Author: Yiwei Lu*
Practice and Procedure
This is the first of a series of blog posts on Columbia Arbitration Day 2022 and covers the keynote speech and the first panel.
Columbia Arbitration Day took place this year on March 4, 2022. Although the conference took place virtually, the spirits of speakers, panelists and attendees were not dampened. The conference created a platform for lively and eye-opening discussions about the current state of arbitration and the future for arbitration.
Professor Gabrielle Kaufmann-Kohler kicked off the conference with her keynote speech titled “Globalization and How to Maintain International Arbitration’s Legitimacy” in which she delved into the importance of diversity to buttress the legitimacy of arbitration. She referred to legitimacy as a sociological notion, and described it as the acceptance of the exercise of authority by those affected by it who voluntarily comply with the decision irrespective of the content because they recognise the authority as legitimate. Diversity increases the legitimacy of dispute resolution mechanisms because a diverse tribunal takes into account different viewpoints and thus makes better-informed decisions.
Professor Kaufmann-Kohler zoomed in on regional diversity in her speech. She canvassed current statistics showing a sub-optimal level of regional diversity – only 26% of arbitrators were from non-western regions in the period between 2011 to 2018. In fact, data shows that there was a drop of 6% in regional diversity from the early period of arbitration between 1972 to 2000. Given that the most frequent respondents in international investment arbitration (namely Argentina, Venezuela, Spain and Egypt) are almost all non-western regions, the difference between those making the decisions and those at the receiving end of the decisions is striking.
The good news, Professor Kaufmann-Kohler reported, is that there is growing awareness of the need for regional diversity and of the deficit in this respect. She praised the efforts taken by states, arbitral institutions and other organisations to increase diversity among arbitrators. Examples she cited include the initiative by European states to draft nationality requirements into investment treaties that are tied to the contracting states , and the Racial Equality for Arbitration Lawyers (REAL) initiative. She called on companies, third-party funders, and law firms to increase diversity. She raised other possible methods including delegating appointment of arbitrators to arbitral institutions, drawing up a list of arbitrators pre-screened for diversity for appointment by states, and creating a multilateral investment court with diversity targets.
While arbitration is inherently diverse because of its transnational dimension, questions remain about whether there is sufficient diversity and whether there is a good mix of diversity. From the statistics Professor Kaufmann-Kohler cited, there is still a long way to go in terms of improving regional diversity. The arbitration community needs to rise up to the occasion, for diversity is both valuable in itself and necessary to anchor the legitimacy of arbitration.
After the keynote speech, conference attendees were treated to another thought-provoking session, this time about technology in arbitration. In the panel moderated by Professor Robert Smit, titled “Is Arbitration Keeping Up with New Ways of Doing Business? The Arbitrators’ Perspective,” both short-run technology issues (i.e., issues regarding remote hearings) and long-run technology issues (e.g., smart contracts, blockchain arbitration and the metaverse) were discussed.
Remote hearings became a necessity during the pandemic. It was helpful to hear from Eduardo Romero about his experience as a practitioner, and from Judge Charles Brower from the perspective of an arbitrator.
Romero cited the following advantages of remote hearings: lead counsel can be better assisted by his/her assisting counsel, all parties can easily refer to the same document at the same time, there is less printing of documents and bundles, and the arbitration process is less expensive due to less travelling. He also gave some disadvantages of remote hearings: the inability to gauge arbitrators’ reactions well and inability to see opposing counsel on screen, lack of adrenaline on the part of counsel, difficulty in preparing for hearings (because multiple video conferences throughout the day break concentration), and difficulty in coordinating with clients if clients are in a different place, shorter hearing periods due to different time zones, and technical issues encountered in some regions. Romero foresees that remote hearings will continue in the post-pandemic future, though likely limited to certain types of hearings such as interim measure hearings, simple jurisdictional pleadings, and ICSID annulment hearings. In most hearings, however, he sees the importance of the personal touch given that proceedings concern justice and fairness.
Judge Brower emphasised the importance of keeping up with technology. Specifically on remote hearings, he highlighted some of the inconveniences he encountered, such as having to wake up at 3am for hearings due to different time zones. Hearing days are also shorter to accommodate different time zones. Judge Brower also pointed out that virtual hearings sacrifice the informal deliberations and relationship-building among arbitrators.
Sophie Nappert from Gray’s Inn (London) gave a provocative and intriguing presentation on the long-run technology issues, namely smart contracts, blockchain arbitration and the metaverse.
The most intriguing part of the presentation centred on blockchain arbitration. Explained in simple terms, it is a decentralized system (as opposed to traditional tribunals and courts which are centralized systems) used to decide disputes concerning blockchain. Some of these blockchain arbitration systems funnel disputes to traditional arbitrations, while some direct them to a completely different system. An example of the latter system is Kleros, which incorporates unknown to one another and motivated by financial incentives to choose a decision each thinks the majority will choose. , with some decisions reached in a matter of days. The entry of further creates an opportunity to design a new arbitration system without the high levels of costs and time associated with traditional arbitration.
Nappert analysed that different kinds of disputes call for different forms of dispute resolution mechanisms. Artificial intelligence is well-suited for simple disputes, while subjective, complex, and high value claims are better resolved through the traditional arbitration system. She identified problems with procedural justice in unorthodox blockchain arbitrations, and problems with recognition and enforceability under the New York Convention. How to translate virtual enforcement to offline enforcement is an open question, although it is not a priority at the moment since there are enough virtual assets to satisfy decisions.
These are only some of the intellectually stimulating snippets from Columbia Arbitration Day 2022. Full recordings of the conference can be found on the Canal Arbitragem YouTube page (https://www.youtube.com/channel/UCkyliqi_KjQXmUl52ClStHQ).
* Yiwei is a Columbia Law School LL.M. candidate.