Washington University in St. Louis School of Law’s Whitney R. Harris World Law Institute and Negotiation and Dispute Resolution Program hosted the International Arbitration & Dispute Resolution Symposium: Challenges and Controversies in International Arbitration on March 1, 2019, in St Louis, Missouri. Nicole Gougeon, a Washington University School of Law Faculty Fellow, and student, Henrik Tessem, report.
This year’s symposium, chaired by M. Imad Khan of Hogan Lovells, reflected upon the recent shifts in both investor-state and commercial arbitration. Sophie Nappert, of 3VB Barristers, launched the symposium with a keynote address on “Defining (And Defending) Values in International Arbitration.”
The powerful, and expanding normative powers of private dispute resolution, coupled with the ease of enforcement of awards afforded by the New York Convention, may have caused practitioners and users to lose sight of the core values that underpin the field, as the relative simplicity of the process has incentivized conquering each new case in the same old-fashioned way.
Discussing the 2018 Queen Mary survey and the Global Pound Conference Series report, Ms. Nappert inferred that challenges to international arbitration stem from the perceived indifference of arbitration practitioners to deviate from the arbitration status quo. Drawing from the results of these surveys, Ms. Nappert indicated reliance on a small set of arbitral institutions, a focus on exclusively adversarial dispute resolution, and a stated belief that diversity in the composition of panels might be irrelevant as key obstacles to the continued success of international arbitration in modern times.
Lagging governance functions require tools or change to tackle the looming challenges to international arbitration. Incorporating the Millennial values of Dynamism and Making a Difference in the practice of international arbitration, Ms. Nappert argued, will make for a field better prepared to confront disruption, misperception, and issues of corruption, while addressing stagnant mentalities.
Recalibrating IA Values
With reference to criticism of the current international arbitration status quo, Ms. Nappert recalled some of its traditional values: fairness, even-handedness, impartiality. By incorporating the Millennial values of Dynamism and Making a Difference along-side the traditional values, practitioners can increase transparency and more adequately address issues of corruption. However, critics and current users are uneasy with changing a system that they believe broadly works. It can be argued that the traditional values are hardly poised for recalibration. However, these traditional values inherently come with the institution of arbitration. Abuses of impartiality may occur in the legal field unless a recalibration in light of the Millennial values occurs.
Further, Ms. Nappert discussed values such as the supra-national normativity that follows with the nearly limitless autonomy of the arbitral regime, the great extent of deference granted to arbitration by municipal courts and legislators, and the ease of enforcement of arbitral decisions afforded by the New York Convention. Ms. Nappert’s speech is not a charge against these values but rather an embrace of how the arbitral regime has helped to usher in a new forum for dispute resolution. Building on her sentiments, the recalibration of the values in international arbitration seeks not to oust the current values but rather revamp the structural framework within which these values exist.
Pointing to a market indicator for international arbitration, Ms. Nappert referred to the 2018 Queen Mary survey “The Evolution of International Arbitration” for yet another set of values that resonate with private practitioners, arbitrators, and users of international arbitration: namely, the ability to customize the adjudicating body of a dispute by appointing an arbitrator. However, the value of customization comes at the price of critique against the lack of arbitrator diversity when disputants are left to select their own adjudicators.
Further, Ms. Nappert pointed out that the Survey results showed that users were happy to use word of mouth and internal colleagues as a source of information for appointment. Critics of international arbitration may point to this as evidence of a skewed decision-making process. Instead of dismissing such critiques as ignorant of the procedural guarantees found within the legal framework of institutional arbitration, Ms. Nappert contended that practitioners and users of arbitration must convey the values of international arbitration in a way that is intelligible to and provides a cogent answer to the critics.
This is where Ms. Nappert seeks to encourage an answer that departs from the old way of dismissing critiques as ignorant. Instead of clinging to the values of old and expecting a different response from critics, Ms. Nappert opined that communication should extend to a recalibration of the values themselves. An enterprise of this measure requires a new power of insight and knowledge, coupled with an irresistible urge to change old patterns for the common good: that power is found in the Millennial force.
