CLE: Re-Inventing Arbitration: Drawing Lessons from International Trade Treaty Controversies
The UNLV William S. Boyd School of Law and the Saltman Center for Conflict Resolution Present
“Re-Inventing Arbitration: Drawing Lessons from International Trade Treaty Controversies” with Professor Deborah Hensler
In Honor of Commissioner Chris Beecroft Jr.
March 30, 2017
Thomas and Mack Moot Court, UNLV Boyd School of Law
1 CLE credit
Mention arbitration to most business lawyers and what comes to mind is a private dispute resolution process in which parties select their own adjudicator and procedural rules and reach a binding resolution more quickly and inexpensively than in litigation. Even when it doesn't live up to promises about speed and inexpensiveness, business decision-makers often prefer arbitration to litigation because it allows them to settle their disputes outside of public view, without creating a public record. When disputes involve international commerce, arbitration has an additional hugely important benefit: because most countries (including the US) have signed onto international treaties committing their courts to enforce arbitrators' judgments, companies doing business with a foreign company don't have to worry that if a dispute arises they will find themselves in a foreign court that might be biased against them. It's not surprising then that when international trade negotiators were searching for a method of resolving disputes between an investor -- e.g. an American corporation -- and a foreign country that nationalizes an industry or unexpectedly withdraws a permit for mining or siting a public facility -- the negotiators chose arbitration modeled after traditional international commercial arbitration. Today, thousands of bi-lateral investment treaties ("BITS") include "investor-state arbitration" provisions that commit national governments to arbitrate disputes that arise with foreign corporations that invest in their countries.
Many of us are now aware of controversy over international trade treaties between the US and Asian nations and the US and the EU, which President Trump has vowed to set aside. But what's less well-known is that before the treaty negotiations became a prominent subject in the US presidential campaign, the negotiations had shuddered to a halt because of the arbitration provisions included in the treaties. In parallel to the trade negotiations, multinational American and European corporations had begun to use investor-state arbitration provisions to challenge national legislatures' decisions to more strictly regulate public health and safety and environmental quality. What might have been a peculiar turn of events only affecting a small number of investors set-off a wide-ranging attack on arbitration itself. What had begun as an arguably clever strategic move by lawyers for multinational corporations back-fired dramatically. Rather than being celebrated for its efficiency and fairness, arbitration was depicted as a mechanism for wresting control of public policy from national governments and placing it in the hands of private decision-makers, selected and paid by multinational-corporations. Public health and environmental advocates challenged the use of a private system operating outside of public view -- and therefore outside of public accountability -- to resolve important public policy controversies. In response, one venerable arbitration institution adopted new "transparency" rules that call for publication of arbitration proceedings and outcomes, including opportunities for NGO representatives to participate as "amici." Not satisfied with these changes, some critics have called for the establishment of a new more court-like tribunal for international investment disputes.
The eruption of controversy over investor-state arbitration carries lessons for arbitration generally. As corporations attempt to extend the application of arbitration to a broader range of disputes and disputants critics raise questions about the wisdom of resolving disputes with public implications in a private process. In response, some private arbitration providers promise greater transparency; others may offer the sorts of due process protections -- discovery, reasoned decisions, appellate processes -- that delay and increase the costs of disposition. Re-inventing arbitration as a dispute resolution process that offers many if not all of the due process protections and public accountability of courts raises a fundamental question: If we think certain types of disputes require the substantive and procedural protections that are characteristic of courts, why are we encouraging their resolution in private processes outside of courts?
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