International Arbitrators as System-Builders

Abstract

ARBITRATORS AS THE CENTER OF A HETERARCHICAL SYSTEM International arbitration is a particularly good example of confronting complexity in modern international law and dispute settlement. One-off arbitral tribunals, constituted under different arbitral rules and without a uniform supervisory mechanism, resolve individual cases based on different national and international standards and thus create a tremendous risk of inconsistent decisions. This leaves many observers with the perception that international arbitration resembles a chaos of unconnected episodes of dispute settlement rather than a structured system. This perception reflects the absence of hierarchical ordering structures usually associated with systems of dispute settlement in the domestic context where a supreme court ensures convergence and unity. International arbitration, by contrast, operates in predominantly heterarchical structures. In them, the system's unity cannot be forged through hierarchy but requires auto-convergence of independent actors. For once, elements of convergence exist in the wide adherence of states to important international conventions and due to the harmonizing effect of model laws. Yet every arbitral tribunal remains king in its own empire. Still, one can observe considerable convergence, and hence order, in the practice of arbitral decisionmaking. Convergence is reflected less in legal sources but crystallizes in the sociological structures and linguistic practices of international arbitration. Just as one requires highly elaborate methods of fractal geometry to uncover ordering structures in Jackson Pollock's seemingly chaotic drip paintings, (1) one can uncover order in international arbitration by analyzing the discourse in and about international arbitration rather than concentrating on formal sources. To understand arbitration as a system thus means understanding the importance and power of arbitrators. They are the center that can forge international arbitration into a system or dissolve it in infinite fragmentation. Similar to courts in the domestic context, arbitrators as a group are the key institution for the emergence, persistence, transformation, and hence existence, of international arbitration as a system. (2) After all, uniform substantive and procedural rules only translate into a system if arbitrators apply them accordingly; likewise, arbitrators can even forge divergent legal rules into a convergent and structured whole. Arbitrators therefore determine the gestalt of international arbitration. INTERNATIONAL ARBITRATION AS GLOBAL GOVERNANCE The idea that arbitrators determine whether international arbitration constitutes a proper system is closely linked to understanding the function of arbitration not only as a mechanism to settle individual disputes, but as an instrument of global governance. (3) After all, the concept of a system implies that there is an overarching structure connecting individual instances of dispute settlement. This overarching structure develops chiefly on the basis of arbitral precedent. (4) Building on the increasingly widespread publication of arbitral awards, in investment treaty but also in commercial arbitrations, both the decisionmaking of international arbitrators and the argumentation of parties appearing before them are highly precedent-driven. Although it is non-binding, arbitral precedent becomes the primary sources for guiding the resolution of international disputes. It is the use of, and reference to, arbitral precedent that lets arbitrators transform international arbitration into an independent system. Not all arbitrators, however, accept that they operate in a system of governance. They stress that arbitration is a party-controlled and party-owned process in which arbitrators function as agents of the parties. (5) Such a position, however, is not particularly convincing, considering how crucial arbitral precedent has become in forging normative expectations of actual and future parties about how international disputes should be resolved and how parties to international transactions should conduct themselves in the shadow of rulings of arbitral tribunals on matters of substantive and procedural law. …