[This article is authored by Simran Upadhyaya & Sri Hari Mangalam, third year law students at WBNUJS, Kolkata.]
Keywords: International Arbitration, Ethnicity, Homogenous Tribunal, Underrepresentation, Diversity
The increased globalisation of world trade and investment has resulted in arbitration becoming an important means of dispute resolution between states, corporations, and individuals. Arbitration ensures effective adjudication of disputes by an arbitrator, who is appointed in accordance with party agreement, and whose decision is final and binding on the parties. [i] Confidentiality and the ability to appoint one’s arbitrator ensures the growing popularity of arbitration.[ii] However, in recent years, the problem of lack of diversity in international arbitration has come to the forefront.
The appalling state of diversity is due to the under-representation of particular groups based on age, gender, geography, culture, and ethnicity. Out of these, ethnic diversity poses a significant concern with tribunals being dominated by a homogenous group of individuals who are “pale, male, and stale”.[iii] The dearth of literature and statistics on the lack of ethnic balance makes it difficult to rely on a uniform definition of “ethnicity” in the context of international arbitration. Hence, in this article, the authors rely on the definition of ethnicity that refers to a nation or group sharing a common nationality, culture, language, race, or religion. Accordingly, the analysis in this article focuses on ethnicity based on nationality, where Anglo-Europeans, Africans, and Asians constitute three different groups.
In the backdrop of these three ethnic groups, Part II of the paper statistically establishes that there is an increasing tendency of appointing arbitrators from only a particular group. Part III discusses the potential causes of concern owing to an ethnically homogenous tribunal. Thereafter, Part IV analyses the reasons for such ethnic imbalances, and Part V discusses ways to overcome them. Finally, Part VI emphasises that ethnic imbalance in international arbitration is a major concern, which could bring the growing popularity of arbitration to a standstill.
Commenters across the globe have been unable to present an approximate figure on the representation of ethnic minorities, but it is suggested that individuals from non-Western geographic origin (such as Africans, Asians) are blatantly under-represented. A survey of 289 closed cases from the International Centre for Settlement of Investment Disputes from 1972 to 2015 suggested that in nearly 45% of the cases, only Anglo-Europeans dominated the tribunal.[iv] In 84% of the cases, either two members or the sole arbitrator was Anglo-European.[v] However, only eleven cases were presided over entirely by non-Anglo Europeans. [vi]According to the World Bank report, only 10% of the arbitrators appointed belong to Africa, in contrast to 50% being appointed from Europe. In the London Court of International Arbitration, more than half of the arbitrators were nationals of Anglo-European countries. In the Singapore International Arbitration Centre, 51% were nationals of Singapore (an Asian country), whereas 20% were nationals of Anglo-European countries, while the other Asian countries were grossly under-represented. In relation to arbitrations under the International Chamber of Commerce, 67.5% of the arbitrators were of Anglo-European nationality, while less than 34% were nationals from the other groups.
Thus, this data clearly demonstrates that Anglo-Europeans are the ethnic majority dominating the constitution of the tribunal, while the other ethnic minority groups are under-represented.
Causes for Concern
Ethnical imbalance is a huge obstacle that prevents the establishment of a diverse tribunal. The diversity of a tribunal is crucial to uphold the modern and flexible nature of arbitration. Parties to arbitration are large, diverse groups from different parts of the world.[vii] As a result, these individuals gain confidence in a tribunal that mirrors a cross-section of the society, rather than reflecting the ideals of an ethnic majority. To uphold principles of fairness and justice, it is essential that the arbitrators are representative of the communities that come before them.
In the recent case of Shawn Carter v. Iconix Brand,[viii] the issue of ethnic diversity was brought to the limelight when Mr. Carter filed for a temporary restraining order enjoining arbitration due to lack of a diverse panel. Mr. Carter made a strong argument on how homogenous panels risk unconscious bias and exclude the diverse voices of arbitrators in the decision-making process. A homogenous panel adjudicating similar disputes may stand testament to their expertise, but it also results in predictable decision-making. This jeopardises the possibility of bringing fresh perspectives to the table. The most culturally able arbitrators have engaged with different cultural groups, making it easier for them to deliberate on finer details and appreciate diverse client perspectives.
The necessity of a diverse tribunal can be illustrated from the case of Chevron v. Ecuador. In this case, the demands of the indigenous groups regarding the level of pollution at Ecuadorian Amazon were ignored, as the arbitrators appointed were oblivious towards the cultural backgrounds of the parties. With the exclusion of alternate opinions, parties lose out on the essence of arbitration that serves as a means of alternate dispute resolution.
