Is Increasing Gender and Ethnic Diversity in Arbitral Tribunals a Valid Concern and Should Arbitral Institutions Play a Greater Role Ensuring Diversity?
Introduction
In 2015, members of the global arbitration community pledged to increase the number of women appointed as arbitrators.[1] The pledge to date has 4,145 signatories, including law chambers, bar associations, law firms and international arbitral institutions.[2] Despite the pervasive concern regarding the lack of diversity[3] in arbitration, women and ethnically diverse practitioners remain under-represented in international arbitral tribunals. For example, the London Court of International Arbitration in 2018 reported that only 17% of the arbitrators selected by parties were women.[4] Similarly, one study shows that the appointment of women as arbitrators to international tribunals averages at around 20%, in 2016, of the total number of appointments.[5] Other research on the make-up of international arbitrators also confirms that they are predominantly male, coming from similar economic and social backgrounds.[6] It has been argued that the lack of diversity in arbitration is an issue of supply, in that the pool of potential female and ethnically diverse arbitrators is not sufficiently large. However, a survey conducted recently found that even when a broader pool is available, parties and their legal counsel often opt for the repeat nomination of individual arbitrators.[7] The prevalence of repeat nominations contributes to the diversity problem, making international arbitration as a profession difficult to break into, and further concentrates an already relatively homogenous group of international arbitrators.
The lack of diversity in arbitration mirrors concerns as to the lack of diversity amongst appointments to the judiciary, senior levels in law-schools and associate positions in law firms, which is often described as the “glass-ceiling,” or an invisible barrier to women and ethnically diverse practitioners from reaching seniority. However, the problem of diversity in international arbitration is arguably even more acute, given the cultural and ethnic diversity of parties in arbitration, and the global dimension of the disputes.
This article first addresses why ensuring diversity in international arbitration is a wholly necessary development, and further, it will argue how best to foster the continued development of diversity in international arbitration. Section I sets out why diversity in appointments to arbitral tribunals has concrete benefits for all parties involved. Section II analyses how improvements to the appointment process in arbitration will play a pivotal role in improving diversity. The right to nominate an arbitrator is a pillar of part autonomy in arbitration, however, the appointment process is often opaque. In Section III, I will make concrete suggestions to improve the process by which arbitrators are appointed in, which addresses the role of arbitral institutions in ensuring diversity.
I. Why Diversity Matters in International Arbitration
An important question begged by calls for increased diversity in arbitration is why we should want a more diverse international arbitral community, and in particular, whether it would make any difference to arbitral decision-making. A famous saying is worth quoting in the context of this debate: “if everyone is thinking alike, then no one is thinking.”[8] Diversity in arbitration serves an important role in enhancing the quality of the substantive decision-making in the arbitration process. First, diverse arbitrators espouse new perspectives, views and analyses of legal issues at hand. When arbitrators from similar backgrounds tend to hold the same views and beliefs, this leads to arbitral tribunals adjudicating in predictable ways. Whilst predictability of outcomes has its benefits, “a lack of pluralism is a denial to users and counsel of the benefit of perspective.”[9] With the exclusion of alternative perspectives in international arbitral disputes, ultimately, the parties to arbitration lose out, on the potential of alternative dispute resolution techniques and problem solving. International arbitration as an alternative dispute resolution mechanism consists of a rigorous process of finding facts and law based on weighing testimony and documents. To this end, an arbitrator’s essential duty is to deliver an accurate award accompanied by a reasonably ascertainable picture of reality. In deciding disputes accurately, arbitrators promote the type of aptitude that supports the positive economic teamwork that marries public and private welfare. Thus, the truth–seeking mission in arbitration lies at the core of how arbitrators perceive facts. Within arbitration proceedings, the same set of facts could be attributed different meanings because of the fact-finder’s cultural background.[10] The existence of diverse panels helps further the aims of meticulous and accurate fact-finding approaches. In addition, in the search of appropriate law, arbitrators with diverse background can seek guidance from other transnational norms articulated by different scholars. Relying on transnational norms often serve as the best indicator of the reasonable expectation of parties from diverse legal culture. These norms apply because of the lack of any better way to promote fair dispute resolution in a global community where not all accept one national law.
