Arbitral Decision-Making: Legal Realism and Law & Economics

As the social impact and role of international arbitration receives increasing attention, one central theme in this conundrum gains prominence: how do arbitrators decide cases? What influences arbitral decision-making?

With the progressive opening of scholarship in the field of arbitration to interdisciplinary approaches and studies going beyond doctrinal work, the question often takes the following form: do arbitrators apply the law, or do they make decisions based on something else – personal preferences, political biases, etc?

When empirical studies fail to find significant statistical evidence of the role of extra-legal factors in their decision-making, the conclusion is drawn that arbitrators do indeed nothing else than apply the law.

This article argues that the question so posed is an argumentative fallacy. Using the epistemology of legal realism and a simple methodology of law & economics, this article maintains that arbitrators, like every dispute resolver, are likely to always rely on both legal and extra-legal factors. It focuses on identifying, in the abstract, possible extra-legal factors which may amount to incentives and constraints placed by the current ecosystem of arbitration on arbitral decision-making.

Read the full article here.

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The evolution of international arbitration as an academic field

Let us think a bit about the purposes of research in international arbitration. Why do we do research in this field? What are we trying to achieve? How good are we at doing that? How has all that changed, if it has, over the last thirty years?

Let me start with general things. In general, it is said that the purpose of any academic discipline, be it within hard sciences, social sciences, or humanities, is to articulate propositions. These propositions together form a system of thought. And this system of thought creates knowledge that is susceptible, if not of verification (think ‘empirical studies’), then at least of rational assent, of rational approval. In other words, it seek to improve our understanding of what has happened and what is likely to happen.

Of course, in law generally, much of what is published in law reviews doesn’t try to do that. It doesn’t really try to produce knowledge. It has more of an advocacy spin. It tries to produce opinion. It is something closer to religion than to social sciences (notice the connotation of the word ‘doctrine’). This type of scholarship identifies itself with the work of an appellate court, chastising or complimenting the lower court. It tries to be part of the substance of the law, to shape doctrines, to offer solutions to judges, arbitrators, and legislators.

To that, we may add what we could call reporting or, less charitably, case law journalism or legislative journalism: we are here in the realm of describing cases and legislative amendments, without really using them to form an overarching system of thought, without really trying to rationalise what is being studied.

Law, of course, is not only a theoretical corpus. It is also a social practice. The way law is actually practiced profoundly shapes the contents of the law. This leads to yet another type of scholarship, on, for instance, how witnesses are and should be cross-examined.

Then of course, there are writings that seek neither to advance our knowledge of law as a theoretical corpus or as a social practice, and not even to form opinions, but that seek to advance our knowledge of the author of the writings: if you need to hire a lawyer who’s good at a certain set of legal question, then I’m your man. Let me write something that demonstrates how good I master these questions. It’s bit like playing the violin in a masterclass.

Now, how about all of this in arbitration? How has it evolved?

First of all, arbitration has grown socially: there are quite more people who write on arbitration today than there were 30 years ago. There are more journals too, and more books.

So there’s more of it. But is it better?

I’d say it is. Be it only because arbitration scholarship, today, is more diversified. I’m oversimplifying, but were there used to be mainly doctrinal work and case law journalism, there is now, in addition to that, conceptual work, epistemological work, sociological work, socio-legal studies, critical systemic work. The methods are more diverse (think of the growth of empirical studies, for instance). There are more political discourses about arbitration, discourses about the social values that arbitration sustains, and whether that is a good idea or not. There is more interdisciplinary work, trying to bring into arbitration theoretical developments happening elsewhere, reaching out more into neighbouring fields (political science, economics, philosophy). To young people, but to everyone really, this would signal that we have more choices now when engaging in arbitration research. The field has become more ecumenical.

And there seem to be more people who write on arbitration whose socio-professional recognition does not depend, or depends to a lesser degree, on their practice of arbitration. This is important because our socio-professional interests, inevitably, shape our epistemology, they influence what we consider valid, interesting, admissible research.

A similar observation can be made about the epistemic community of arbitration – that is, the community of so-called experts (that would be us) that shapes the episteme of arbitration. The community that shapes the knowledge we have of the field, the way in which we come to apprehend it theoretically, to use it practically and to explain its operation. Well, that community has become much more diversified, much more fragmented into sub-communities, for instance the commercial lawyers, the trade lawyers, the public lawyers and the public international lawyers. Each sub-community has a somewhat different understanding of arbitration, and they don’t necessarily really talk to one another. The stars of one sub-community may have a very different standing in another sub-community, if they are known there at all.

As a result, there are more diverse discourses in arbitration today than there were 30 years ago. This matters because it means more experimentation with new ideas, and thus a greater likelihood that something really new emerges, what Thomas Kuhn would call paradigm shifts, what Gaston Bachelard would call epistemological breaks. And these are what we need to make the field progress, these are what is generally considered to make for a healthy scientific discipline.

