (accessed August 13, 2016) (discuss-ing the US Supreme Court’s criticism of finality).

18. Thomas Stipanowich, Arbitration: The “New Litigation,” 2010 U. Ill. L. Rev. 1, 1–2 (2010)(“Once promoted as a means of avoiding the contention, cost, and expense of court trial, bindingarbitration is now described in similar terms—‘judicialized,’ formal, costly, time-consuming,and subject to hardball advocacy. Though “court-like” arbitration has alienated many businessusers, others strive to make arbitration even more like court trial, as through agreements forexpanded judicial review of arbitration awards. …The most important difference betweenarbitration and litigation—and the fundamental value of arbitration—is the ability of users totailor processes to serve particular needs.”).

19. Mary Swanton, SuperConference: In-house Counsel Say International Arbitration Takes TooLong, http://www.insidecounsel.com/2010/05/27/superconference-inhouse-counsel-say-international-arbitration-takes-too-long (accessed November 29, 2015).

20. 2015 International Arbitration Survey, supra n. 1, at 7.21. See, e.g., Catherine A. Rogers, Transparency in International Commercial Arbitration, 54 U. Kan.

L. Rev. 1301 (2006).

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expect some degree of transparency on how their cases are likely to be managed anddecided, as well as predictability and transparency of the costs of the arbitration.

In the 2015 survey of the Queen Mary School of International Arbitration,respondents expressed their discontent with the lack of insight due to a lack oftransparency regarding institutional efficiency and arbitrator performance.22 Respon-dents suggested that arbitration institutions could publish data on the average length oftheir cases and on the time taken by individual arbitrators to issue awards. Respon-dents were in favor of the publication of awards in a redacted form (and/or assummaries), “not only because of its academic value and usefulness when arguing acase, but also in order to gain more insight into arbitrator performance and toencourage arbitrators to write high-quality awards.”23 An additional concern was thelack of transparency about the appointment of, and challenges to, arbitrators. As aresult, respondents are in favor of the publication of the selection criteria used byinstitutions to choose arbitrators as well as publication of the reasoning behindarbitrator challenges.24

Academic criticism includes addressing the fundamental question of whethernon-judicial resolution of disputes is consistent with the rule of law25 to recentconcerns that it is impossible to balance the tenets of fairness and efficiency ininternational arbitration.26 Building on the work of William Park,27 Joerg Risseintroduced a “magic triangle” formulation of the objectives of arbitration: the cornersof the triangle represent the simultaneous desires for time efficiency, cost savings, andquality of the award.28 Risse argues that in a given arbitration only two of the threeobjectives can be prioritized; the other objective cannot be achieved to the samedegree.29

Noting that time efficiency and cost savings can be combined under the conceptof “arbitral efficiency,” Fabricio Fortese and Lotta Hemmi, in their discussion of the

22. 2015 International Arbitration Survey, supra n. 1, at 2 and 22.23. Ibid.24. Ibid.25. Notable commentaries include Owen M. Fiss, Against Settlement, 93 Yale L.J. 1073, 1073–1075

(1984); Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?, 99 Harv. L.Rev. 668, 675–682 (1986); David Luban, Settlements and the Erosion of the Public Realm, 83 Geo.L.J. 2619, 2622–2623 (1995). However, in defense of ADR procedures comporting with the ruleof law, see Jean R. Sternlight, Is Alternative Dispute Resolution Consistent with the Rule of Law?Lessons from Abroad, 56 DePaul L. Rev. 569 (2007) as well as Hollander-Blumoff & Tyler, supran. 7, and Matti S. Kurkela, Santtu Turunen, & Conflict Management Institute (COMI), DueProcess in International Commercial Arbitration (2d ed., Oxford, 2010).

26. Fabricio Fortese & Lotta Hemmi, Procedural Fairness and Efficiency in International Arbitration,3 Groningen J. Intl. L. 110, 110–124 (2015).

27. William W. Park, Arbitrators and Accuracy, 1 J. Int’l Disp. Settle. 25, 33 (2010) (“Particularly forinternational transactions, arbitration often justifies itself by reference to a more level playingfields, not speed and economy. In a stubbornly heterogeneous world lacking a supranationaljudiciary with mandatory jurisdiction, arbitration enhances a relative measure of adjudicatoryneutrality, which in turn promotes respect for shared ex ante expectations at the time of acontract or investment. A desire for confidentiality and expertise also play a role, as doapprehensions about xenophobia and civil juries.”)

28. Joerg Risse, Ten Drastic Proposals for Saving Time and Costs in Arbitral Proceedings, 29 Arb. Intl.453, 455 (2013).

29. Ibid. at 454.

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tension between fairness and efficiency in arbitration, have reformulated Risse’striangle with “party autonomy,” “due process,” and “efficiency” at the corners.30

Fortese and Hemmi’s triangular formulation sheds light on the perceived disadvan-tages of institutional arbitration. These disadvantages include: (1) decreased flexibilityassociated with the belief that the proceedings are constrained by institutional rules;(2) increased cost based on the assumption that institutional arbitration is moreexpensive than ad hoc arbitration due to administrative fees for services charged by thearbitration institutes; (3) decreased confidentiality; and (4) a general assumption thatthe proceedings prioritize “bureaucracy” (i.e., adhering to established procedures)over efficiency.31

These real-world concerns of parties fit neatly into Fortese and Hemmi’s concep-tual triangle. Concern about the strictures of institutional rules is a concern about partyautonomy. Concerns about cost and bureaucracy implicate the second corner of thetriangle, efficiency. Confidentiality concerns implicate both party autonomy and dueprocess corners.

Although it is clear that parties will need to be mindful of their priorities in orderto make decisions about how to structure arbitration proceedings, we are not aspessimistic as the authors discussed above. We posit that the structure and function ofarbitration institutions plays a critical role in satisfying (albeit imperfectly) the needs ofparties to balance the party-driven flexibility and autonomy that are the hallmarks ofarbitration with due process. The underlying psychological aim of due process—topromote a sense of fairness and justice—is achievable through the mechanisms ofprocedural justice, which we describe below.

§16.02 PROCEDURAL JUSTICE IN ARBITRATION

When Naimark and Keer surveyed attorneys and clients about their preferences amongseveral facets of international arbitration—including obtaining a fair and just result,cost, winning a monetary award, finality of decision, arbitrator expertise, privacy, andfuture relations—they found that when forced to choose, participants ranked a fair andjust result twice as important as any of the other factors.32 Naimark and Keercharacterized their findings as somewhat surprising.33 Although they acknowledgethat participants may have provided socially desirable answers (ranking fairness abovewinning an award, for example), their findings are in line with psychological researchdemonstrating that humans will (under the right circumstances) pursue fairness evenat a cost to themselves.34

30. Fortese & Hemmi, supra n. 26 at 122.31. See, for example, Michael McIlwrath & John Savage, International Arbitration and Mediation, A

Practical Guide Chapter 2, 93–115 (Kluwer Law International 2010).32. Naimark & Keer, supra n. 9, at 80.33. Ibid.34. Daniel Kahneman, Jack L. Knetsch, & Richard H. Thaler, Fairness and Assumptions of

Economics, 59 J. Bus. S285 (1986) (reporting subjects enforced fairness at the expense of theirown profits).

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Fairness in legal disputes has been operationalized as both distributive justice(which refers to obtaining the “correct” outcome) and procedural justice (which refersto the disputants’ perceptions of being treated fairly in the process of getting theoutcome).35 As Alex Shaw and Kristina Olson have demonstrated, people (evenchildren as young as 5 years old) will tolerate inequity (a result that is unfavorable tothem) “if the inequity is determined using an impartial procedure.”36 Thus, thequestion of legitimacy of a third-party decision maker is critically dependent oncreating the conditions for procedural justice (and the ways arbitration institutionswork to create these conditions will be elaborated in section §16.03 of this chapter).