Encouraging the workforce of tomorrow to disrupt the status quo of international arbitration, Ms. Nappert directed the focus of her address towards a new set of values, which include making a difference through tackling issues of corruption and illegality and dynamism through sensing, shaping, and seizing new opportunities.
Making a Difference – Tackling Allegations of Corruption and Illegality
Just as Ms. Nappert started discussing the Millennial value of Making a Difference, a rally led by Washington University students marched by – chanting for change. Without skipping a beat, Ms. Nappert asked: “Is that for me?” While attendees laughed, it was clear that her message had been well received.
Millennials, she noted, derive greater satisfaction from the ability to work in an environment that can make a change in their lives, communities, and the world than any previous generation. Pertaining to international arbitration, this means that Millennials derive satisfaction from finding practical solutions to tackle corruption and illegality at its source – within the status quo. The old adage, “If it isn’t broken, don’t fix it,” no longer resonates with a generation of fixers, thinkers, and doers. Instead, Millennials ask: If it isn’t broken, how can we improve it?
It is with this mindset that Millennials are uniquely situated to take on Ms. Nappert’s challenge and to tackle these “festering wounds” within our global society. While, as she noted, the current climate surrounding corruption is of the strictest condemnation, the reality remains that parties and arbitrators alike are still debating surface issues around the problem, such as the applicable standard for proving these allegations, instead of focusing on prevention from the outset. Unfortunately, the challenges do not stop there, and there are a wide range of issues to address, including alleging, proving, reporting, and sanctioning corruption.
At this point Ms. Nappert articulated her primary issue with the status quo: Many arbitrators seem content to ignore the very topic of corruption once their condemnation has been voiced.
Calling for a reform of arbitral practice on this topic, she pointed to three recent decisions from the French Courts which have used the public policy exception to refuse to enforce arbitral awards after reopening the merits of the case and scouring the records for indicia of illegality and corruption.
Belokon v. Kirghizistan was discussed in particular. Ms. Nappert suggested that the “concrete and decisive” standard of proof required by the tribunal to determine whether money laundering had occurred was considered by the French Court to have blinded the tribunal to the investigation of red flags indicative of money laundering. It should not be reasoned that corruption and illegality which “by its very nature, thrives in the occult and the unsaid” must be proven to a degree exceeding the usual civil standard.
The Paris Court of Appeal found that there existed “grave, precise and converging” manifestations of illegality.
Ms. Nappert counseled the audience that when a state court in a country with a history of deference to arbitral awards considers it necessary to reopen the merits of a case, we should not only be concerned, but take immediate action to remedy the blight in our processes, mentality, and ultimately our reputation.
One way to Make a Difference and address the investigation of corruption allegations is through the assistance of technology. Ms. Nappert encouraged Millennials to look to the future, and with it, “Arb-tech” and the use of algorithms to identify and sanction corruption and illegality.
Dynamism and the IA Process
Turning to the value of Dynamism when redesigning the values and expectations of the international arbitral process, Ms. Nappert pointed to a strategy of system dynamism posited by Teppo Felin and Thomas Powell, Professors of Strategy at the University of Oxford’s Saïd Business School.
In their 2016 article “Designing organizations for dynamic capabilities” the professors discussed the dynamic capabilities of a system and the tools for revamping a system through the use of “the three S’s” – the sensing, shaping, and seizing of new opportunities.
Understanding the need for dynamism strategy within the field of international arbitration requires an understanding of the premise behind the theory of organizational dynamic capability. The theory of an organization’s dynamic capability is based on the premise that “[e]ven if a company’s advantages are inimitable due to experience or proprietary knowledge, disruptive technologies and business models can undermine the underlying drivers of industry advantage, making conventional advantages irrelevant or out of step with market conditions and customers’ requirements.”