Arbitration ought to be viewed as a social process, where arbitrators rely upon their own knowledge, life experience and individual “sense of justice” to interpret and evaluate the facts. Diverse arbitrators may attribute different meanings to particular factual contexts, due to their unique cultural backgrounds.[11] Diverse panels of arbitrators, each with different viewpoints, could result in more variety and enhancement in fact-finding approaches. Further, in his empirical study of judicial reasoning, Morris theorized that an adjudicator may employ different theories which will lead to different styles of analyses and legal reasoning, thereby reinvigorating the deliberation process by embracing various styles of reasoning.[12] Diverse arbitrators would have different viewpoints, values and perspectives and would interpret the law uniquely. Diverse tribunals that adopt non-mainstream approaches, which, arguably, may only nominally impact the ultimate outcome of the resolution of the dispute, may discernably affect the legal reasoning within arbitration. This will help reinvigorate the law and create opportunities for enhancing arbitral justice.[13] This is important because critics of international arbitration often express concerns about the quality of legal reasoning in arbitral proceeding. The reasoning of arbitrators remains pertinent as it contributes to the credibility of this dispute resolution process. Furthermore, whilst it may seem that precedent does not play a prominent role in arbitration as a private consensual process wholly confidential to the parties, there are several sources of information about arbitrations and arbitral awards which allow information to become publicly accessible. For instance, the International Chamber of Commerce (ICC) publishes extracts of arbitral awards providing insight into the reasoning of international arbitrators on the interpretation and application of international treaties and the law of international trade. In addition, these legal reasonings will form part of guidelines and practice notes (traditionally known as soft law) which can help persuade a tribunal to a point of view. In fact, some of these reasoning have been codified to some extent.[14] In this way, they are a creature of precedent having been created based on what approaches have been adopted before by tribunals and help shape future practice. In addition, the issue of consistency in legal reasoning within the context of arbitration bears a significant value. Consistency in the legal reasoning suggests some unity, rendering arbitration as a viable dispute resolution system.[15] Therefore, as Paula Hodges QC comments, “diversity brings richer, results, richer decision making all walks of life, it’s exactly the same for arbitrators.”[16]
Paradoxically, the community of international arbitrators does not reflect the community which it serves: the globalized, ethnically and culturally diverse community of arbitration users. Arbitrators should ideally reflect the diversity of parties to arbitration for the following reasons. Diversity of appointments to arbitral tribunals ensures that a single set of values or views does not dominate the process, and mitigates the perception that arbitrators, coming from a predominantly white, male group, serves the needs of a niche, elite constituency. The introduction of outside narratives into the legal decision-making process as such improves the idea of impartiality within arbitration. All arbitrators ought to demonstrate their sound reasoning to the parties involved to justify the accuracy of their decisions, the legitimacy of their awards, and their acceptability over the long run. The ability to give reasons is dependent on the arbitrator’s ability to understand and empathize with parties to arbitration. As Bradshaw argues, “we tend to like people who are similar to us […] similarities lead to likability and more ethnic proximity will lead to understanding.”[17]
Further, diverse panels in arbitration would better ensure that the perspectives of minority ethnic groups are considered, which have traditionally been excluded from legal processes. Although the arbitrator appointment process is predominately managed by parties and the freedom of parties to select any individual for appointment as arbitrator is relatively unfettered, the evidence suggests that the repeat players are favored. It has been argued that the parties exhibit reluctance in appointing candidates who had not previously been appointed despite their similar backgrounds. To this effect, the London Court of International Arbitration (LCIA) Registrar’s report 2013 indicates that throughout 2013, only 16.5% of appointments were made to candidates who had not previously been appointed in LCIA arbitrations.[18] There has been a misguided sentiment that the regularly appointed arbitrators are more apt to adjudicate over different cases, however, the lack of aptitude of newly appointed arbitrators has not born by practice. The need for diversity in arbitration in an increasingly globalized business world comes into sharp focus when examining the relationship between arbitral institutions and developing countries. The Chevron v. Ecuador case illustrates the role diverse tribunals can play in ensuring the legitimacy of arbitration proceedings. [19] In that case, the grievances of local indigenous groups regarding the environmental pollution of Ecuadorian Amazon were ignored. In cases like this, concerns as to bias are often raised, with criticisms that arbitrators are incapable of understanding different cultural backgrounds.[20] These concerns can be addressed by the inclusion of arbitrators with different social and ethnic backgrounds, increasing the confidence of parties to arbitration, traditionally under-represented or excluded from existing legal processes.
II. Appointment of Arbitrators
A key pillar of party autonomy in arbitration involves the appointment of the arbitrator. A neutral arbitrator is selected by the parties in arbitration, and has the power to impose binding decisions. When appointing arbitrators, parties can opt for specialists with in-depth knowledge of the particular context. However, this writer would highlight that in practice, the appointment process is one that centers on past precedent and informal networks, rather than opting for the most qualified person to arbitrate the particular dispute. The process, determined by individual traditions, has become one plagued by inefficiency, where old networks are utilized frequently.[21]
The confidential nature of arbitration means that there is a lack of information available to parties about how to identify the best arbitrator for the particular dispute. Parties cannot review arbitrators’ practices or resumés. The lack of information about arbitrators, disputes they have adjudicated and their resulting decisions means that decisions made by parties regarding the appointment of arbitrators is made privately, with resort to legal counsel who seek arbitrators through informal networks. This process is one which perpetuates bias, as diverse arbitrators seeking appointment may not be visible to parties who seek to appoint them.