Since the initial concept of procedural justice was introduced by Thibaut andWalker in 1975,37 many legal scholars have empirically tested it, most prominently thesocial psychologist Tom Tyler.38 Tyler has demonstrated a critical role for proceduraljustice in explaining why people ascribe legitimacy to the law and comply with it.39

Summarizing the research, Hollander-Blumoff and Tyler describe four critical elementsrelated to assessments of fairness in procedural justice:

First, individuals care whether or not they have had an opportunity to present theirown story, a factor that the literature commonly refers to as voice. In the case of athird-party neutral procedure, parties or their attorneys typically present evidenceto a decision maker. Second, people assess whether or not the decision maker wasneutral. This involves issues such as impartiality (lack of bias); the ability to gatherand assess the information needed to make appropriate decisions; openness aboutthe procedure (transparency); and consistency in the application of rules overpeople and across time. Third, and related, is the question of whether or not thethird-party authority was trustworthy. Trust is the least overt aspect of fairnessbecause it involves inferences on the part of the parties that the authority wassincerely trying to do what was right and was motivated to do what was good forthe people involved. Because trust is an inference, it is shaped by how theauthorities act. When the authorities provide evidence that they have listened toand considered the views of the parties, and tried to take them into account inthinking about how to respond to the issues, they are viewed as more trustworthy.Finally, individuals consider whether or not they were treated with courtesy andrespect. This involves both common respect and courtesy and respect for people’srights. Those rights are both human rights (treatment with dignity) and legal rights(standing to bring a case to the authorities and have it treated seriously).40

35. Tom Tyler, Social Justice: Outcome and Procedure, 35 Int. J. Psychol. 117, 119 (2000). ShariSeidman Diamond, Psychological Aspects of Dispute Resolution: Issues for International Arbitra-tion in Albert Jan van der Berg, International Commercial Arbitration: Important ContemporaryQuestions 327, 329 (Kluwer Law International 2003).

36. Alex Shaw & Kristina Olson, Fairness as Partiality Aversion: The Development of ProceduralJustice, 119 J. Experimental Child Psychol. 40 (2014).

37. John Thibaut & Laurens Walker, Procedural Justice (Lawrence Erlbaum Associates 1975).38. Edgar A. Lind & Tom R. Tyler, The Social Psychology of Procedural Justice (Plenum 1988).39. Tom R. Tyler, Why People Obey the Law (2nd ed., Princeton University Press 2006).40. Hollander-Blumoff & Tyler, supra n. 7, at 3.

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Procedural justice is particularly relevant to ADR mechanisms including arbitra-tion, mediation, and negotiation.41 Longitudinal studies suggest that disputants’preferences for procedural justice predict their satisfaction with ADR mechanisms.42

The finding that procedural justice is a separate construct from distributive justice isheartening in light of findings by Chris Guthrie (among others) that judges (andpresumably arbitrators) fall short of achieving distributive justice (i.e., they misjudgethe result) due to cognitive biases.43

Shari Seidman Diamond has elaborated on the role of procedural justice ininternational arbitration.44 Diamond reported that the level of satisfaction people feelwith the decision of a third party is strongly influenced by their perception of thefairness of the procedures used by the third party to reach that decision, even whenthose outcomes are negative.45 Highlighting the influence of arbitration institutions,she notes “the authority and perceived legitimacy of the institutions that produce thedecisions are enhanced when the procedures used to produce the decisions are viewedas fair—again, even when those decisions involved unfavorable outcomes.”46 Ifarbitration institutions can meet the parties’ expectations for fairness, they will extendlegitimacy to the extra-judicial context of arbitration. Diamond concludes that “[t]hevalue of enhanced authority and legitimacy for international arbitration is clear:contracting parties will be more willing to include an arbitration clause in theiragreements if they recognize the fairness and legitimacy of the institution that willresolve any disputes that arise.”47

Synthesizing the research on procedural justice, Diamond identified three factorsleading to a perception of fairness: perceived neutrality, perceived trust, and treatmentwith respect and dignity.48 These three factors are influenced by the choice of the

41. Ibid. More broadly, it has been debated whether arbitration should be considered an ADRmechanism. See, e.g., Jean R. Sternlight, Is Binding Arbitration a Form of ADR?: An ArgumentThat the Term “ADR” Has Begun to Outlive Its Usefulness, 2000 J. Disp. Resol. 97 (2000).

42. Donna Shestowsky & Jeanne Brett, Disputants Perceptions of Dispute Resolution Procedures: AnEx Ante and Ex Post Longitudinal Empirical Study, 41 U. Conn L. Rev. 63 (2008); DonnaShestowsky, The Psychology of Procedural Preference: How Litigants Evaluate Legal ProceduresEx Ante, 99 Iowa L. Rev 637 (2014).

43. Chris Guthrie, Jeffrey Rachlinski & Andrew Wistrich, Blinking on the Bench: How Judges DecideCases, 93 Cornell L. Rev. 101 (2007); Chris Guthrie, Jeffrey Rachlinski & Andrew Wistrich, Insidethe Judicial Mind, 86 Cornell L. Rev. 777 (2001); Edna Sussman, What Lurks in the Unconscious:Influences on Arbitrator Decision Making, 32 Alternatives to High Cost Litig. 149 (2014). For ananalysis of how cognitive biases may affect parties in a dispute see Jessica Kiser, To Bully or Notto Bully: Understanding the Role of Uncertainty in Trademark Enforcement Decisions, 37 Colum.J. L. Arts 211 (2014).

44. Diamond, supra n. 35. See also Nancy A. Welsh, Disputants’ Decision-Control in Court-connectedMediation: A Hollow Promise Without Procedural Justice, 1 J. Disp. Resol. 179, 180 (2002)(arguing that concerns about procedural justice and fairness are more compelling than distin-guishing mediation from arbitration on the basis of the control that disputants wield: “courtsneed to focus quite intently on upon the institutionalization of third party processes that areprocedurally just, regardless of whether those processes are classified as consensual or non-consensual.” [emphasis in original]).

45. Diamond, supra n. 35.46. Ibid. at 329–330.47. Ibid. at 330.48. Ibid. at 330.


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decision maker (party autonomy) and the conduct of the procedure (due process andefficiency). Establishing procedural justice by maintaining the perception of fairness isthe task of arbitration institutions: at the deepest level, the purpose of the rules andprocedures is to foster the psychological sense of fairness, which will lead to satisfac-tion by the parties and confer broader perceptions of legitimacy in the arbitrationprocess, particularly when awards are enforceable.49

Supplementing Diamond’s analysis, Anne Marie Whitesell argued that along withthe parties and the arbitrators, there is a clear role for arbitration institutions to play inaddressing the psychological aspects of international arbitration.50 Whitesell intro-duces a criticism that is worthy of comment, noting that parties do not always employpsychology to ensure fairness in the procedure. She describes how “psychology is usedby the parties as a strategic weapon,” citing, for example, groundless challenges toconfirmation of arbitrators, intentionally drafting unenforceable clauses, and inten-tional complication of procedures.51 These tactics are at odds with the findings byKahneman et al. described above where people altruistically choose fairness incompetition. However, the behavior is sensibly explained when one considers that theattorneys and corporate employees who engage in these tactics have an incentive to actunfairly as long as they can be still be perceived as fair. Indeed, psychological researchhas identified circumstances in which people will act unfairly as long as they seemfair.52 Shaw and colleagues reported that children as young as 6 would act unfairly insituations where their unfairness could not be detected.53 This separate focus on“signaling to others” that one is fair may explain the tactics that Whitesell discussed.Focusing on evidence in support of one’s fairness and disregarding evidence ofunfairness is an example of the “self-serving” bias that is commonly observed amongdisputants in litigation and ADR.54 Fairness has subtle psychological nuances; conse-quently, arbitration institutions should be mindful of the biases of users and arbitratorswhen establishing procedures to ensure procedural justice, which we will now review.

49. See infra, §16.04[C]50. Anne Marie Whitesell, The Psychological Aspects of Dispute Resolution in Albert Jan van der

Berg, International Commercial Arbitration: Important Contemporary Questions 343, 343–347(Kluwer Law International 2003). Whitesell’s brief article covers some of the same ground as wedo, and her details about the rules of the ICC serve as a useful comparison to the rules of the FAIdiscussed here.