We are probably still far behind other legal fields, such as international law, which clearly is no longer the intellectual wasteland that it was said to be 20 years ago. My sense is that arbitration is following a similar route, thanks in part, precisely, to the fact that international lawyers, but also political scientists, economists, and even militant NGOs, have joined the fray.

Of Correct Views on Law without the State

Over the decades innumerable attempts have been made to tell us what the correct view is on the question of what law without the state is. But what if there is no correct view?

Let me begin from the beginning. In many part of the world, state borders are increasingly less relevant. This is not only so for commercial transactions and arrangements, but also for the way we think of ourselves, and thus for our allegiances and for the rules we believe we should obey. It’s probably rarely been the case since the 17th century that we orient our behaviour so much according to transnational rules – rules that, like clouds and pollution, like economic transactions and crises, have little regard for the imagined communities we call nations.

Yet most of us lawyers continue as if nothing happened; as if these developments were the problem of economists, sociologists, political scientists, and soon historians, but not really the problem of lawyers; as if the only thing it really is appropriate for lawyers to think about is what happens in court (national and international); as if we had to take instructions from states about what law is and, in return, help states determine what that law exactly says; as if our students could have no other calling than to engage in a trade that, ultimately, revolves around what states and their courts do; as if we had no other choice, when thinking about law, than to think about what states undertake; as if the frontiers of legal thinking had to match the political borders of states.

Not that states are unimportant politically and socially. They can do things, good and bad, no one else can. But to give them the power to constrain what intellectuals in law can think about when they think about law and teach law: that is a different story entirely. Yet it is a story we tell ourselves quite often. And when we do, we usually skip the first chapter, in which we see the hero of the story (that would be ourselves, the lawyers) granting states the monopoly of law-making. For indeed that first chapter could have been written differently. The relationship between society and law does not have to be a relationship between society and states, between society and nations. It is only the way we lawyers usually want to think about it.

Strangely enough, perhaps, a great challenge we lawyers face today in our attempts to grapple with our changing, “transnationalising” world, lies within ourselves. A great new frontier of transnational law is indeed introspective, or “reflexive” as our jargon would have it. It starts with the realisation that law is whatever we call law. There is nothing inherent in law that makes law law. We could call law whatever set of rules a community gives itself. It could be a qualified version of this idea, for instance only those rules that embody certain basic human right ideals. Or it could be whatever the ruling power says it is. We are all potential Humpty Dumpties. There is nothing inherent in law that makes it only creatable by states. Law is whatever we want to call law. This means we have a choice.

We have a choice about how we want to define what we lawyers are supposedly competent to talk about: law. And it seems to be empirically true (I don’t think this has ever been properly studied) that most people believe they should, in general, obey the law, that it is, on most occasions, morally better to follow the law than to break it. If that is indeed true, isn’t it possibly meaningful what we do call law?

The problem with this choice, for us lawyers, is that we can’t answer it based on… the law. So we have to reach out beyond the traditional frontiers of our discipline to look for answers. And what we find there is, again, foreign to the natural habitat of the lawyer: there are a number of possible answers to the question of what it might be appropriate to call law. Some are better, some are worse. Different answers, different ways to understand what law is, empower different actors (by giving them law-making powers), and thus advance different interests. The less states have the monopoly of law-making, the more interests other than state interests are likely to be advanced. As a consequence, there are incentives for certain understandings of law to be pushed, and socio-professional constraints put in the way of others.

All of this is, as I said, fairly foreign to lawyers. It is also so because it forces us to see that there aren’t simply right and wrong answers, and that several understandings of what law is can validly coexist at the same time. It calls on us to practice intellectual pluralism. Let me tell a story to explain this.

Two individuals call on a rabbi to resolve their dispute. The rabbi listens closely to the first person, and finally says “you are right”. The second individual launches into a detailed repartee, defending the exact opposite view. “You are right too”, the rabbi enthusiastically responds. The rabbi’s wife, who had overheard the discussions, sighs, and admonishes her husband: “you can’t say that they are both right!”. The rabbi thinks about it for a while and answers “you, my dear wife, are right too.”

(Published as an editorial in the Journal of International Dispute Settlement in March 2015.)

The choices we have

A  few weeks ago (I’m a slow blogger, and intend to remain so) I happened to be given almost carte blanche to organise the Closing Plenary of the International Law Association (ILA) British Branch Spring Conference we were hosting at King’s College London. (My colleagues are either extreme risk seekers or were totally desperate.)