Parties seek advice from legal counsel who are more inclined to nominate arbitrators that they know. This process, which has been coined as “the solicited feedback loop” reinforces bias against diverse candidates.[22] Some reported that legal counsel consciously favored the “old boys” in advising clients on potential arbitrators.[23] Similarly, others describe transnational networks of community,[24] with networks composed of prominent legal players in international arbitration. Information disseminated through this network of community is based on interpersonal trust, personal accounts, anecdotes, and hearsay.[25] The result of this is that parties, relying on advice from legal counsel, select arbitrators based on anecdotal and subjective information, rather than objective, quantifiable data.
As such, this writer would identify the lack of quality information regarding potential arbitrators as central to the diversity problem in international arbitration. The lack of objective information about arbitrators means that decisions regarding appointment are made by parties relying on the personal, subjective accounts of legal counsel, who tend to advise the appointment of those that they know. This is contrary to the principle of informed, fact-based decisions making, as articulated by Malcom Gladwell, “mediocre people find their ways into the position of authority […] because our selection decisions are a good deal less rational than we think”[26]. In order to address how to further the goal of diversity in arbitration, a critical assessment is needed of the resources available to parties to make decisions regarding the appointment of arbitrators.
III. The Role of Arbitral Institutions in Ensuring Greater Diversity
Arbitral institutions’ general role consists mainly of assisting the parties in resolving certain procedural difficulties, such as the constitution of the arbitral tribunal and in supervising the proper conduct of the arbitration proceedings.[27] In doing so, the institution as an appointing authority in the appointment of arbitrators holds a unique and multi-faceted position.[28] They are in the best position to take the lead and ensure diversity. The publishing of information about the qualifications of arbitrators, and relatedly, their decisions in arbitral proceedings, are essential components of a fair and transparent system which allows parties to make informed decisions regarding the appointments of arbitrators. Arbitral institutions must take a proactive approach to devise platforms to advertise information regarding the particular expertise of arbitrators, encouraging parties to choose from the best candidates, mitigating the problems caused by repeat nomination of arbitrators from similar backgrounds, and barriers to entry for new, diverse practitioners.
Arbitral institutions have more information on arbitrators, their practices and qualifications than any other stake-holder in the arbitral community.[29] As such, arbitral institutions ought to facilitate improvements in the information resources available to parties regarding arbitrators. This would help counter word-of-mouth inquiries, and the role of “old boy” networks in appointing arbitrators. The note argues that that decision making based on fact-based or evidence based data that clearly measures and showcases performance may slowly replace the old decision-making that is based on limited assumptions or subjective inquiries. Whilst this note acknowledges that intuitive decision making is conceptual, some studies have shown that in the absence of qualitative and quantitative resources, the decision makers often resort to elicit subjective input.[30] In light of this analysis, alternative and accurate information networks could assist parties in making informed decisions as to who is the best arbitrator available, with specialist, in-depth knowledge of their particular disputes.
Parties and counsel ought to rely on institutional lists, published by arbitral institutions to find the best potential candidates. Whilst the need to address diversity has been accepted by many international institutions, the practice of disseminating information regarding arbitrators needs to be developed. For example, the International Chamber of Commerce (hereafter “ICC”) disseminates statistics on the balance of their tribunals, and in 2016, the ICC began publishing limited information regarding arbitrators appointed to ICC cases.[31] Other institutions, such as the Hong Kong International Arbitration Centre or the Singapore International Arbitration Centre have adopted similar positions, where statistics are published to monitor the constitution of their tribunals. [32]These institutions do not however, maintain depositories of information that sets out the expertise, specialist skill-sets and background of their arbitrators. Furthermore, improving diversity and inclusivity in investment arbitration requires a robust commitment by states. If states are appointing arbitrators, they should be cognizant of diversity criteria in making those appointments.
Arbitral institutions, to commit fully to the pledge against the under-representation of diverse candidates in arbitration, ought to publish more information to counter against informal networks that largely dictate current appointments. Arbitral institutions can exert influence by publishing depositories of information, requiring arbitrators provide redacted awards and details on their involvement in previous disputes, for example, the length of time it took to resolve the dispute, details as to the award, any appeals that resulted from decisions made. Such a process would render the “solicited feedback loop” obsolete and redundant, enabling diverse candidates to be rendered more visible to parties seeking to appoint them. This would also help modernize the appointment process of arbitrators, bringing from a system that operates by word of mouth to one that can be easily accessed through an internet search.