51. Ibid. at 346.52. Alex Shaw, et al., Children Develop a Veil of Fairness, 143 J. Exp Psychlo. Gen. 363 (2013); Jason

Dana, Roberto Weber & Jason Xi Kuang, Exploiting Moral Wiggle Room: Experiments Demon-strating an Illusory Preference for Fairness, 33 Econ. Theory 67, 67 (2007) (“we show that in abinary version of the dictator game, a majority of subjects choose the fair and efficient outcome.We then show that subjects playing the same game instead choose to maximize their ownpayoffs, at the expense of fairness and efficiency, when the recipients’ payoffs are uncertain,even if this uncertainty can be costlessly resolved. We also find that when either of two subjectscan sacrifice to implement a fair and efficient outcome, but neither can ensure fairness orinefficiency, selfishness prevails.”)

53. Shaw et al, supra n. 52.54. Linda Babcock & George Loewenstein, Explaining Bargaining Impasse: The Role of Self-Serving

Biases, 11 J. Econ. Persps. 109 (1997). See also Lowenstein et al., Self-Serving Assessments ofFairness and Pretrial Bargaining, 22 J. Leg. Stud. 135 (1993).

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§16.03 ARBITRATION INSTITUTIONS BALANCE THE TRIANGLE

Balancing party autonomy, due process, and efficiency may be possible in ad hocarbitration between sophisticated parties, but in general the administrative functions ofarbitration institutes, which have evolved in response to the needs of arbitration users,are likely to create consistent opportunities to meet the parties’ needs. As Anne MarieWhitesell has argued, arbitration institutions play a key role in increasing the parties’perception of the fairness of the procedure.55 Oversight of the procedure by thearbitration institution is consistent with the principles of procedural justice discussedabove; the result is enhanced perceptions by the parties of the fairness of theprocedure.

Party autonomy is also supported by the active participation of the parties in thechoice of the arbitrators, which allows them to feel that they have some control overthe proceedings (in procedural justice literature this is typically described as giving“voice”56); the result is increased psychological acceptance of the arbitral procedure.Although this is a characteristic of ad hoc arbitration as well, the difference is that ininstitutional arbitration, in case the appointment procedure fails due to failure of aparty to participate, the arbitration institute will step in and appoint the arbitrator onbehalf of the defaulting party, thus preserving procedural justice and efficiency at thesame time.

Thus, there are two independent factors that contribute to acceptance by theparties of the outcome. First, parties’ sense of acceptance will be affected by thearbitrator’s final award, which reflects distributive justice concerns about which partyshould prevail (and the appropriate size of the award). Second, acceptance will also beinfluenced by procedural justice concerns including the perceived quality of arbitratordecision-making and the experience of efficient and impartial service provided by anarbitration institution. An examination of the FAI Rules and procedures demonstratesthe approach that many arbitration institutions employ to balance the desire forefficiency, due process, and party autonomy.

[A] Efficiency

The most recent FAI Rules (and other arbitration institutions’ newest rules) endeavorto make arbitration procedurally more efficient. In response to ever more complexarbitrations and complex commercial relationships between business parties, theupdated rules address emergency arbitration procedures and provisions applicable tomulti-party and multi-contract arbitrations.

To promote efficiency, a number of provisions impose an obligation on theparties and the arbitrators to conduct the proceedings in an expeditious and cost-effective manner.57 These efforts address concerns by users of arbitration that cost is

55. Whitesell, supra n. 50.56. Hollander-Blumoff & Tyler, supra n. 7.57. For example, the FAI Rules provide that: (i) the arbitral tribunal shall arrange a preparatory

conference with the parties at an early stage of the arbitration for the purpose of organizing and

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the worst feature of arbitration.58 Users have indicated a preference for more transpar-ency and efficiency in institutional arbitration.59 The proposed procedural change withthe strongest level of support in the Queen Mary survey was a requirement for tribunalsto commit to a time schedule for deliberations and delivery of the final award with clearcommunication to the parties of this schedule.60

To address concerns about time and cost, some arbitration institutions haveamended their rules or introduced guidelines for managing time and cost pressures,both for arbitrators and for attending parties.61 Furthermore, offering parties’ expeditedarbitration represents one way arbitration institutions can meet the need for efficiency,and by clearly labeling the process “expedited” and publishing the adjusted rules,institutions preserve party autonomy in choosing whether to consent to an expeditedarbitration. This flexibility in procedures was endorsed by users in the 2015 survey,which reported 92% supporting simplified procedures for smaller claims (33% of theusers felt this should be a mandatory provision; 59% supported it in cases where theparties have agreed to simplified procedures).62

In practice, arbitral tribunals appointed in arbitration under the FAI Rules andFAI Expedited Rules follow these provisions during the proceedings, which hasresulted in a median duration of arbitrations under the FAI Rules of only eight months

scheduling the subsequent proceedings and agreeing on a fair and cost-efficient process for thetaking of evidence, unless the tribunal in exceptional circumstances determines that a prepara-tory conference is unnecessary (Art. 29 of the FAI Rules); (ii) at the outset of the arbitration, thearbitral tribunal shall establish a provisional procedural timetable, which shall be communi-cated to the parties and the FAI without delay (Art. 30 of the FAI Rules); (iii) the arbitral tribunalis authorized to set a cut-off date prior to the commencement of a hearing and order that afterthe cut-off date, the parties will not be allowed to present any new claims, arguments ordocumentary evidence on the merits of the dispute, or to invoke any new witnesses notpreviously nominated, unless the tribunal in exceptional circumstances decides otherwise (Art.33.3 of the FAI Rules); (iv) the arbitral tribunal shall declare the proceedings closed, and informthe parties and the FAI of the date by which it expects to issue the final award, as soon aspossible after the last hearing date or the date on which the tribunal received the parties’ lastauthorized written submissions. After the closing of the proceedings, no further claims,arguments or evidence may be presented with respect to the matters to be decided in the award,unless in exceptional circumstances requested or authorized by the arbitral tribunal (Art. 39 ofthe FAI Rules); (v) the time limit for the rendering of the final award is nine months from the dateon which the arbitral tribunal received the case file. The FAI may extend this time period upona reasoned request of the arbitral tribunal or, if deemed necessary, on its own motion (Art. 42 ofthe FAI Rules); (vi) all participants in the arbitral proceedings shall act in good faith and makeevery effort to contribute to the efficient conduct of the proceedings in order to avoidunnecessary costs and delays. If the arbitral tribunal determines that a party has failed to complywith its duties under this provision, the tribunal may, in addition to any other measuresavailable to it under the Rules or otherwise, take such failure into account in its allocation ofcosts (Art. 25.3 of the FAI Rules).

58. 2015 International Arbitration Survey, supra n. 1, at 2.59. 2015 International Arbitration Survey, supra n. 1, at 22.60. 2015 International Arbitration Survey, supra n. 1, at 25.61. For example, the ICC’s report addressing controlling time and costs in arbitration provided a

range of techniques that could be used to increase the time and cost efficiency of arbitration.Report from the ICC Commission on Arbitration, Techniques for Controlling Time and Costs inArbitration, Preface, ICC Publication 843 (ICC 2007).The Report was updated to reflect thevarious modifications made in the 2012 ICC Rules of Arbitration.

62. 2015 International Arbitration Survey, supra n. 1, at 26.


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in proceedings that ended in 2015. This is well in line with the provisions of the FAIRules which call for efficiency of arbitration proceedings and require that, as a rule, thearbitral tribunal shall render the final award in no more than nine months from receiptof the file. Furthermore, the median duration of cases conducted under the FAIExpedited Rules was only three months, which is equally well in line with therequirements set forth in the FAI Expedited Rules. The development of the option forexpedited arbitration with modified rules among many arbitration institutions reflectsthe attempt to meet the objectives of efficiency while preserving due process and partyautonomy.

The 2015 Queen Mary survey demonstrated that users are aware of the chal-lenges in balancing these factors. For example, users reported a trend of “due processparanoia,” referring to the sense that tribunals are reluctant “to act decisively in certainsituations for fear of the award being challenged on the basis of a party not having hadthe chance to present its case fully.”63 Users indicated that arbitration institutions,arbitrators, and counsel all potentially shared responsibility for improving efficiency.64

[B] Due Process

Given that the standard for review of arbitration awards is very narrow and arbitrationawards cannot be appealed on the merits, efforts to ensure a credible decision(distributive justice) is made are of critical importance. Even though arbitration isdistinct from litigation, parties will want well-reasoned decisions that are enforceable.Indeed, enforceability of an award is of paramount importance to the parties, particu-larly when emergency arbitrators are utilized.65 Arbitration institutions use a variety ofquality control methods to preserve due process.