Additionally, arbitration requires rigorous analysis of facts and laws based on parties’ submissions.[ix]A particular fact can be interpreted in multiple ways depending on the individual’s cultural background. Thus, a tribunal with diverse ethnical backgrounds will ensure a holistic interpretation of the facts with just results.[x] The key to a successful arbitration is that there are no encumbrances involved in the enforcement of an award.[xi] This requires tribunals to pass decisions taking into consideration the ground realities and socio-political factors of the countries from which the parties hail. A homogenous panel is almost always inclined to decide matters in a particular way. In this regard, an ethnically diverse tribunal would do a better job by looking into the larger perspectives, appreciating the context in which the dispute arises, and implementing the laws uniquely. The hallmark of arbitration is that arbitrators pass decisions binding on particular and not future disputes.[xii] Previous decisions merely have a persuasive value.[xiii] However, if members of only one group dominate tribunals, there is a risk that they might decide in a similar manner as their predecessors. This would gradually transform the nature of arbitration from decisions having persuasive value to being used in the form of established precedents.
Multiple studies prove that heterogeneous teams in any profession yield better productivity, creativity, and put forward diverse perspectives. Similarly, a diverse tribunal would improve the effectiveness and efficiency of decision-making, thereby providing better solutions and analysis as compared to a non-diverse tribunal.[xiv] Moreover, repeat appointments may not result in the efficient and timely disposal of disputes due to multiple cases being assigned to the same arbitrators.
Lastly, the domination by ethnic majorities might lead to an emergence of a cartel of elite arbitrators, solely responsible for shaping the future of arbitration without accounting for differences faced by the ethnic minorities.
Therefore, an ethnically imbalanced tribunal leads to an inefficacious tribunal, which poses a major cause of concern.
Reasons for Ethnic Imbalance
The reasons for ethnic imbalance in the international arbitration community can be understood through an analysis of demand and supply problems.
I. Demand-Side Problems
It is easier for ethnic majorities to attain elevated statuses at major law firms, garner reputation, and assemble an impressive resume. A survey of U.S. law firms demonstrates that out of 25.5% of minority graduates, only 7.33% are partners at major law firms. This makes it impossible for ethnic minorities to establish themselves due to limited opportunities. Additionally, arbitral awards and challenges to arbitrator’s decisions often remain unpublished to maintain confidentiality. [xv] As a result, parties are unaware of the arbitrators’ names and the decisions passed by them. This makes it difficult for new arbitrators to gain recognition for future appointments due to the tendency to repeatedly appoint few known faces.[xvi] Usually, the parties, based on their counsel’s suggestion, appoint arbitrators. In order to ensure quality, counsels suggest names of well-established arbitrators over other potential candidates. This leads to the formation of a subconscious bias that only repeats appointees ensure quality, which makes it extremely difficult for the minorities to enter the field and establish a name for them. Additionally, as lawyers, co-arbitrators, and presiding arbitrators belong to the same circle, they inevitably nominate each other.[xvii] Consequently, ethnic majority gain monopoly over their positions due to such a distorted feedback system.
II. Supply-Side Problems
Usually, parties choose seats that are located in countries of ethnic majorities such as Paris, London, Geneva, etc. As a consequence, individuals from Latin America and Africa are heavily under-represented in arbitral institutions, which also hampers the establishment of diverse tribunals. Mostly, individuals serve as arbitrators in the later stages of their careers after retiring from the judiciary.[xviii] However, judicial appointments have always been skewed with respect to ethnic and gender diversity. This means the same set of individuals from the judiciary are appointed to the tribunal, thereby jeopardising the probability of ensuring diversity.
Additionally, minorities struggle to be appointed to an international tribunal as compared to the majority. This is mainly because minorities not only need to excel within their country but also gain international recognition.[xix] However, it is comparatively easier for Anglo-Europeans to gain international recognition, as they dominate international arbitration.
Measures to Overcome Ethnic Imbalance
Diversity is often equated with a reduced quality.[xx] However, such assertions are baseless when made against minority arbitrators without giving them an equal chance in the international community. Also, as discussed above, a diverse tribunal leads to better results and adds credibility to the process. Party autonomy grants parties unfettered right to choose arbitrators of their own.[xxi] However, the appointment process is opaque and may be susceptible to biases and stereotypes. Hence, it is incumbent upon arbitral institutions to generate awareness among the parties on the advantages of having a diverse tribunal and accordingly, suggest names of arbitrators from the ethnic minorities. Additionally, in cases involving non-Anglo-European parties, efforts should be made to ensure that at least one or more arbitrators in the panel are from ethnic minorities.
When entrusted with the responsibility of making appointments, arbitral institutions should make active efforts to include female and ethnic minorities as arbitrators. Furthermore, it is incumbent upon arbitral institutions to maintain a diverse pool of candidates, so that ethnic majorities and minorities are equally represented. Similarly, senior arbitrators should make active efforts to mentor young arbitrators from an ethnic minority background and give them more opportunities to establish themselves.
Alternatively, there are many initiatives launched to ensure diversity in international arbitration. For example, “Alliance for Equality in Dispute Resolution” aims at promoting inclusivity and strives to work towards the lack of ethnic, gender, and other forms of diversity.[xxii] It focuses on addressing unconscious biases through online discussion forums, training, and mentoring. [xxiii] The training sessions minimize inherent bias by promoting bias literacy. “Arbitrator Intelligence” is yet another initiative that records feedback of individual arbitrators at the end of every decision. The feedback is mostly to judge an arbitrator’s skills such as expertise or efficiency. [xxiv] This information is made publicly available for parties to choose from a diverse pool of candidates. Such consistent efforts via initiatives can bring about transparency in the field of international arbitration, counter informal feedback systems, and ensure more visibility to diverse candidates.
