This article is written by Yash Sharma, from Vivekananda Institute of Professional Studies, Indraprastha University, New Delhi. This article deals with the diversity deficit in international arbitration tribunals and how the diversity deficit affects the efficiency and reliability of the tribunal.
Table of Contents
Introduction
An International Arbitration Tribunal has the job to hear and resolve any dispute that comes to it. An International Arbitration Tribunal does not belong to only one region but to different regions from all over the world. Diversity is an inevitable part of the working of such tribunals. Diversity could be defined as a number of different types of things, people or factors included in the same thing. In an arbitration tribunal, those factors are arbitrators, parties, panellists and other persons being a part of the mechanism. Diversity in arbitration tribunal includes representation from different gender, race, nationality and even age. The global survey provides data from all over the world which shows that diversity in arbitration tribunals are far from being fulfilled. Diversity and efficiency are directly related to each other. Efficiency improves with the quality of decision making when the arbitrators include more than one side of the argument and more diverse factors of a problem. Accountability, transparency, democracy and efficiency all together make an institution reliable for its users and guarantee a just treatment.
Need for diversity in arbitration tribunal panel
An arbitration tribunal is a decision-making body which works with people from different nationalities. Diversity in an arbitration tribunal is integral to the credibility of the panel. This adds a unique perspective gained from each diverse region to the issue and helps in the redressal of the dispute. Diversity does not limit itself to just a panel of judges but also includes the parties, the counsels and other players of the arbitral institution. The need for diversity in arbitration institutions is to enhance the representation and talent in the panel. If there is a member in the panel from the region of the parties, this would help him understand the dispute better.
According to a survey, arbitration cases in the International Centre for Settlement of Investment Disputes (ICSID), from 1972 to 2015, 45% of all the closed cases, the tribunals were composed of all Anglo-European arbitrators. Another statistics from the International Chamber of Commerce (ICC) shows that among all the appointments of arbitrators till November 2016, only 20% were women. It is evident from these studies that diversity is not considered while appointing arbitrators among other attributes. Gender diversity is given least importance among other diversity factors. In only 12% of the instances, gender is taken as a factor while deciding upon the appointments.
Gender diversity
Gender diversity should be given prime importance in arbitration tribunal appointments among other diversity components. Also, it could be seen that efforts and significant steps are taken for enhancing the representation from different genders. In various International Arbitration Surveys of 2018, it was found that almost half of the subjects believe that considerable progress has been made in ensuring gender equality over the past five years. But, even after some progress, women still are underrepresented in various international arbitration institutions.
The diversity we are talking about connotes increasing or providing an equal opportunity in the appointment of women in arbitration. The ultimate goal is a complete parity in the appointment of arbitrators, and to fulfil this, we have to start with increased representation first. The equal representation in arbitration pledge is an initiative towards gender diversity betterment and has done a lot of work for gender equality. Pledge also proposed some really good solutions. Firstly, a proposal for making a quota based on the recommendations from the Steering Committee and consultants was made. But it was not adopted, instead, a more flexible standard for appointment acceptable by all the stakeholders was implemented across many arbitral tribunals. The new flexible standards for appointment are based on an equal opportunity, which is based on equal qualifications.
Geographical diversity
Geographical diversity is ensured when a panel or group of people are different from each other in terms of geographical belongingness, for example, belonging to different countries or regions. Geographical diversity in an international arbitration tribunal is important because, in international arbitration, most cases are from two different regions or parts of the world. When there is a diversity in the arbitrator’s panel, it gives heterogeneity to the ideological pattern of the panel and they can incorporate more views from the different cultural backgrounds. Geographical diversity can be achieved through the appointment of arbitrators from various regions that represent a different geographical, cultural and legal background. It is logical to assume that appointment of an arbitrator from a certain region has to do with the education and cultural identity.
As per the ICC statistics, among the cases filed in 2017, around 3 thousand cases were from North and West Europe. And most arbitrators were of British or French nationalities. This shows that case facts and details affect the arbitrator’s selection, moderating the arbitration in that case.
Barriers to diversity
There are several reasons for the lack of diversity in international arbitration. One of the reasons is the notion that people of old age have a better experience and they can do the arbitration job better than the younger generation and due to this, the arbitrator’s face remains the same in most cases. Another reason is that most of the time the outside counsels appoint arbitrators from a similar background of their own. Due to this, the diversity that the tribunal tries to preserve gets damaged. This same ideological pattern has resulted in the exclusion of women and ethnic candidates from arbitration tribunals. Another drawback is that it hinders the images of the whole institution in terms of diversity and gender equality. As one person’s biased choice makes diversity impossible, the institution gets prejudiced for their individual discriminatory behaviour. But there are certain institutional barriers too which limits the reforms for better position of candidates in terms of diversity. For example, if the selection process of arbitrators in a tribunal lacks transparency, then the institution itself is to be blamed.
Lack of transparency
The lack of transparency in the process of appointing the panel of arbitration tribunal puts a direct effect on tribunal diversity. In a client-counsel relationship, the counsel can not avail all the information publicly, that way it can be easy to find contact information of an advocate but hard to look for the qualities that a client tries to find in their counsel. Due to this bottleneck of information, few advocates keep getting appointed again and again and no scope for a new talent remains. Due to this, those who get one or few chances tend to establish a career for themselves in arbitration. This makes it harder for diversity to be introduced in the arbitration tribunal mechanism.