Some arbitration institutions routinely scrutinize awards prior to accepting them(with the ICC being widely known for this practice).66 Gustav Flecke-Giammarcoexplains the logic of scrutiny: “the principal purpose of scrutiny is rather to bolster anaward’s legal effectiveness. It serves to maximize the award’s chances of surviving anattempt to set it aside at the place of arbitration or to resist enforcement elsewhere. Asa quality control mechanism, the scrutiny process further ensures that the award meetsthe parties’ expectations.”67

Arbitral awards issued in proceedings governed by the FAI Rules are not formally“scrutinized” by the FAI Board. However, they are carefully reviewed once renderedand submitted to the FAI. Also, the FAI Secretariat seeks feedback from the parties in

63. 2015 International Arbitration Survey, supra n. 1, at 2.64. A majority of respondents in the 2015 survey suggested, for example, that counsel could

promote efficiency by narrowing issues, limiting document production, promoting settlement(including mediation) and generally not overlawyering. 2015 International Arbitration Survey,supra n. 1, at 30.

65. 2015 International Arbitration Survey, supra n. 1, at 28.66. See, e.g., Gustav Flecke-Giammarco, The ICC Scrutiny Process and Enhanced Enforceability of

Arbitral Awards, 24 J. Arb. Stud. 47, 68 (2014) (describing in substantial detail the use andpotential benefits of scrutiny for a significant percentage of arbitration awards).

67. Ibid.


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all cases that proceed until a final award on the merits. These practices serve to assistthe FAI in monitoring the quality of the work of different arbitrators, thereby contrib-uting to the appointment of highly competent individuals in future cases. The iterativeprocess of evaluating the competencies of arbitrators over time in separate arbitrationscan develop the sense of trust by parties in the expertise of the arbitration institution(provided the institution’s rating of competency comports with the parties’ experi-ence).

Scrutiny (whether formal or informal), therefore, is one strategy used by arbitra-tion institutions to enhance enforceability (due process) and meet parties’ expectationswhere possible (procedural justice). In the 2010 Queen Mary survey, scrutiny ofawards by the institution was one of the lower priorities (11th), but was endorsed by33% of respondents.68 Since there are arbitration institutions that deliberately avoidscrutiny, for example, because it can raise concerns for some parties about breaches ofconfidentiality, the value of scrutiny can be subsumed under users’ broad preferencefor fairness above all else as evidenced by Naimark and Keer’s findings.69

[C] Party Autonomy

Party autonomy concerns are central to the procedures that govern the constitution ofthe arbitral tribunal, and so, under the rules of many arbitration institutions, the partiesare the primary actors in the nomination of arbitrators. Under the FAI Rules, parties areencouraged to agree on the number of arbitrators and the person to be confirmed by theFAI as sole arbitrator or presiding arbitrator of a three-member arbitral tribunal.70 Thedefault use of sole arbitrators promotes efficiency, but this default can be changed inorder to respect party autonomy for parties who prefer a three-member tribunal.71 TheFAI Board will appoint sole arbitrators, presiding arbitrators of three-member tribu-nals, and also arbitrators on behalf of defaulting parties only if they have failed to makea nomination where required. Despite party autonomy in the constitution of the arbitral

68. 2010 International Arbitration Survey, supra n. 10.69. Naimark and Keer, supra n. 9.70. According to Art. 15 of the FAI Rules, parties may agree on the number of arbitrators and the

procedure for appointment of the arbitral tribunal. The default provisions contained in Arts16–19 of the FAI Rules apply only to the extent that the parties have not agreed on the numberof arbitrators or the appointment procedure or have been unable to constitute the arbitraltribunal within the time period agreed by the parties or set by FAI at a party’s request. Thedefault rule is that the arbitral tribunal shall be composed of a sole arbitrator. The Board may,however, decide that an arbitral tribunal be composed of three arbitrators if it considers itappropriate having regard to the amount in dispute, the complexity of the case, any proposalsmade by the parties, or other relevant circumstances (Art. 16 of the FAI Rules). With regard tothe appointment procedure, Arts 17–19 of the FAI Rules set out comprehensive defaultprovisions for the appointment of the arbitrator(s) in bi-party and multi-party proceedings.

71. Historically, arbitral tribunals composed of a sole arbitrator have been more common thanthree-person tribunals in FAI proceedings. According to the FAI statistics for 2014, no less than85% of the cases were heard by sole arbitrators, whereas only 15% of the cases involved athree-member tribunal.


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tribunal, every arbitrator nominated by the parties or by the party-nominated arbitra-tors must be confirmed by the FAI.72 This rule is intended to ensure that due processconsiderations are not abridged by party autonomy. The Board may decline theconfirmation of a nomination only if the prospective arbitrator fails to meet therequirements of impartiality and independence set forth in the FAI Rules, or if thecandidate is otherwise unsuitable to serve as arbitrator. The Board has no obligation togive reasons for its decision. Where the Board declines the confirmation, it may givethe nominating party, or the nominating arbitrators, as the case may be, an opportunityto make a new nomination within the time limit set by the FAI, or, in exceptionalcircumstances, proceed directly with the appointment of an arbitrator chosen by theBoard.

Mika Savola, chair of the FAI Board, has clarified the purpose of the confirmationsystem:

It needs to be emphasized that the new confirmation regime is not intended to limitthe overarching principle of party autonomy in the choice of arbitrators. Rather,the confirmation system serves to enhance party autonomy by ensuring theappointment of arbitrators who fulfil the basic requirements of impartiality andindependence and who have the necessary qualifications to serve as arbitrators inspecific cases. In practice, FAI will not interfere with the parties’ selection ofarbitrators without weighty reasons. This is clear already from the wording ofArticle 21.3, which limits the Board’s power to decline confirmation of a nomina-tion or appointment to situations where the prospective arbitrator fails to fulfil therequirements of impartiality and independence set the forth in Article 20.1, orwhere he or she is otherwise “unsuitable” to serve as arbitrator.73

Based on observations at the FAI, there is a correlation between confirmation anda lesser number of challenges to arbitrators.

In the event of any failure in the constitution of the arbitral tribunal under theRules, the FAI Board shall have all powers to address such failure and may, inparticular, revoke any confirmation or appointment already made, appoint or reap-point any of the arbitrators, and designate one of them as the presiding arbitrator.74

Thus, quality control, in the service of the due process objective, is available at allstages of the proceedings.

In appointing arbitrators, the FAI Board will consider, among other things, anyqualifications required of the arbitrator by the agreement of the parties, the nature andcircumstances of the dispute, the nationality of the parties and of the prospectivearbitrator, the language of the arbitration, the seat of arbitration, the law or rules of lawapplicable to the substance of the dispute, and any other relevant circumstances.75

Here, the FAI Rules clearly comport with the preferences as reported by the 2010 Queen

72. The appointment of any arbitrator becomes effective only upon such confirmation (Art. 21 of theFAI Rules).

73. Savola, supra n. 6, at 203.74. Article 21.7 of the FAI Rules.75. Article 21.5 of the FAI Rules.

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Mary survey in which corporate counsel identified the choice of substantive law andchoice of seat as primary concerns.76

As is the practice of many arbitration institutions, the FAI Board does not selectarbitrators from a pre-established list of arbitrators. Instead, the FAI Board composedof Finnish and international Board members will draw on the knowledge and experi-ence of its members to find the most suitable experts for each dispute. Institutionalexpertise is leveraged here as the Board may evaluate the psychological fit between thearbitrators and the parties by consideration of the parties’ counsel’s personality, theseniority and personality of an arbitrator, and known or presumed intra-tribunaldynamics.

The 2010 Queen Mary survey indicated that sophisticated users of arbitrationhave clear preferences about the behavior (which is not necessarily a reflection ofunderlying personality) of arbitrators, particularly regarding efficiency objectives:“parties prefer pro-active arbitrators who take control of proceedings. This is seen as aneffective mechanism to limit cost and delay and reduce the risks of later challenge.Parties also prefer pro-active arbitration institutions that firmly adhere to deadlines andcommunicate effectively with the parties.”77 In addition, arbitration institutions havethe opportunity to enhance perception of neutrality in the appointments in order tofoster an increased sense of procedural justice and due process. For example, the FAIhas experienced enhanced perception of neutrality after the introduction of foreigninternational members to the FAI Board. The perception of neutrality is furtherenhanced when appointments are nuanced (i.e., made in view of a variety ofconsiderations and from a sufficiently large pool of candidates).