The lack of ethnic diversity in arbitration has been plaguing the international community. The paradox of having an ethnically imbalanced tribunal is that it does not reflect a globalised and ethnically diverse community. Homogenous members sharing similar values may not help in the evolution of arbitration according to the changing times and might bring international arbitration to a standstill. Accordingly, it is the need of the hour to convince individuals that party autonomy would not be subverted in the quest of a diverse tribunal. Instead, the alternative measures employed will create demand for ethnic minorities and will change the face of arbitration beyond the spectrum of “pale, male and stale”. Ultimately, it is the appointment of a diverse tribunal that will dispel concerns regarding arbitrator bias, nepotism or favouritism, and bring transparency, political legitimacy, and inclusiveness in the appointment process.[xxv] Hence, to ensure the holistic development of international arbitration, it is necessary to appoint an ethnically diverse tribunal.
[i] Born G, “Overview of International Commercial Arbitration,” International commercial arbitration, 67 (Kluwer Law International 2021). [ii]Roberts S & Palmer M, Dispute Processes: ADR and the Primary Forms of Decision-Making 124 (Cambridge University Press 2005) [iii]Hikawa C, “Beyond the Pale: A Proposal to Promote Ethnic Diversity Among International Arbitrators” (2005) 12 Transnational Dispute Management 4. [iv]Hikawa, (n 3). [v]ibid. [vi]ibid. [vii] Hikawa, (n 3) 2. [viii]Shawn C. Carter v. Iconix Brand Group, Inc, Case number 655894/2018. [ix] Crook J, “Fact-Finding in the Fog: Determining the Facts of Upheaval and War in International Disputes” The Future of Investment Arbitration 314 (2009). [x] Kidane W, “Culture and Legal Infrastructure of Investment Arbitration”, The Culture of International Arbitration 243 (2017); Benhalim R , “The Case for American Muslim Arbitration” (2019) Wis. L. Rev. 531. [xi] McClendon J. “Enforcement of Foreign Arbitral Awards in the United States” (1982) 4 Nw. J. Int'l L. & Bus. ; McLaughlin J, “Enforcement of Arbitral Awards Under the New York Convention: Practice in U.S. Courts”, (1988) 3 Int’L Tax & Bus. Law. [xii] Born G, “Forms and Contents of International Arbitral Awards,” International commercial arbitration, (Kluwer Law International 2021). [xiii] ibid. [xiv] Greenwood L & Baker M, “Is the Balance Getting Better? An Update on the Issue of Gender Diversity in International Arbitration” (2015) 31(3) Arbitrational International. [xv] Rogers C, “The Vocation of the International Arbitrator” (2005) Am. U. Int ’L L. Rev. 969; Pilawa D, Pilawa D, “Sifting Through the Arbitrators for the Woman, the Minority” (2019) 51 Case W. Res. J. Int'l L 413. [xvi] Dezalay Y & Bryant G, “Dealing in Virtue: International Commercial Arbitration and The Construction of a Transnational Legal Order” 37 (1996); Kidane W, “Culture and Legal Infrastructure of Investment Arbitration”, The Culture of International Arbitration 113 (2017); Polonskaya K, “Diversity in the Investor-State Arbitration: Intersectionality Must Be a Part of the Conversation” (2018) 19 Melbourne Journal of International Law 13. [xvii] Dezalay Y & Bryant G, “Dealing in Virtue: International Commercial Arbitration and The Construction of A Transnational Legal Order” 39 (1996); Rogers C, “The Vocation of the International Arbitrator” (2005) Am. U. Int ’L L. Rev. 968. [xviii] Hikawa, (n 3). [xix] Hikawa, (n 3) 6. [xx] Greenwood L & Baker M, “Is the Balance Getting Better? An Update on the Issue of Gender Diversity in International Arbitration” (2015) 31(3) Arbitrational International 420 ; Polonskaya K, “Diversity in the Investor-State Arbitration: Intersectionality Must Be a Part of the Conversation” (2018) 19 Melbourne Journal of International Law 14. [xxi] Khambata D, “Tensions Between Party Autonomy and Diversity” Legitimacy: Myths, Realties, Challenges (2015). [xxii] Greenwood L, “Indepth: Going Beyond the Usual Suspect” (2018) Kluwer Law International 14. [xxiii] ibid. [xxiv]Greenwood L, “Indepth: Going Beyond the Usual Suspect” (2018) Kluwer Law International 14; Polonskaya K, “Diversity in the Investor-State Arbitration: Intersectionality Must Be a Part of the Conversation” (2018) 19 Melbourne Journal of International Law 31. [xxv] Hikawa, (n 3) 11.