The Past, Present, and Future of Arbitral Diversity in Investment Arbitration
by Ana Prundaru
Introduction
Arbitral diversity remains a topical issue in international investment arbitration. Despite the multitude of legal systems reflected in investor-state disputes, arbitrator panels are often homogenous in terms of gender, nationality, ethnicity, age, and other factors.[1] In observance of this homogeneity, the average international arbitrator has been typically described as a ‘fifty-three-year-old man who was a national of a developed state.’[2] As arbitration institutions work to improve the perceived legitimacy of investor-state dispute resolution, the issue of arbitral homogeneity is a recurring and yet to be settled matter.
2. Why does Arbitral Diversity Matter?
Two major reasons[3] which underpin the proposal to diversify arbitral tribunals relate to higher quality of decision-making and strengthened democratic legitimacy of the investment arbitration regime.[4] A diverse tribunal enables arbitrators to contribute different perspectives on a legal issue.[5] Groupism and cognitive biases are also less likely to occur among adjudicators from multiple backgrounds.[6] Critics have raised concerns that investor-state arbitration often favours interests of corporations of wealthy states over interests of poorer nations.[7] The addressal of these issues is likely to inject much needed confidence in awards rendered in investor-state arbitration.
2. The Arbitral Diversity Discourse So Far
In-depth study of arbitral diversity has been hampered by the private nature of the investor-state dispute resolution process.[8] However, recent years have witnessed increased transparency and public scrutiny of investor-state arbitration in relation to arbitral claims, awards, and arbitrators themselves.[9] This is in part due to the acknowledgement of the principle that justice needs to be seen to be done.[10]
i. Non-Western Representation
In a recent study, it was concluded that 35% of investment arbitrators are from non-Western states.[11] This is particularly relevant as most respondents come from developing and non-Western states.[12] Ensuring that the makeup of the global community is better reflected in tribunals is likely to lower public distrust in the validity of the investor-state dispute settlement process.[13] Given these legitimacy concerns,[14] it has been suggested to establish arbitrator pools that aptly reflect their diverse constituencies.[15]
ii. Intersectionality
Early attempts to address diversity of adjudicators in investor-state disputes have almost exclusively focused on gender imbalances.[16] Recent studies found that 11% of arbitrators at the International Centre for Settlement of Investment Disputes (ICSID) are women.[17] While providing a broad overview to the gender issue, this approach failed to consider other factors that intersect gender, such as socioeconomic status and ethnicity. As such, these approaches were not completely successful in accurately describing the extent of the diversity problem. Importantly, the discussion has progressively expanded beyond a sole focus on gender and embraced intersectional approaches. These approaches consider different facets of diversity in an aspiring arbitrator.
In order to better understand barriers to becoming an arbitrator, it is therefore important to consider multiple social identities, such as gender, ethnicity and class. A look at the ICSID arbitral tribunal make-up in the period of 2012-2017 reveals that merely three out of 951 appointed arbitrators were female, non-white, and hailing from developing nations.[18] This expansion of the gender imbalance through ethnicity and nationality allows for a better inference into where focus is required for initiatives to promote inclusivity.
3. Challenges and Opportunities in Increasing Diversity Among Investor-State Arbitrators
The following part presents key reasons which underpin the persistent arbitral homogeneity in investor-state arbitration. These relate to the party-autonomy principle and prior experience standard on one hand, and the appointment process on the other. Subsequently, two proposals are inspected that are designed to dismantle homogeneity of the arbitrator pool. Each approach is analysed in light of its potential to enhance diversity and overall improve the investor-state dispute resolution mechanism.
i. Entrenching Arbitral Homogeneity: Appointing Authorities and the Principle of Party Autonomy
Under the UNCITRAL Arbitration Rules, if parties have agreed on a sole arbitrator, but fail to reach common ground, the appointing authority appoints a sole arbitrator at the request of one of the parties.[19] By virtue of this role, appointing authorities have potential to influence the composition of tribunals and ultimately diversify the pool of investor-State arbitrators.[20] However, these authorities only have such potential where parties are unable to agree upon an arbitrator at the first instance under the principle of party autonomy. As is shown, this presents significant issues.