Undeniably, there exists a possibility of parties themselves being unable to increase either gender or ethnic diversity on their own. It is not clear how likely parties could counsel/rely on institutional lists. In this case, a second option could be eliminating or amending the party appointment process. Treaties could require that appointments be made directly by institution, rather than by the parties themselves. However, the ability to choose the arbitrator is one of the pillars of the party autonomy. Such power of the party distinguishes arbitration from national state and courts adjudication. [33]
Perhaps a hybrid approach could be adopted whereby the parties would be to require to appoint arbitrators made from a roster composed of diverse individuals. This approach might work either with party appointment or with institutional appointment. This would significantly improve the possibility of having tribunals that encompass diverse arbitrators.
Conclusion
The paradox of having a homogenous, white, male pool of arbitrators is that it does not reflect its customer base: an increasingly globalized and ethnically diverse commercial community. A diversity of appointments to arbitral tribunals would help legitimize arbitration as an impartial process, and better ensure that parties to arbitration, traditionally excluded from legal processes, feel that a single set of values does not dominate the arbitral process, and counters the idea that arbitration is biased in favor of niche interests.
This article has identified that the lack of information about arbitrators has led to appointment decisions based on informal networks and habit, as opposed to quality, data-based decision-making. A lack of information regarding potentially diverse candidates, means that they are not visible to parties seeking to appoint them.
Arbitral institutions ought to facilitate access to information regarding the best arbitrators available. Through increased transparency, arbitrators from diverse backgrounds would be rendered visible to parties, through quick internet searches on legal directories available through arbitral institution websites. This would help modernize the appointment process, level the playing field for diverse candidates, and ultimately ensure that parties can access information as to the best available arbitrators.
Naimeh Masumy is a research fellow at Swiss International Law School and ACIC. She is on ITA Advisory Board and serves on several Editorial Boards including ITA in Review and Vindobana Journal of International Commercial Law and Arbitration.
This is a guest blog post and in no way represents the views of the Fordham International Law Journal.
[1] See Equal Representation In Arbitration, ERA, http://www.arbitrationpledge.com/about-the-pledge.
[2] See Ashley Jones, ERA Pledge Surpass 4,000 signatories, Lexology, (June 3, 2020), https://www.lexology.com/library/detail.aspx?g=dfe838d6-8401-4ca9-a6cf-bc88c45f7d51.
[3] The word “diversity” is used throughout this article to describe arbitrators who are women and from ethnic minority backgrounds.
[4] See Dipen Sabharwal & Mona Wright, Diversity Dilemma in Arbitrator Appointments, Kluwer Arbitration Blog, http://arbitrationblog.kluwerarbitration.com/2018/07/30/the-diversity-dilemma-in-arbitrator-appointments/.
[5] See Catherine Rogers, The Key to Unlocking the Arbitrator Diversity Paradox?: Arbitrator Intelligence, Kluwer Arbitration Blog, http://arbitrationblog.kluwerarbitration.com/2017/12/27/on-arbitrators/.
[6] See Susan D. Franck, The Diversity Challenge: Exploring the "Invisible College" of International Arbitration, 53 Colum. J. Transnat’l. L. 429 (2015).
[7] See White & Case, 2018 International Arbitration Survey: The Evolution of International Arbitration, School of International Arbitration, http://www.arbitration.qmul.ac.uk/research/2018/, (last visited Sept. 28, 2020).
[8] This quote, and similar variations are attributed to many people, but most often to General George S. Patton Jr. See, e.g., Michael Murphy, 'If everyone is thinking alike, then somebody isn't thinking', Hartford Courant (Nov. 15, 2017, 9:55 AM), https://www.courant.com/os-ed-what-do-i-know-november-151115-story.html.
[9]Joseph Mamounas, Does “Male, Pale, and Stale” Threaten the Legitimacy of International Arbitration? Perhaps, but There’s No Clear Path to Change, Kluwer Arbitration Blog, http://arbitrationblog.kluwerarbitration.com/2014/04/10/icca-2014-does-male-pale-and-stale-threaten-the-legitimacy-of-international-arbitration-perhaps-but-theres-no-clear-path-to-change/.
[10] See William Park, Arbitrators and Accuracy, 1 J. Int’l Disp. Settlement 25, 25-53 (2010).