[D] Considerations in Appointment of Arbitrators

The distinct factors considered when appointing arbitrators are relevant to explicatinghow the three legs of the triangle are balanced.

[1] Nationality

The FAI Rules provide that where the parties are of different nationalities, the FAI shallnot, as a general rule, appoint a sole or presiding arbitrator with the same nationalityas any of the parties or party-nominated arbitrators, unless otherwise agreed by theparties, or unless the Board in special circumstances determines that it is appropriateto appoint a sole or presiding arbitrator with the same nationality as any of the partiesor party-nominated arbitrators.78

Psychological aspects of nationality loom large in the appointment process. Forexample, in choosing an arbitrator of a different nationality, the FAI Board will payspecial attention to the perception of neutrality by both parties, which, in some cases,

76. 2010 International Arbitration Survey, supra n. 10, at 2.77. 2010 International Arbitration Survey, supra n. 10, at 32.78. Article 21.6 of the FAI Rules.

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can include considerations of cultural and historical influences on some nationalities,consideration of geographical location, and even efforts to search for an internationallyminded arbitrator with experience and training in different legal systems.

[2] Quality

To promote due process as evidenced by both distributive and procedural justice, theFAI Board pays particular attention to the quality of the prospective arbitratorcandidates. The FAI seeks to ensure that all arbitrators appointed in both domestic andinternational disputes have sufficient experience, expertise, and other relevant quali-fications to serve as an arbitrator in the specific case. Quality of previous workperformed by arbitrators will be highly considered.

There is a unique role that arbitration institutions can play in regulating thevocation of the international arbitrator, and this may be an area where arbitrationinstitutions can continue to demonstrate strength in service of due process objectives.As Catherine A. Rogers has forcefully argued:

The relative permanence and visibility of arbitral institutions, as compared toindividual arbitrators, and their intimate knowledge of, and direct involvement in,arbitration practices and procedures gives them an unrivaled institutional compe-tence to regulate arbitrators. Given their institutional competence, they are poisedto become to international arbitrators what bar associations are to lawyers.Arbitral institutions, in other words, should formalize arbitrator qualifications andentry requirements, improve mechanisms for reviewing claims of alleged arbitra-tor misconduct, and impose real sanctions on transgressing arbitrators. Thesechanges necessarily imply a need to intentionally separate the administrativefunctions of institutions from the decision-making services provided by individualarbitrators.79

Although no arbitration institute can currently meet the standards that Rogersadvocates, the FAI implements quality control procedures that are true to the spirit ofthese reforms.

[3] Diversity

Mindful of the importance of expanding the “pool of arbitrators,” particularly given theconcern that arbitration has become an insider’s club,80 the FAI does not hesitate toappoint also younger arbitration practitioners who are known for their talent, effi-ciency, and interpersonal skills (in managing interactions with the parties).

Furthermore, arbitration institutions can proactively take the lead in the appoint-ment of female arbitrators, as lack of gender diversity in arbitral tribunals has been

79. Catherine A. Rogers, The Vocation of the International Arbitrator, 20 Am. U. Int’l L. Rev. 957(2005).

80. Susan D. Franck et al., The Diversity Challenge: Exploring the “Invisible College” of InternationalArbitration, 53 Colum. J. Transnat’l L. 429 (2015).

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recognized as an ongoing issue on a global scale.81 Women are under-represented oninternational arbitration tribunals for a reason that is not entirely clear.

It has been argued that the major reason for the disproportionate appointment ofmen is rooted in the difficulties women continue to face in reaching the senior levels atlaw firms, i.e., there are simply not enough women reaching the top of the profession.82

However, could it be that deeply rooted cultural stereotypes about men and womencould affect the appointment of arbitrators? Even in Scandinavia, where genderequality is among the highest reported in the world,83 it is noteworthy that partiesrarely nominate female arbitrators. According to the FAI statistics, only in two caseshad parties nominated a woman as arbitrator.

One possible explanation for this trend is provided by the “heuristics and biases”research pioneered by Amos Tversky and Daniel Kahneman.84 As Kahneman ex-plained, often the function of a heuristic procedure (which is faster than moredeliberative, rational analysis) is to reduce the complexity of a difficult question:“When faced with a difficult question, we often answer an easier one instead, usuallywithout noticing the substitution.”85 In this case, the difficult question “Who is themost suitable arbitrator to nominate?” may be replaced by simpler questions using theavailability and representativeness heuristics. Availability refers to the process ofanswering the question based on the “ease with which instances or occurrences can bebrought to mind.”86 For the appointment of arbitrators, one would expect thatwell-known arbitrators (who have historically been men) or familiar arbitrators whothe parties have used before will be the easiest examples that come to mind. This couldperpetuate the insider’s club described above. In addition, the representativenessheuristic may be activated when parties are asked to nominate arbitrators. Represen-tativeness refers to the mental shortcut of assessing the overlap of characteristics of anindividual (the specific arbitrator being considered) with the characteristics of aprototypical arbitrator. Effectively, the question of ‘Who is a good arbitrator?’ isreplaced with the question “Does the person I am thinking of have the stereotypicalcharacteristics of an arbitrator?” Given the historical development of internationalarbitration that created the prototypical representation of an arbitrator as a WesternEuropean man,87 this substitution (which does not occur at the conscious level of overtdiscrimination) could account for the bias towards nominating male arbitrators.

81. Ibid. at 429 (reporting that in a large international survey, “17.6% of the arbitrators werewomen, and there was a significant age difference such that male arbitrators were approxi-mately ten years older than women”).

82. Frances Gibb, Gender Equality Reports Find Not Enough Women at the Top, The Times,http://www.thetimes.co.uk/tto/law/article3660135.ece (accessed August 13, 2016).

83. World Economic Forum, Global Gender Gap report 2013 1, 22–25 http://www3.weforum.org/docs/WEF_GenderGap_Report_2013.pdf (accessed November 29, 2015).

84. See e.g., Amos Tversky & Daniel Kahneman, Judgment under Uncertainty: Heuristics and Biases,185 Sci. 1124–1131 (1974).

85. Daniel Kahneman, Thinking: Fast and Slow, 12 (Farrar, Straus, and Giroux 2011).86. Tversky & Kahneman, supra n. 84, at 1127.87. Which is supported by the survey results in Franck et al., supra n. 80, at 429 (noting that “The

median international arbitrator was a fifty-three year old man who was a national of a developedstate reporting ten arbitral appointments.”)


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To address these challenges to arbitrator diversity, arbitration institutions canplay a critical role in expanding the pool of qualified arbitrators that are nominated.Essentially, the availability heuristic can be manipulated for the sake of fairness: ratherthan putting the burden on parties to search for diverse arbitrators, parties can answerthe simpler question of which arbitrator they prefer among the set of arbitratorsendorsed by the arbitration institution.88 Such endorsement reduces the search costsfor the parties and ensures that qualified arbitrators are not overlooked on the basis ofgender, nationality, or other diversity concerns.

For the aforementioned reasons, the FAI is dedicated to promote gender diversityin arbitrator appointments. In 2015, 32% of the arbitrators appointed and confirmed bythe FAI were female, which is a notable achievement taking in the context ofinternational arbitration generally, where the proportion of appointed female arbitra-tors is around 6%.89

An interesting line of psychological research has reported generally that womenare more likely to prioritize procedural justice over distributive justice90 (although thishas typically been assessed from the perspective of women as consumers of the judicialsystem, rather than from positions of power). Given the primacy of procedural justiceconcerns to ensure due process, this finding of gender preference in procedural versusdistributive justice may inform the appointment of arbitrators, particularly whentribunals are being constituted.

