Behavioral Insights into International Arbitration: An Analysis of How to De-Bias Arbitrators

Abstract

Empirical evidence indicates that national court judges fall prey to cognitive biases and heuristics. The same may be assumed for international arbitrators. Improving third-party adjudication through behavior-ally informed rules on procedure thus seems to be an avenue of research worth being pursued. In applying behavioral law and economics to international commercial arbitration, the present analysis shows (1) that behavioral economics can help to understand arbitrators’ behavior and (2) suggests how the law may mitigate their cognitive biases and heuristics in order to design more effective, efficient, and fair arbitral proceedings under the UNCITRAL Arbitration Rules. The analysis focuses on (i) the representativeness heuristic, (ii) anchoring, (iii) the hindsight bias, (iv) framing effects, and (v) the egocentric bias. Building on their underlying dynamics and recent research on context-dependent decision-making, corresponding debiasing mechanisms may be implemented into arbitral proceedings through either behaviorally informed (model) arbitration clauses or by complementing existing frameworks such as the UNCITRAL Notes on Organizing Arbitral Proceedings in a behaviorally informed manner. Hence, in applying insights from economics and psychology to international arbitration, the present analysis adopts a prescriptive approach, examining how to actively mitigate arbitrators’ cognitive shortcomings as much as possible. Ac-curacy in fact determination – or the search for the truth – is perceived as the central motivation of this approach. As prescriptive insights from behavioral economics are able to allow for more accurate judgment, behaviorally informed rules on procedure not only benefit disputing parties by enhancing the idea of due process, but in doing so, they also empower international arbitration as a legal institution when con-fronted with national legal systems.