The corollary of this theory is that “continuous improvement of existing capabilities is not enough [and that] organizations need an overarching capacity for developing new capabilities that anticipate and respond to a turbulent marketplace.”
Tying this into the recalibration of international arbitration values, this strategy entails revamping international arbitration’s organizational structure through a well-known feature of arbitration: giving autonomy in decision-making to the users of the structure. To this, Ms. Nappert presented an example of increased autonomy in the arbitral regime: the online arbitration system Kleros which was created to resolve blockchain disputes. As a disruptive tool for providing access to arbitration to a larger crowd of users, Kleros utilizes anonymous arbitrator appointment and consensus incentivization through use of algorithms that measure the arbitrators’ conformity with calculated standards of what is deemed a “correct” verdict.
Anonymous and algorithm-based appointment might appeal to those who criticize international arbitration’s perceived collegiality and non-diversity in arbitrator selection. However, Ms. Nappert opined that these new services run the risk of swapping the values of arbitral due process with rapid and simplistic resolution of the dispute.
Drawing from the Queen Mary Survey, Ms. Nappert noted that 80% of respondents viewed arbitral institutions as the proper agents for future change in the field. Integrating technology into institutional dispute resolution may be one way that these institutions will not only answer to critics but also take an important step towards developing a new era of international arbitration.
Ms. Nappert closed her talk with a selected review of the challenges presented by Millennial values, such as impatience. Specifically, she cautioned our desire to Make a Difference, and act and achieve goals immediately. Being an arbitrator is an “isolating business,” which requires the development of a mindful knowledge of one’s limitations and a realistic grasp of one’s own abilities. This was not to say that Millennials could not achieve a place on a tribunal in a relatively short time, but rather to caution that there are serious implications when using one’s own “judgment, common sense, and legal and human reasoning” to decide high-stake disputes.
Next, Ms. Nappert discussed the role played by influencers and incentivizers in Millennial culture. Consensus becomes the ultimate goal when pursuing “likes” within the social-media hierarchy but is not necessarily a trait to be valued when deciding disputes. Discussing Kleros, which is inherently consensus-driven in its approach to dispute resolution, Ms. Nappert highlighted their model of game theory incentivization, which relies on anonymous jurors accessing shared evidence to reach a similar verdict, to the audience: Can it work? Is it not antithetical to the system of delivering sound reasoning regardless of what one’s peers may think? This platform seems to ignore the need for reasoned discourse when evaluating the merits of a case. While it may work in a limited sphere such as software development, might the incentivization of consensus drive participants to overlook or disregard certain facts or issues in order to better preserve the majority?
While these challenges are framed amongst Millennial values when it comes to confronting the status quo of international arbitration, the incentive of being liked, and being impatient with stagnation has tormented humanity for millennia.
Ms. Nappert concluded her keynote with a very prolific quote from Nobel Prize Laureate Albert Camus: “Without a doubt, every generation believes that it is destined to change the world. My generation, however, knows that it will not. But its task is greater still. It consists in preventing the world from unraveling.”Ms. Nappert acknowledged that maybe Millennials’ predecessors are so resistant to change because they bear this burden of maintaining the semblance of a coherent world. In the alternative, because the status quo has worked for a long time there will be a legitimate notion of hesitancy as long as critics of the system cannot show that the intended recalibration will further the current efficiency of international arbitration.
Our generation must focus on fortifying what works and changing what does not. It is within this duality – preservation and reformation – that today’s practitioners, students, and academics must find balance. It is hoped that these efforts will allow whoever comes next to not be burdened with preservation but instead allow them to focus purely on improvement and innovation.
The International Arbitration & Dispute Resolution Symposium was sponsored by The Claro Group, U.S. Arbitration & Mediation, the American Arbitration Association and its International Centre for Dispute Resolution; the American Branch of the International Law Association; the Asian International Arbitration Centre; the ICC International Court of Arbitration; and the National Academy of Arbitrators.