What we ended up doing was this: Philippa Webb and I invited to the stage Thomas Pogge (the rockstar philosopher at Yale, and one of the leaders of the Global Justice movement), Paul Stephen (at Virginia, and the reporter for the American Law Institute’s Restatement of the Foreign Relations Law of the US) and Diane Marie Amann (at Georgia, and an adviser to the prosecutor of the International Criminal Court). Thomas and Paul knew what was expecting them, but not Diane. Our hope was to provoke a freewheeling, improvised, but introspective discussion. We asked them this:

“Do we not, as international scholars and practitioners, have a distinct social responsibility, or can we indeed simply be content to ‘clarify’ international law, to improve its internal consistency, or to advocate a certain norm? Isn’t there something more to what we do?”

The question of course rests on the immodest assumption that we are contributing to shaping the future of international law. That what we do can be meaningful. But is it an assumption we should reject? Then why the heck are we here in the first place?

We do have a certain freedom in doing the things we do – clearly in academia, even though many people act as if they don’t know this, but also in practice. And with that freedom comes responsibility (yes, just as Spiderman said…).

If the point is obvious, and obviously important, which I hope it is, then shouldn’t we, from time to time, just a bit, talk about it, and stop pretending there is nothing more to our job than craftsmanship?

Back to our room in London. The audience (and Diane) were told the question. Almost immediately a complete silence fell over the room. What a bizarre yet intriguing question: we are free!? Thomas Pogge went first. He came up with a detailed list of ways in which we can think of ourselves, and accordingly orient our writing, as participants in the project to end poverty in the world (this is, brutally simplified, one of the basic projects of the Global Justice movement). No, he essentially said, it is not too good to be true. No, it is not too lofty an ideal to be pursued. Yes, if we can, and we can indeed, we should. (He later promised me to write an editorial for one of the next issues of the Journal of International Dispute Settlement – an unlikely venue for such thoughts, but this precisely is why it matters.)

Paul Stephan spoke of our need to understand other cultures than our own usual Western habitat when we try to make (or restate) foreign relations law, and thus international law. We tend to project, he said, understandings, concepts, values on other peoples, which simply don’t exist there quite in the same way. Just as the German word “Kultur” emerged in defensive reaction to the French idea of “civilisation” (these are my words now, trying to explain differently what Paul said), where Kultur was trying to pull towards particularism when civilisation was trying to pull towards universalisation, we should understand that even values like democracy and human rights are cultural values. All very obvious, you might say, but when this is said by the rapporteur of the US Restatement? And the difficulties this creates for his daily work? If you think this is but normal, you probably just don’t know by what sort of people even large and important projects like this one are often conducted.

Diane Marie Amann told us a personal story. When she heard she was awarded a doctorate honoris causa by the University of Utrecht,  she wondered what was up.  Her academic craftsmanship is impeccable, but a doctorate honoris causa at this young age? She got the answer along with the award when she arrived in Utrecht: it was in recognition of the fact that she was the first US academic who had said, in an article she had difficulties to publish, that Guantanamo was not ok. A doctorate for courage, in other words. An award for something that makes the life of an academic worthwhile. A prize for a valuable way in which to exercise the choices we have.

It’s the law! But is it law? Ha, that’s the question. And that question matters

The first chapter of my book Transnational Legality: Stateless Law and International Arbitration is now accessible for free on SSRN, here. Courtesy of Oxford University Press. It’s called Why Being Law Matters.

Lawyers should love it: it tells us that law matters, that it matters to call something law. Oh, how important us lawyers are – didn’t you know?

It’s a strange world, this chapter. There lives Franz Kafka; football is debated; computer code sits next to the French Revolution of 1789; and Emile Zola has to listen to statistics on how many books Oxford University Press publishes on international law. And all of it is transnational.  

I had good fun writing it (as you can tell). I hope you might chuckle a bit reading it.

Pierre Schlag on… well, us, and who we are

Check out this wonderful piece by Pierre Schlag in the Journal of International Dispute Settlement.

It’s wonderful not because it talks to me (who cares – except me of course). It’s wonderful because it speaks of the core concern we all face in academia (at least those of us who still care about our job): are we any good at it? Are we good academics? Isn’t this what we all want to be: good?

That question decides more or less everything in our world: the sort of university we want to join, our personality, how pretentious (if we fail) or arrogant (if we succeed, but stay stupid) we become. If we dare to write with ideas or if we stay case journalists. If we annoy others or live and let live. It’s the one currency that we can’t live without. But what does it mean to be good? Schlag, liberal enough here to make even JS Mill content, tells us that it is a question of choice. A question of choice in the sense that there are many ways to be good. Sounds good, and reassuring.

But that’s not all. It’s also, and that’s his point, a question of choice in the sense that the one thing we can’t get out of is making that choice, after, or even better before, each sentence we write: is this what I want to do? Is this what I want to be? Is this how I want to be good?

Then perhaps – perhaps – some people will come to the conclusion that their aim in being good actually makes fairly little sense, when being an academic. I mean, one can be extremely good in rote learning the phone book, and spending a whole life on it. (Well, now there’s an app for that, so it might be quicker.)

Doesn’t make sense? Read the article. It does, there.