Breaking the Bias in International Arbitration: Party Autonomy and the Opportunity to Diversify
The popularity of international commercial arbitration is growing. Unsurprisingly, in our global commercial environment, shifting international alliances and concerns about unreliability or jurisdictional obstacles of various court systems increase the appeal of established arbitration organizations. Recently, these international bodies demonstrated their adaptability and user-friendliness with hybrid formats addressing the pandemic and carbon-reduction needs, increased opportunities for joinder and consolidation of cases, stricter and more compressed time frames, increased transparency regarding potential conflicts and facilitated electronic filing, to name a few advances.
Given the attention of international arbitration institutions to reform opportunities, it’s remarkable how slow arbitration has been to improve the diversity of its arbitrator appointments. The trends for diversity among international arbitrators in terms of gender, ethnicity, and geographic origin are indeed upward. However, recent improvement has not kept pace with other institutional reforms. Focusing here on gender disparity, across major arbitral panels in 2019, only 21% of international arbitrators appointed were women. In 2020, the ICC reports only 23% women among appointed ICC international arbitrators. These numbers more reflect U.S. law school enrollment and law firm employment ratios of the 1970s and 1980s than other current trends. Looking at law practice globally, in the late 2000s, women made up at least 50% of practicing lawyers in Poland, Latvia and Romania; about 35% in Kuwait, Jordan and Turkey; and just over 30% in Norway, Germany, Denmark and the U.S. United Nations statistics report that approaching 2020, women made up 40% of the judiciary worldwide, compared to 35% 10 years earlier. Notably, the percentage of women arbitrators currently appointed for international cases worldwide (approximately 21%) corresponds with the percentage of women who are equity partners at law firms in the U.S. As the business community embraces arbitration, as arbitral institutions and users strive for greater accessibility, adaptability and acceptance, how can these percentages be improved?
Unquestionably, increasing gender diversity among appointed arbitrators is a priority for arbitral institutions. Approximately 5,000 organizations and individuals worldwide have signed on to the Equal Representation in Arbitration Pledge, which was introduced in 2016. Leading international arbitration bodies, including the ICC, the LCIA, the SIAC, JAMS, WIPO Arbitration and Mediation Center, the ICDR and the LCDR, have devoted resources and public relations campaigns to increasing the proportion of women appointed as international arbitrators. Even with these efforts, they appear unable to translate attention to the imbalance in gender representation into a material increase in the actual appointment of women to serve in particular international arbitrations. At least so far.
Thus, key to righting the balance is for participants to pay extra attention to the prerogative given them by a tenet of arbitration: party autonomy. One reason for the lag between good institutional intentions and results is that while arbitral institutions play an important role in arbitrator appointments, the largest proportion of sole arbitrators and panelists is nominated and chosen by parties and counsel.
This principle, that the arbitration is a contractual relationship controlled by the parties, is a fundamental feature of arbitration agreements. It’s one important reason arbitral dispute resolution is favored over the court system for protecting the interests of international parties in many jurisdictions.
Party autonomy, the freedom to contract, lets parties to an arbitration agreement choose the applicable substantive law. They can select the place of arbitration, the language of the arbitration and the composition of the arbitration panel or desired expertise of a single arbitrator, as well as the applicable procedural law and the modalities for fact-gathering and information exchange. We’ve recently witnessed that, because of party autonomy, arbitration provides an ideal mechanism for companies to pursue best practices in designing technological support for their dispute resolution.
The major opportunity for parties’ exercise of party autonomy is in their choice of arbitrator. This clearly contrasts to court litigation. Litigants may have a single peremptory challenge or occasional opportunity to disqualify a judge (with the attendant risk when a DQ motion fails). On the other hand, except in special circumstances, the arbitration is structured on the principle that the parties can select a decision-maker or a panel with whom they (or their delegees) are comfortable.
What drives parties’ choice of arbitrator?
Typically, the arbitrator is chosen by the parties (and attorneys) negotiating from their own list of known entities. Other times, the arbitration organization gives counsel a strike list they can research and have supplemented. Often in international arbitration, in-house counsel have final choice among potential arbitrators.
This results in a high percentage of male arbitrators being chosen. Parties’ choices depend on colleagues’ and attorneys’ professional contacts, as well as individuals’ experiences with an arbitrator. Inevitably, this makes for slow change. Adding names to the list takes the same conscientious efforts by the counsel involved as arbitral organizations now use in constructing strike lists.
Is there a connection between diversity and impartiality? Between gender diversity and quality results in particular arbitrations? Between diversity and reliable arbitration practice? These are not rhetorical questions.
When asked, participants state that diversity among the arbitrators that institutions offer and diversity on arbitration panels have a positive effect on their perception of the arbitrators’ impartiality and independence. That perception is important. It’s a critical element in parties’ comfort with arbitration as a dispute resolution forum and in helping parties accept arbitrated decisions. And diversity of choice is basic to building trust in a process that extols party autonomy.
Ultimately, the demands of the case drive the choice of arbitrator. No one is asked to sacrifice their choice of the best available arbitrator for their case to the institution’s short- or long-term needs for reform. Rather, counsel and parties should take seriously the responsibilities and benefits of party autonomy and increase their selection for the better of the practice they rely on. Choose arbitration organizations that support the advancement and education of diverse international arbitrators. Look to your own pipelines for sustainable diversity. Find new ways to lend visibility to women from various backgrounds in your practice and your valuable recommendations. Initiate conversation with clients on the benefits of diversity to them and to decision-making processes (and the detriments of homogeneity). The push by organizations for a diverse selection must be accompanied by vigorous efforts of lawyers and parties to ensure sustainable participation in the benefits of diversity across the profession.
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