Understanding Discovery in International Commercial Arbitration through 'Behavioral Law and Economics': A Journey Inside the Minds of Parties and Arbitrators

Abstract

Several authors and practitioners have bemoaned the fact that in the current international commercial arbitration practice, there is an excessive use of discovery. International arbitration seems to be losing its cost-effectiveness and attractiveness, in comparison to court litigation. This study explores the reasons for this present tendency, and argues, as a tentative thesis, that the overuse of discovery is a consequence of cognitive illusions on the part of parties as well as arbitrators. Based on insights provided by “behavioral law & economics” studies on cognitive psychology and human behavior, it will be argued that arbitrators have failed to properly exercise their role as the gatekeepers of discovery. More specifically, it will be shown that heuristics and biases affect their decision-making process when it comes to discovery.In order to restore arbitration’s original efficiency and fundamental values, this study suggests that arbitration institutions should more strictly regulate the use of discovery, and at the same time, reduce arbitral discretion. The analysis is organized as follows. Part I provides a description of the originally limited scope of discovery in international arbitration, and the original intuitions that lie behind the procedural discretion granted to tribunals. Part II verifies whether the idea of limited use of discovery in arbitration is consistent with a cost and benefit analysis. To conduct this analysis, traditional “law and economics” theory will be used together with insights from “game theory” and “behavioral law and economics”. Part III examines the causes of the current tendency toward allowing broad discovery in international arbitration. This analysis will focus on the decision-making processes of arbitrators, arguing that they could be affected by “bounded rationality”. Part IV provides some possible solutions for restoring the original values of international arbitration, and offers concluding remarks.