From Courts to Arbitration: Arbitration's Confidentiality Advantage

Abstract

This paper points out an intrinsic inefficiency in contemporary courts: courts adjudicate publicly, leading to deadweight loss in the form of reputational damages. I build a model to show that arbitration can circumvent this inefficiency by affording disputants a renegotiation opportunity following private adjudication. I then apply this model to account for the historical evolution of arbitral institutions in the 20th century under the leadership of the International Chamber of Commerce, and underscore critical elements in the building of strong arbitral institutions.