Party autonomy is one of the underlying principles of arbitration and can perpetuate arbitral homogeneity. While seemingly impartial, the reality of selection of arbitrators paints a picture of systematic bias. The principle of party-autonomy dictates that in most arbitrations, parties and their counsel appoint their arbitrator(s). Given that arbitrators are appointed on this case-by-case basis, there is no one institution methodically pursuing arbitral diversity.[21]
When selecting an arbitrator, parties generally seek the advice of a trusted law firm and rely on past experiences. When parties seek a trusted law firm’s expertise in appointing an arbitrator,[22] high-profile, partner-level candidates are those who are represented. This leaves those who have not made partner level in major firms and those who are underrepresented on the bench less likely to be considered.[23] Furthermore, those high-profile candidates are likely to continue acting for those parties based on past experience. [24] This system of party autonomy provides a grim picture of underlying bias and barriers against increased representation of diverse candidates.
ii. Opportunities to Overcome Homogenous Tribunals: ‘Inspired Arbitrator Choices’ and Blind Selection Processes
An investor-state arbitrator panel that represents constituencies more accurately brings with it strengthened cultural competence that allows for disputes to be considered from different angles. This raises parties’ trust that their points are fully understood. In that sense, parties may be more likely to accept an award, which in turn can improve the perceived legitimacy of the investment arbitration regime. Proposals such as ‘inspired arbitrator choices’, along with blind selection processes have the potential to effect a better system of arbitration.
When parties to arbitration delegate arbitrator selection to an appointment authority, real progress on arbitral diversity can be achieved through the proposed regime of ‘inspired arbitrator choices’.[25] Inspired arbitrator choices require those with power to influence the arbitrator appointment outcome to critically examine unconscious biases on the ideal arbitrator. In light of the homogenous investor-state arbitrator pool, inspired arbitrator choices may lead to dismantlement of ready-made lists of qualities traditionally sought from investment arbitrators. As a result, a candidate who may not perfectly fit the picture in terms of organisational memberships or academic background may nonetheless contribute to decision-making. For example, this could be through cultural knowledge, which helps to understand a dispute in context.[26] Furthermore, initiatives such as the Equal Representation in Arbitration pledge[27] encourage counsel, arbitrators, and arbitration institutions to cement their commitment to achieve a fair representation of female arbitration candidates.[28]
To broaden the investor-state arbitrator pool, blind selection processes have been proposed. This entails disputing parties choosing from arbitrator resumes that have the names redacted.[29] Similar blind interview models have been adopted successfully in other fields. For example, using a screen to obscure the identity of the applicant resulted in a 25% raise in female musicians among symphony orchestras in the United States.[30] In a similar vein, removing the names of arbitrator candidates from their curriculum vitae is likely to facilitate a selection without unconscious bias related to gender or other characteristics. Focusing purely on candidates’ skills ensures that unconscious biases do not interfere with the hiring process. Given that arbitrators are chosen based on their skillset alone, the perceived fairness of decisions is likely to rise. Therefore, adopting relevant hiring policies to promote more inclusiveness in investment arbitration may also reflect well on the legitimacy of the investor-state dispute settlement regime.
Less homogeneity in panels lowers the likelihood of uniform thinking. The decision-making process of arbitrators from different walks of life is less likely to be tainted by groupthink,[31] as opposed to decisions made by cohesive panels.[32]Having a diverse adjudicating body raises the chances of considering different perspectives and innovative solutions. Consequently, the presence of diverse arbitrators is likely to create better balanced awards. Therefore, meaningful steps to enhance arbitral diversity can tremendously improve the quality of decision making.
Conclusion
Enhancing arbitral diversity is a critical component of addressing the legitimacy problem in investor-state arbitration. Promoting inclusiveness toward arbitrators from non-Western, developing state backgrounds is likely to improve the fairness and quality of decision-making. Furthermore, better representation of investor-state arbitration constituencies in arbitrator pools is likely to lead to greater acceptance of the dispute outcome.