[4] Impartiality and Independence

To foster a sense of procedural justice, arbitrators should be impartial and indepen-dent. In practice, as the vocation of international arbitrator has developed, concern hasbeen expressed that impartiality and independence have been compromised by theeconomic incentives of the various actors.91 Arbitration institutions put considerableattention toward this possible perception of bias, and they undertake significant effortsbefore conferring the institutional imprimatur on the arbitrator. These efforts, whenwidely trusted by the international community, lead to perceptions of arbitration

88. Some arbitration institutions attempt to address this by offering a public list of arbitratorsrecommended to the parties. The FAI, however, has chosen not to reduce the diversity problemby simply producing a list, instead focusing on a more comprehensive approach to identifyingqualified, diverse arbitrators.

89. Statistics published by arbitration institutions are in agreement with the general findings ofFranck et al., supra n. 80, indicating that there is a gender imbalance in the appointment ofarbitrators whether by parties or by the institutions concerned. Seeking to counter this trend, FAIis dedicated to the promotion of talented female arbitrators by way of the equal appointment ofmale and female arbitrators.

See also Lucy Greenwood & C. Mark Baker, Getting a Better Balance on InternationalArbitral Tribunals, 28(4) Arb. Int’l 653, 655–665 (2012).

90. See e.g., Jasmine Tata, The Influence of Role and Gender on the Use of Distributive VersusProcedural Justice Principles, 134 J. Psychol.: Interdisciplinary & Applied 261 (2000); Paul D.Sweeney & Dean B. McFarlin, Process and Outcome: Gender Difference in the Assessment ofJustice, 18 J. Organizational Behav. 83 (1997).

91. Fabien Galinas, The Independence of International Arbitrators and Judges: Tampered With orWell- Tempered? 24 N.Y. Int’l L. Rev. 1 (2011).

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institutions and the seat of arbitration as reputable, but commentators have observedthat this reputation for impartiality must be earned.92

Pursuant to the FAI Rules, each arbitrator must be impartial and independent ofthe parties at the time of acceptance of the appointment and must remain so during theentire course of the arbitration proceedings. In practice, before confirmation orappointment, a prospective arbitrator shall sign and submit to the FAI an arbitrator’sstatement of acceptance, availability, impartiality, and independence. In the statement,the prospective arbitrator shall disclose any circumstances likely to give rise tojustifiable doubts as to his or her impartiality or independence. The FAI transmits acopy of the statement to the parties who are invited to submit comments on it or objectto the confirmation or appointment of the arbitrator within a set time limit. During thecourse of the arbitration, the disclosure of conflicts of interest shall be made promptlyand in writing to the FAI, the parties, and the other arbitrators.93 Any arbitrator may bechallenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’simpartiality or independence, or if the arbitrator does not possess any requisitequalification on which the parties have agreed. A party may challenge an arbitratornominated by it only for reasons of which it became aware after the nomination wasmade.94 The FAI’s role is key in the evaluation of such challenges, leading to decisionson the challenge, release, or replacement of an arbitrator.95

Impartiality requires maintained neutrality. All arbitration institutions share thestated goal of arbitrator neutrality, but the psychological reality makes this hard toguarantee in practice. Arbitrators, as imperfect human beings with their own learninghistories, are not immune from assumptions, biases, and judgments about the partici-pants in the process, especially if they have strong reactions towards one of theparties.96 Guarding against these biases requires that arbitrators have insight into theirown perspectives and experiences and understand the impact that these have on theirrelationship with the parties. However, self-awareness does not protect against the“bias blind spot,” which refers to the ease of identifying the biases of others comparedto the difficulty of identifying one’s own cognitive biases.97 In fact, improved cognitiveability (as one may expect is characteristic of an international arbitrator) predicts a

92. Michael I. Kaplan, Solving the Pitfalls of Impartiality When Arbitrating in China: How the Lessonsof the Soviet Union and Iran Can Provide Solutions to Western Parties Arbitrating in China, 110Penn. St. L. Rev. 769 (2006) (Summarizing that “[i]n order to guarantee the legitimacy of thearbitration process, the arbitral institution must ensure the neutrality of the arbitrator. While thisproposition may seem self-evident, in practice the process can be more daunting. First, parties,at least in the short run, would benefit from favorably partial arbitrators. Second, since nationsfall predominantly into either eastern or western political traditions, parties may find itchallenging to find an arbitrator that can fairly balance an issue decided along geopoliticallines.”)

93. Article 20 of the FAI Rules on independence and impartiality of arbitrators.94. Article 22 of the FAI Rules on challenge of arbitrators.95. Article 22 of the FAI Rules on challenge of arbitrators and Art. 23 of the FAI Rules on release and

replacement of an arbitrator.96. Guthrie, Rachlinski & Wistrich, supra n. 43; Sussman, supra n. 43.97. Richard F. West, Russell J. Meserve & Keith E. Stanovich, Cognitive Sophistication Does Not

Attenuate the Bias Blind Spot, 103 J. Pers. Soc. Psychol. 506 (2012).


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stronger bias blind spot.98 Intelligence alone cannot monitor and ameliorate uncon-scious or implicit biases. Saving arbitrators from themselves may be a role forarbitration institutions. For example, there may be value in arbitration institutionsscreening arbitrators on standardized case studies to assess reliability and consistencyof judgments.99 Alternatively, as part of quality control, arbitration institutions couldobserve the proceedings and provide feedback about potential sources of bias to thearbitrators or create “checklist” guidelines100 or algorithms analogous to those thathave become popular in medicine.101 These concerns raise the question—What elseshould arbitration institutions do to serve the needs of their users?—which we addressbelow.

§16.04 RECOMMENDATIONS FOR STRENGTHENING INSTITUTIONALARBITRATION

We posit that effective arbitration institutions continually shape their procedures tomeet the psychological needs of their users. Of critical importance is knowledge of userneeds and preferences and obtaining user feedback throughout the arbitration proceed-ings. In addition, clarifying common misconceptions about international arbitration,particularly for inexperienced users, should be a focus. Finally, arbitration institutionsshould be prepared to address concerns about non-compliance with awards, whichmay be a barrier for users considering arbitration in a particular seat.

[A] Knowing the Users and Soliciting Feedback

Since arbitration institutions’ customers include a wide range of arbitration users fromindividuals to multinational corporations who differ along the spectrum of expertise(from laypeople and lawyers considering arbitration for the first time to experiencedend users and arbitration practitioners), knowledge and sensitivity to the needs andexpectations of users is paramount.

Summarizing the results of the various Queen Mary Surveys, internationalarbitration users look for the following characteristics in arbitration institutions: high

98. Ibid.99. For a longer discussion of methods to counter the effect of cognitive biases, see elsewhere in

this volume Cornel Marian and Sean P. Wright, The Separate Awards for the Advance on Costs:Psychological Phenomena that Account for Biased Risk Assessment Generated By EarlyVictories and Methods for Legal Counsel to De-bias Risk Assessment.

100. An example of possible guidelines for arbitrators is provided in Sussman, supra n. 43.101. For example, guidelines like those in Sussman, supra n. 43, could meet the Queen Mary

survey respondents’ desire for transparency in arbitrator selection, supra n. 22. This is similarto the approach in medicine of using standardized clinical algorithms which are more efficientthan relying on the expertise of individual physicians. See e.g., Brendan M. Reilly et al., Impactof Clinical Decision Rule on Hospital Triage of Patients with Suspected Acute Cardiac Ischemiain the Emergency Department, 288(3) JAMA 342 (2002); Atul Gawande, The ChecklistManifesto: How to Get Things Right (Holt 2009). Clearly, arbitration institutions could play arole in developing and publicizing fair selection criteria for arbitrator selection; once theguidelines are developed, the process of evaluating prospective arbitrators becomes moreefficient and less subject to criticisms of biased decision-making.


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level of administration, neutrality and internationalism, global presence/ability toadminister arbitrations worldwide, and some degree of transparency.102 Additionalfactors influencing the choice of arbitration institutions are free choice of arbitrators,early procedural conference, scrutiny of award, regional presence/knowledge, strongreputation, and widespread recognition of the institution.103 The results of thesesurveys have begun to have an impact as a number of arbitral institutions haveimplemented measures to increase transparency and certainty.104

In the rapidly evolving and highly competitive field of arbitration, none of thesecharacteristics can be taken for granted. It requires constant work for arbitrationinstitutions to achieve and maintain world-class reputations. Economic competitionhas helped the development of arbitration institutions, by incentivizing them toimprove their services and rules in order to attract customers. Although there is adiverging trend, in which arbitration institutions have a need to distinguish themselvesfrom their competitors, in some respects they are converging, which can be explainedby the common effort to implement “best practices” that standardize institutionalbehavior. When arbitral institutions revise their rules, they take into account any bestpractices that have crystallized since the last revision of the rules. Since arbitrationinstitutions track best practices, institutional arbitration rules become increasinglysimilar with each successive revision. Given the growing number of arbitrationinstitutions all over the world, institutional participation in and knowledge of com-parative studies that characterize their rules, tasks and powers, and provide statistical

102. 2015 Survey of International Arbitration, supra n. 1; 2013 Survey of International Arbitration,supra n. 1.