Client interest over diversity
When the client’s interest is given more importance, that often leaves a void for diversity. As clients choose outside counsel with whom they can relate, it makes it harder for the tribunal to put diversity over the client’s wishes. The international arbitration community is highly conscious of their status and legitimacy. Due to this, they do not go against the wishes of the clients and the same names dominate the arbitral tribunal. This is the ethical paradox in the institution, where they have to improve diversity while also having to provide the clients with the best attorney or arbitrator. A solution to this is to simply close the gap between the need for diversity in arbitration tribunals and strategic practicality that influence the arbitrator selection process. This is also because all the surveys and studies suggest that lack of diversity causes only negative effects on the practice in the arbitration centre.
How diversity and efficiency are related
The working of the international arbitration tribunal depends largely upon the users of the arbitration centres. It depends on the users whether they believe that the diversity in the resolution mechanism affects the decision making or not. Efficiency in an international arbitration tribunal could be judged from the quality of decision making. All the players in international arbitration proceedings can contribute to deal with the diversity deficit. Surveys show that, at a large extent, the arbitrators and counsel, for parties in a case, have a better position in achieving diversity than others. There are many reasons for the need for diversity in arbitration centres. Some of these reasons are mentioned below.
Heterogeneity brings a more diverse perspective to decision making
Firstly, there isn’t much heterogeneity in international arbitration, as most of the players are from the same region or group, so that takes away the possibility for the inclusion of an untouched factor essential to decision making. Using the experience of arbitrators from diverse backgrounds and varied approach to decision making can help improve decision-making significantly. Arbitrators from a single region would lack experience and legal knowledge of other regions. People from different regions can have a different analysis of the details. In arbitration, a lot of work, contracts and promises are done without paperwork and that shows the system’s reliance. To keep that trust and function as a global institution, an arbitration centre must include arbitrators from around the globe. Same goes with diversity in terms of gender, as studies show that women have a different approach to problem-solving then men. As per some tests, panels with at least one female panellist had better reasoning than all men panellists. Scientifically, women possess some gender-specific traits that could be used in arbitration.
The legitimacy of the decisions
The legitimacy or credibility of any institution working at any level it is important for decision-making. The legitimacy of the decisions of a decision-making body could not be judged alone by its application of the rule of law and principles of natural justice. The need to recognise the diversity deficit becomes essential. It is non-debatable that the international arbitration industry is hegemonized by law firms and arbitration centres from developed countries and regions of the globe which automatically creates a biased environment for decision making. The Corporate European Observatory said that there is an accumulation of all the cases of arbitration in a very few hands and that shows, somehow, these few players have great control over the institution itself.
It is further detrimental to the quality and legitimacy as the arbitrators become more receptive of the interests and needs of the investor. As long as there is a diversity deficit in the international arbitration institutions, there will be a doubt of the tribunals’ legitimacy as well.
Sustainability of the system
Recently, it has been observed among the clients that there is growing frustration among them because of the increasing costs and delay. Because only a limited number of people get all the job opportunities that make them extremely busy for a speedier process. Because there are no deadlines or limitations to the proceedings period, they keep on accepting more cases for their selfish needs. With diversity being introduced to the system, this problem could be solved. This will also give clients a more extensive choice and relieve stress in the form of the workload and will make the decision-making process cheaper and faster. There have been earlier initiatives to make reforms to address the diversity deficit. It is undebatable that for reforming diversity deficit, not everything could be changed in an arbitration mechanism. It is agreed that party autonomy could not be compromised. The experience of one arbitrator to the other could not be compared and, to some extent, time itself will correct the faults in the market structure. While the parties shall have the liberty to select their arbitrators, the mechanism too shall be reformed to include more diversity, legitimacy and efficiency in resolving disputes.
It is not logical to deny that experience is not important, but this way, the paradox remains in providing an opportunity to young women or talent from a diverse background without giving them a chance to gain experience first. In order to be efficient, arbitration needs to be innovative and its diversity should be visible to its global users, which necessitates the need for such reforms.
Conclusion
In an international arbitration tribunal, it is essential that the parties feel well represented as they themselves belong to a diverse background. Diversity is important because of the efficient and accountable functioning of the tribunal. Diversity brings a new perspective to the decision making procedure. It has been studied that female gender traits enhance the quality of the decision which further results in an increase in the efficiency of the tribunal.
International arbitration institutions worldwide have experienced changes in terms of diversity deficit. One of the main reasons is that the arbitrator’s appointment is mostly done by the clients who do not have to abide by the diversity reforms. Many surveys report that people feel the expertise of arbitrators is a very important criterion. As expertise and efficiency are directly related, it could not be challenged but this makes it harder for new arbitrators to gain job opportunities as the same experienced arbitrators dominate in the career.
Some strategies were suggested to implement more efficient and diverse working policies in the arbitration tribunals. It was suggested that a heterogeneous environment gives more choices to the clients. With multiple perspectives added to the arbitrator’s panel, biased opinions influenced by ideals of one place gets eliminated. Lastly, it is important for the sustainability of the tribunals as lately, only a few people get all the work and the decision making process becomes slow and corrupt.
References
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