[11] See Won Kidane, The Culture of International Arbitration 243 (Oxford University Press 1st ed. 2017).
[12] See Gregory Sisk, Michael Heise, & Andrew Morriss,, Changing the Influences on the Judicial Mind: An Empirical Study of Judicial Reasoning, 93 N.Y.U. L. Rev. 1377, 1380-488 (1998).
[13] See Won Kidane, Does Cultural Diversity Improve or Hinder the Quality of Arbitral Justice?, Kluwer Arbitration Blog (Mar. 31, 2017), http://arbitrationblog.kluwerarbitration.com/2017/03/31/does-cultural-diversity-improve-or-hinder-the-quality-of-arbitral-justice/.
[14] See Ben Jolley & Oliver Cook, Revised ICC Note to Parties and Tribunals: Will Publication of Awards Become the New Normal?, Kluwer Arbitration Blog, (Mar. 7, 2019), http://arbitrationblog.kluwerarbitration.com/2019/03/07/revised-icc-note-to-parties-and-tribunals-will-publication-of-awards-become-the-new-normal/.
[15] See Jan Hendrik Dalhuisen, Legal Reasoning and Powers of International Arbitrators, SSRN Elec. J., (2015), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2393705.
[16] Paula Hodges QC, quoted in Christine Simmons, Pledge to Name More Women as Arbitrators Reaches U.S. Firms, Law.com (June 21, 2016), https://www.law.com/sites/almstaff/2016/06/21/pledge-to-name-more-women-as-arbitrators-reaches-u-s-firms/?slreturn=20200912120418.
[17] Brad Bradshaw, The Science of Persuasion: A litigator’s Guide to Juror Decision-Making, 149 (2014).
[18] See Barriers to Entry- the Lack of Diversity in International Arbitration, LexisNexis (Jul. 15, 2015), https://www.lexisnexis.co.uk/blog/dispute-resolution/barriers-to-entry-the-lack-of-diversity-in-international-arbitration.
[19] See generally Chevron v. Ecuador, Interim Award, 11, 16, Jan. 15, 2012, 3.21, 3.22, 3.181 .
[20] See Won Kidane, LDC’s Unique Challenges of Getting the Composition of Arbitral Tribunals Right, Seattle Univ. Sch. of Law Digital Commons, 64, 70. (2017).
[21] See Caroline dos Santos, Diversity in international arbitration: A no-woman’s land?, in Beiträge Zu Aktuellen Themen An Der Schnittstelle Zwischen Recht Und Betriebswirtschaft Iii, 1-18 (Leo Staub ed., 2018).
[22] See Lucy Greenwood, Tipping the balance- Diversity and inclusion in International Arbitration, 33 Arb. Int'l, 99-108 (2017).
[23] See Elizabeth Oger-Gross, Gravitas: Persuasion And Legitimacy, Transnational Dispute Management (2015) (last visited Sept. 28, 2020) https://www.transnational-dispute-management.com/article.asp?key=2239.
[24] See Roger Cotterrell, Transnational Networks of Community and International Economic Law, in Socio-Legal Approaches to International Economic Law, 133-49 (Amanda Perry-Kessaris ed., 2013).
[25] See Id. at 139.
[26] Khushali Adhiya, Blink: the power of thinking without thinking, 6 Frontiers in Psychology (2015) (reviewing Michael Gladwell, Blink: The Power of Thinking without Thinking (2005)).
[27] See Janice Lee, The Evolving Role of Institutional Arbitration In Preserving Parties’ Due Process Right, 10 (2) Contemporary Asia Arbitration Journal, 235-256 (2017).
[28] See Gary B. Born, International Commercial Arbitration 2606 (2d ed. 2014).
[29] See David Gaukrodger, Appointing Authorities and the Selection of Arbitrators in Investor-State Dispute Settlement: An Overview OECD ( March 2018) https://www.oecd.org/investment/investment-policy/ISDS-Appointing-Authorities-Arbitration-March-2018.pdf
[30] See Jay Liebowitz, Busting the Big Data Bubble: the Case for Intuition-based Decision Making 73, 79-85 (2014).
[31] ICC beings Publishing Arbitrator Information in Drive for Improved Transparency, News ICC International Chamber of Commerce, (2016). https://iccwbo.org/media-wall/news-speeches/icc-begins-publishing-arbitrator-information-in-drive-for-improved-transparency/
[32] Hong Kong Arbitration Center, Statistics 2019. https://www.hkiac.org/about-us/statistics
[33] See Moses Oruaze Dickson, Party Autonomy and Justice in International Commercial Arbitration, 60 (1) International Journal of Law and Management. pp114-134 (2018).