However, the arbitral diversity discourse has raised critical issues that are relevant for addressing transparency and consistency in international investment arbitration. Until comprehensive research demonstrates a strong correlation between arbitral diversity and decision-making outcome, justifying arbitral diversity initiatives remains difficult. At the same time, encouraging developments, such as the Equal Representation in Arbitration pledge, allow for an optimistic prediction that the trend to diversify arbitral tribunals is in full swing. Initiatives to dismantle homogenous panels give hope that future arbitrator appointments will cast a wider net and clear the path for arbitrators that aptly reflect the rich legal cultures arising in investment arbitration.
For the sake of efficiency in processing cases and improving trust dispute outcomes, the investment arbitrator pool is likely to be broadened. Given the advantages of a diverse panel, it can be hoped that the coming years will witness key players such as practitioners, academics, arbitration centres and others, doing their part to diversify the arbitrator pool.
[1] Ksenia Polonskaya, ‘Diversity in the Investor-State Arbitration: Intersectionality Must Be Part of the Conversation’ (2018) 9 Melbourne J Intl L 259.
[2] Susan D Franck and others, ‘The Diversity Challenge: Exploring the ‘Invisible College’ of International Arbitration’ (2015) 53 Colum J Transnatl L 466.
[3] Joshua Karton, ’Can I Get A … Diverse Tribunal?’ (Kluwer Arbitration Blog, 7 December 2018) <www.arbitrationblog.kluwerarbitration.com/2018/12/07/can-i-get-a-diverse-tribunal> accessed 24 January 2020.
[4] The ISDS Academic Forum working group (No 7) included in its list of matters of chief concern, the homogeneity of arbitrators across the vectors of nationality, gender, work experience etc. See Malcolm Langford, Daniel Behn, Laura Létourneau-Tremblay, ’Empirical Perspectives on Investment Arbitration: What do we know? Does it matter’ (Geneva Center for International Dispute Settlement, 15 March 2019) <www.cids.ch/images/Documents/Academic-Forum/7_Empirical_perspectives_-_WG7.pdf> accessed 2 February 2020.
[5] Won Kidane, ‘Does Cultural Diversity Improve or Hinder the Quality of Arbitral Justice?’ (Kluwer Arbitration Blog 31 March 2017) <www.arbitrationblog.kluwerarbitration.com/2017/03/31/does-cultural-diversity-improve-or-hinder-the-quality-of-arbitral-justice/> accessed 1 February 2020.
[6] Andrea Kay Bjorklund, ‘The Diversity Deficit in Investment Arbitration’ (Blog of the European Journal of International Law 4 April 2019) <www.ejiltalk.org/the-diversity-deficit-in-investment-arbitration/> accessed 30 January 2020.
[7] Gus van Harten ‘Investment Treaty Arbitration, Procedural Fairness, and the Rule of Law’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (Oxford University Press 2010) 627.
[8] Todd Weiler, Freya Baetens (eds), New Directions in International Economic Law: In Memoriam Thomas Wälde(Nijhoff 2011) 21.
[9] Bilateral investment treaties, such as the model US BIT, have started to include provisions relating to transparency; The 2014 UNCITRAL rules on Transparency have established transparency standards, such as requirements to disclose to the public basic information of a dispute; Under the 2017 ICC Arbitration Rules, awards issued after 1 January 2019 are under the presumption that they may be published in their entirety, while allowing disputing parties to object or add redactions, as needed; See Roland Ziade, Andrew Plump, ’More efficiency, transparency and diversity in ICC Arbitration’ (ICC News & Speeches, 4 March 2019) <www.iccwbo.org/media-wall/news-speeches/more-efficiency-transparency-and-diversity-in-icc-arbitration/> accessed 28 January 2020.
[10] Rex v Sussex Justices (1924) 1 King‘s Bench Reports 256, 259. See also Colin Trehearne, ’Transparency, Legitimacy, and Investor-State Dispute Settlement: What Can We Learn from the Streaming of Hearings?’ (Kluwer Arbitration Blog, 9 June 2018) <http://arbitrationblog.kluwerarbitration.com/2018/06/09/transparency-legitimacy-investor-state-dispute-settlement-can-learn-streaming-hearings/> accessed 2 April 2020.
[11] Gabrielle Kaufmann-Kohler and Michele Potestà, ‘The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards’ (2017) CIDS Supplemental Report.
