Betting the Farm on International Arbitration: Is It Time to Offer an Appeal? – Vol. 11 No. 4

Print Friendly, PDF & Email

AuthorsWilliam H. Knull, III and Noah D. Rubins*

Published: October 2000

Arbitral Awards
Appeal to Arbitral Tribunal and Annulment

Description: The last two decades have seen extraordinary expansion of the use of arbitration to resolve commercial disputes around the world. The reasons for this marked growth, particularly in the context of cross-border transactions, are manifold. Historically, and particularly in domestic arbitration, “finality,” meaning principally the lack of appeal on the merits of the dispute, has been counted among the advantages of private dispute resolution over court litigation. It is widely assumed that many parties select arbitration to resolve their disputes at least in part because an arbitral award offers an effective and early end to the dispute in a way that a court judgment does not. Increased finality, so the argument goes, brings with it corresponding advantages in speed and cost savings. Furthermore, parties whose dealings with one another are repeated and continuous can put behind them the rancor of conflict and get on with the more serene business of making money.

However, speed and finality come at a price: “The sacrifice that arbitration entails in terms of legal precision is recognized . . . .” As a result, however desirable it may seem at first, finality can be a universally positive quality in dispute resolution only if one of two basic assumptions is true. First, finality would always be an asset if arbitrators, unlike distinguished judges, never made mistakes. Even the most avid proponent of arbitration is unlikely to make such a claim. A more likely assumption is that the stakes in arbitration are small enough that errors are tolerable and the risk of error is outweighed by the desire for speed and finality. While this second hypothesis may apply in many situations, it seems probable that in some cases the amount in dispute is so large that the absence of a mechanism to correct an erroneous result is unacceptable, even if the likelihood of such a result seems, ex ante, to be low. Given the increasing magnitude and frequency of cross-border investment and trade transactions, it seems correspondingly likely that this concern applies in particular to international arbitration.

Download Full PDF

*William H. Knull, III is the head of litigation and arbitration practice at Mayer, Brown & Platt’s Houston, Texas office. Noah Rubins is an associate at the Washington office of Jones, Day, Reavis & Pogue. The authors would like to thank Alan Scott Rau, Robert F. Windfohr & Anne Burnett Windfohr Professor of Law, University of Texas at Austin School of Law for his invaluable comments and input. The opinions expressed in this article, as well as any inaccuracies, are those of the authors and not of Professor Rau.