103. 2010 Survey of international Arbitration, supra n. 10, at 1.104. The FAI, for example, publishes case commentary regarding selected awards, orders and other

decisions, taking care that all references to the parties’ names and other identifying details aredeleted to ensure confidentiality. The LCIA has been providing reasons on challenges toarbitrators for many years. Further, in November 2015, the LCIA released data about theaverage costs and duration of arbitrations under its auspices. It explained that publication ofdata regarding average costs of LCIA arbitrations was necessary given that it assesses fees onan hourly basis, unlike other institutions operating on an ad valorem basis (such as SIAC or theICC).

The ICC publishes extracts from procedural decisions made by tribunals, on topics suchas security for costs and evidence. It also publishes anonymized extracts from arbitral awards,providing examples of arbitrator decisions on a variety of subject areas, such as multi-tierdispute resolution and corruption. As of October 2015, the ICC is also issuing reasons to theparties for certain procedural decisions, including challenges to arbitrators, prima faciedecisions on jurisdiction and decisions on the consolidation of proceedings.

In addition to this, last year, the ICC announced that it would publish the names ofarbitrators sitting in ICC arbitrations for cases commencing on January 1, 2016 onwards to helpparties assess how busy a particular arbitrator is and his or her likely availability. Although nocase details will be published, parties can opt out of this publication. Moreover, the ICCannounced that it will reduce the fees paid to arbitral tribunals that fail to submit a draft awardwithin three months of the last substantive hearing or the last substantive post-hearingsubmission (two months in the case of a sole arbitrator).

Likewise, the SCC, in February 2016, in order to address the parties’ concerns as topredictability of the recoverability of the costs of the arbitration and to increase transparency ofSCC practice, published a report on costs of arbitration and apportionment of costs on the basisof the outcome of the case under the SCC Rules. The report also describes how party conductinfluences both the tribunal’s apportionment decisions and the recoverability of costs.


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benchmarks to distinguish institutions from each other is a valuable endeavor in theservice of better user experience.105

Users’ perspectives are critical to track throughout the arbitration process.Surveys of user perceptions, preferences, and attitudes among dispute resolution usersoffer an excellent opportunity to identify and subsequently meet their expectations andneeds. In addition to the administration of cases, arbitration institutions dedicate timeto education and the promotion of arbitration as a method of dispute resolution,106 andthey would be well served by increasing thoughtful efforts into educating the publicabout the benefits of arbitration.

Arbitral institutions generally have some mechanism for soliciting careful cus-tomer feedback and addressing concerns that arise. We expect that the care andthoroughness that is put into these mechanisms varies widely across arbitrationinstitutions; some may offer simple pro forma feedback mechanisms while othersemploy regular, responsive mechanisms for customer feedback.

Opportunities for customer feedback should be present from first contact andcontinue throughout the proceedings. Feedback from customers can be solicitedthrough formal written comments, but also in an informal manner during conversa-tions with customers or at conferences. Feedback can also be obtained by surveys.

As an example, the FAI has implemented a “customer satisfaction survey,” whichis sent to parties to arbitrations after the final award has been rendered. The purposeof the survey is to get information on the level of satisfaction of the parties with regardto the arbitration, the performance of the arbitrator, the FAI Rules, and a rating of thecustomer service. The survey has been considered successful by the FAI in that it hasprovided the FAI with further insight on the parties’ level of satisfaction with thearbitration (something that does not follow from reading the arbitral award). At thesame time, the survey has provided a voice to parties (fulfilling one element ofprocedural justice), who are willing to share their experience with the FAI after thearbitration has concluded. In practice, the survey is not answered by many parties andthe responses tend to lack objectivity, i.e., one can easily see from the answers who haswon or lost the case. Nevertheless, the FAI considers getting feedback from the partiesto an arbitration highly valuable and is considering improvements to the feedback formand procedure.107 Some users have suggested that the survey be sent to the parties

105. See e.g., Loukas A. Mistelis, Concise International Arbitration (Kluwer Law International 2010),Pascale Gola, Claudia Götz Staehelin & Karin Graf, Institutional Arbitration: Tasks and Powersof Different Arbitration Institutions (Schulthess 2010), and Philipp Habegger et al., ArbitralInstitutions under Scrutiny, ASA Special Series No. 40 (JurisNet, LLC 2013).

106. As an illustration, the FAI has organized for two consecutive years the “Finnish ArbitrationAcademy” aiming to provide legal practitioners with experience and interest in arbitration withthe necessary tools to effectively participate in arbitrations as counsel or arbitrators inaccordance with current best practices and standards. Amongst the seminar activities, the FAIhas successfully organized the international conference “Helsinki International ArbitrationDay” for four consecutive years on hot topics in international arbitration.

107. In 2015, another arbitration institution, the Hong Kong International Arbitration Centre(HKIAC), launched a system that allows users to evaluate the conduct of their arbitralproceedings and the performance of their arbitrators. HKIAC describes the system as part of itscontinuing efforts to draw on users’ feedback to appoint fair and competent arbitrators and toperfect HKIAC’s case administration services.


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before the final award is rendered. Generally, this is a sound strategy since surveyingusers’ perceptions of fairness prior to announcement of the award may foster the users’sense of fairness in the process (procedural justice) separate from their perception ofthe fairness of the award (distributive justice).

The observation that perceptions are influenced by the fact that one party haswon or lost the decision is expected in light of research on the “illusion of certainty,”in which prior perceptions are strongly misremembered after a significant event.108

Clearly, feedback after the decision is rendered is valuable and should be collected, but,as Donna Shestowsky and colleagues have shown (in the rare longitudinal studies),disputants’ preferences for alternative dispute procedures prior to the decision canpredict satisfaction with the proceedings after the decision is rendered.109 It is unclearif this pattern applies in the case of international arbitration, but certainly this researchhas established that simply administering satisfaction surveys at the end of theproceedings is a missed opportunity to predict the needs and satisfaction of usersearlier in the process.

[B] Clarifying Misconceptions

Misperceptions about the nature and practice of arbitration persist, particularly forthose with limited experience using arbitration. For instance, less experienced arbitra-tion users are usually surprised by the fact that an arbitral decision cannot be appealedon the merits. Since the general public is more familiar with court proceedings that arecommon in litigation (or even criminal matters) than with arbitration, many usersexpect to have the possibility to appeal the arbitration decision, which might lead themto perceive the lack of arbitration review as a disadvantage in comparison to courtproceedings.

Similarly, the benefits of institutional arbitration in comparison with ad hocarbitration are less known by the general public and even by members of the legalprofession. This appears evident from the comparisons that are sometimes drawnbetween institutional and ad hoc arbitration which lead to the inaccurate perceptionthat ad hoc arbitration is less expensive and more flexible than institutional arbitra-tion,110 which, based on the FAI experience and other arbitration institutions’ experi-ence, does not hold true. As for the costs of the arbitration, administrative fees chargedby arbitration institutions are modest when compared with the other costs of thearbitration (particularly the fees of the parties’ lawyers),111 and the arbitrators’ fees andexpenses are generally fixed by the institution on the basis of predetermined feeschedules. In fact, ad hoc arbitration tends to be more expensive than institutionalarbitration, as arbitrators will determine their own levels of compensation for their

108. Baruch Fischhoff, Paul Slovic & Sarah Lichtenstein, Knowing with Certainty: The Appropriate-ness of Extreme Confidence, 3 J. Exp. Psychol.: Human Perception and Performance 552 (1977).

109. Shestowsky & Brett, supra n. 42.110. McIlwrath & Savage, supra n. 31.111. According to recent FAI statistics, about 73% of the costs of arbitration proceedings under the

FAI Rules consist of the parties’ legal costs and only around 19% consist of arbitrators’ fees.The remaining 8% of the overall costs consists of the FAI administrative fees.