[12] Thomas Schultz and Cedric Dupont, ‘Investment Arbitration: Promoting the Rule of Law or Over-Empowering Investors? A Quantitative Empirical Study’ (2014) 25 European Journal of International Law 1147.
[13] Kaufmann-Kohler and Potestà (n 11).
[14] Alessandra Arcuri and Francesco Montanaro, ’Justice For all? Protecting the Public Interest in Investment Treaties’ (2018) 59(8) Boston College Law Review 2791.
[15] Kabir Duggal, ’Understanding Racial Representation in International Investment Arbitration’ (2017) 72(2) Dispute Resolution Journal 27.
[16] Joshua Karton and Ksenia Polonskaya, ‘True Diversity is Intersectional: Escaping the One-Dimensional Discourse on Arbitrator Diversity’ (Kluwer Arbitration Blog, 10 July 2018) <www.arbitrationblog.kluwerarbitration.com/2018/07/10/true-diversity-is-intersectional-escaping-the-one-dimensional-discourse-on-arbitrator-diversity/> accessed 28 January 2020.
[17] Langford, Behn, and Létourneau-Tremblay (n 4).
[18] Karton and Polonskaya (n 16).
[19] UNCITRAL Arbitration Rules Art 8.1.
[20] Meg Kinnear, ’Advancing diversity in international dispute settlement’ (World Bank Blogs 8 March 2019) <www.blogs.worldbank.org/voices/advancing-diversity-international-dispute-settlement,> accessed 28 January 2020.
[21] Bjorklund (n 6).
[22] PricewaterhouseCoopers and Queen Mary, (University of London, 3 July 2012) ‘2013 International Arbitration Survey – Corporate choices in International Arbitration‘ <www.pwc.com/gx/en/arbitration-dispute-resolution/assets/pwc-international-arbitration-study.pdf > accessed 2 February 2020.
[23] Langford, Behn, and Létourneau-Tremblay (n 4).
[24] Andrea K Bjorklund and others, ‘The Diversity Deficit’ (Geneva Center for International Dispute Settlement 30 March 2019) <www.cids.ch/images/Documents/Academic-Forum/5_Diversity_-_WG5.pdf> accessed 25 January 2020; Granted, thorough analysis on decision patterns of repeatedly appointed arbitrators has yet to be conducted. Yet there is arguably the risk that to increase chances of re-appointment in the future, arbitrators may decide in favour of the party that appointed them; See Daphna Kapeliuk, ‘The Repeat Appointment Factor: Exploring Decision Patterns of Elite Investment Arbitrators’ (2010) Cornell Law Review 96 (47).
[25] Sarah Z Zasani, ‘Inspired Arbitrator Choices: Addressing International Arbitration’s Diversity Deficit’ (2011) 23 Young Arbitration Review 5, 8.
[26] Bjorklund (n 6).
[27] Equal Representation in Arbitration, ’In Recognition of the Under-Representation of Women on International Arbitral Tribunals, in 2015, Members of the Arbitration Community Drew up a Pledge to take Action,’ <www.arbitrationpledge.com/> accessed 18 February 2020.
[28] ibid.
[29] Lucy Greenwood, ‘Could “Blind” Appointments Open Our Eyes to the Lack of Diversity in International Arbitration?’ (2015) TDM Special Issue on Diversity.
[30] Claudia Goldin, Cecilia Rouse, ‘Orchestrating Impartiality: The Impact of “Blind” Auditions on Female Musicians, (2000) 90 The American Economic Review 71.
[31] In context with gender, Caley found that involving more women reduces the risk of group thinking. See Turner Caley, ‘Old, White and Male: Increasing Gender Diversity in Arbitration Panels’ (CPR International Institute for Conflict Prevention & Resolution, 3 March 2015), <https://www.cpradr.org/news-publications/articles/2015-03-03–old-white-and-male-increasing-gender-diversity-in-arbitration-panels>, accessed 27 March 2020.
[32] Irving Janis, ‘Groupthink’, in Harold Leavitt, Louis Pondy, David Boje (eds), Readings in Managerial Psychology(University of Chicago Press 1980) 84.