Adriana Aravena-Jokelainen & Sean P. Wright§16.04[B]

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work as arbitrators and the administrative tasks performed in the absence of anarbitration institution.112

The promise of confidentiality is complicated in arbitration; there is not a binarydistinction between confidentiality in institutional arbitration versus ad hoc arbitra-tion. In institutional arbitration, the degree of confidentiality will depend on thearbitration rules chosen by the parties. In this respect, the FAI’s interest in securing theconfidentiality of the arbitration proceedings is strong.113 However, even when im-posed by the rules of an arbitration institution, in practice, it is difficult to guaranteethat confidentiality will be respected by the parties. Further, whether institutional or adhoc, there is a risk of arbitration compromising confidentiality if a party applies to thecourts at any point, for example, in challenge and enforcement proceedings.114

Moreover, confidentiality will depend on the procedural rules applicable to the arbitralproceedings, i.e., on the law at the seat of arbitration.

In sum, these various perceptions reflect common misconceptions, a conclusionthat is supported by the generally positive perceptions of institutional arbitration asdescribed in the various surveys conducted by the School of International Arbitrationat Queen Mary University of London.115 Participant responses support the view thatmodern and reputable arbitration institutions are service providers whose worksupports the efficiency and smoothness of the arbitration proceedings. These institu-tions have rules that are flexible to allow the balance of due process, efficiency, andparty autonomy.

112. See McIlwrath & Savage, supra n. 31.113. Article 49 of the FAI Rules provides that:

(1) Unless otherwise agreed by the parties, the FAI and the arbitral tribunal shall maintain theconfidentiality of the arbitration and the award. Any expert or secretary appointed by thearbitral tribunal, the members of the Board and the representatives of the Secretariat arebound by this obligation.

(2) Unless otherwise agreed by the parties, each party undertakes to keep confidential allawards, orders and other decisions of the arbitral tribunal, correspondence from thearbitral tribunal to the parties, as well as documents and other materials submitted byanother party in connection with the arbitration, except where and to the extent that:(a) such information (i) is publicly known or available, or subsequently becomes

publicly known or available without any breach of confidentiality obligation by thereceiving party, (ii) was in the lawful possession of the receiving party, without beingsubjected to confidentiality obligation, prior to its receipt from the disclosing party,(iii) is independently developed by the receiving party, or (iv) is received from a thirdparty without any breach of confidentiality obligation; or

(b) disclosure may be required of a party by a legal duty, to protect or pursue a legal right,or to enforce or challenge an award in legal proceedings before a judicial authority; or

(c) there is otherwise a demonstrated need for disclosure that outweighs any party’slegitimate interest in preserving confidentiality.

(3) The deliberations of the arbitral tribunal shall be confidential.(4) Unless otherwise agreed by the parties, the FAI may publish excerpts or summaries of

selected awards, orders and other decisions, provided that all references to the parties’names and other identifying details are deleted.

114. See McIlwrath & Savage, supra n. 31.115. 2015 Survey of International Arbitration, supra n. 1; 2013 Survey of International Arbitration,

supra n. 1; 2010 Survey of international Arbitration, supra n. 10; 2008 Survey of InternationalArbitration, supra n. 5.


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[C] Addressing Enforceability and Compliance with Awards

Since arbitration takes place outside the formal judicial context, parties may beconcerned about actually realizing an award after it is decided. From the perspective ofprocedural justice, users voluntarily cede decision control, which is “the extent towhich disputants are free to accept or reject the result of a third party intervention.”116

The issue of enforcement of decisions is a potential threat to the perceived legitimacyof international arbitration; as such, arbitration institutions should be prepared toaddress user’s concerns, particularly if parties are interested in maintaining thecommercial relationship.117

In order to ensure the enforceability of both the arbitration clause and theprospective arbitral award, arbitration institutions consistently recommend that partiesuse their standard model clauses in order to avoid defects that could result in the failureof the arbitral clause or unenforceability of an arbitral award. Further, many arbitrationinstitutions’ rules provide that the arbitral tribunal and the parties shall make everyeffort to ensure that all awards are legally enforceable (e.g., Article 50 of the FAI Rules),that the award shall be final and binding on the parties, and that by agreeing toarbitration under the rules, the parties undertake to carry out all awards without delay(e.g., Article 41.4 of the FAI Rules). In addition, many arbitration institutions supervisethe arbitration process from the filing of the request for arbitration until the arbitralaward is rendered. This enhances the enforceability of the arbitral award sincepotential problems can be identified before the award is rendered. Some commentatorssuggest that scrutiny of the award (e.g., as performed by ICC and other arbitrationinstitutions) would enhance the enforceability of the arbitral award,118 while othersclaim that scrutiny delays the process and that a checklist for the arbitral award wouldsuffice.119 In addition, the reputation of the arbitration institution may affect thelikelihood of compliance since arbitral awards rendered under the rules of widelyrecognized arbitration institutions are more easily enforceable than those renderedunder the rules of unknown arbitration institutions. Although arbitration institutionscannot guarantee awards will be complied with,120 an outcome study by Naimark andKeer121 found that rates of compliance with arbitral awards were quite high.

116. Edgar A. Lind, Robin I. Lissak & Donald E. Conlon, Decision Control and Process Control Effectson Procedural Fairness Judgments, 13 J. App. Soc. Psychol. 338, 339 (1983).

117. Rebecca Hollander-Blumoff & Tom R. Tyler, Procedural Justice in Negotiation: ProceduralFairness, Outcome Acceptance, and Integrative Potential, 33 L. & Soc. Inquiry 473, 493–495(2008).

118. Flecke-Giammarco, supra n. 66, at 68.119. Oliver Brown, The Pros and Cons of the Scrutiny of Arbitral Awards, Lexis-Nexis Dispute

Resolution Blog, http://blogs.lexisnexis.co.uk/dr/the-pros-and-cons-of-the-scrutiny-of-arbitral-awards/ (accessed November 29, 2015).

120. Historically, arbitration institutions could affect the reputation of the parties as discussed inJussi Lehtinen & Heidi Yildiz, Finland: 100 Years of Institutional Arbitration, The European andMiddle Eastern Arbitration Review 2012 (2012) (“the first rules of the Finnish arbitrationinstitute provided that a party that had failed to comply with the award was to be publiclynamed on the notice board of the Helsinki Stock Exchange or on another such public noticeboard as the arbitration institute saw fit. In the worst case of non-compliance, the public noticewas to remain in place for a period of five years.”)

121. Richard Naimark & Stephanie A. Keer, Post-award Experience in International CommercialArbitration, 60 Disp. Resol. J. 94 (2005).


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§16.05 CONCLUSION

This chapter has explored some of the psychological aspects that characterize thepurpose and procedures of arbitration institutions, a perspective that should not beoverlooked by dispute resolution actors given the careful balance needed to achieve theobjectives of arbitration. The FAI and other arbitration institutions have endeavored toincrease knowledge of domestic and international arbitration. However, more coop-eration (and spirited competition) should be fostered between arbitration institutionsand the other actors in the field of arbitration (e.g., arbitration groups and associations,universities, law firms, courts) to increase, on the one hand, the understanding ofarbitration as a method of dispute resolution among users and, on the other hand, toincrease the understanding of users’ needs and perceptions. By this effort, institutionalarbitration could better serve the needs of users of dispute resolution services, enhanceaccurate users’ perceptions of the benefits and challenges of arbitration, and helpshape their expectations and preferences to accord with reality. This adaptationprocess should promote diversity in the operation of arbitration institutions, not limitit. Arbitration institutions and the arbitrators who they appoint should not be homo-geneous, but rather be diverse to meet the different needs and preferences of arbitra-tion users.

In evaluating the effectiveness of arbitration institutions, one cannot analyze onlyprocedural and legislative aspects. As we have shown, the psychological aspects,including the perceptions, expectations and preferences of arbitration users, must beaccounted for since users are the ultimate beneficiaries of the dispute resolutionsystem.


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Documents

The Roles of Psychology in International Arbitration · 2001 to further his ... (Oxford University Press, 2015, 2nd edition ... on English Public Policy and Mandatory Rules in International