It is a certainty that in my inbox every morning there is at least one, if not more, email with a discussion on the future of arbitration in our changing society today. Further, the debate continues in halls of university law schools to GAR events to law firm seminars. I am reluctant to write more, but the events hit me a little differently. Recent government pronouncements on trade and immigration can ultimately, if not sooner, have an impact on the “right to arbitration,” a right some may see, as do I, embedded in the freedoms of contract and association. The Trump Administration seems to have some inherent distrust of anyone deciding disputes other than its own handpicked people as the US has walked away from multilateral agreements such as Trans Pacific Partnership and Paris, and stating that in renegotiating NAFTA, foreign NAFTA country investors in the United States “are not accorded greater substantive rights than domestic investors,” a shout-out to the Calvo Doctrine. This may eventually not bode well for NAFTA ISDS. Protectionism and the current America First climate has certainly placed what we have known as globalization in the back seat. The soundings from such arbitration leaders as Gary Born and John Beechey have been well publicized, that with economic nationalism or retrenchment and the negative concerns of free trade and globalization on both sides of the Atlantic, could well signal further distrust for the general concept of investor state arbitration. ISDS is under the microscope and under some criticism, possibly with some merit in part, but overall the criticism is unfounded at least in my judgment.
The scarier proposition, to me at least, is that the very underpinnings and floor on which arbitration sits may itself begin to shake with the onset of the above thinking leading the charge or setting the stage. History has clearly shown when governments move to centralize power away from democratic individual autonomy, people’s rights are of necessity going to be adversely affected; and it follows their individual rights to decide how they want their disputes resolved are taken away. This is what happened in the time of Napoleon, and in Germany in the 1930s. Today, in Poland, the government has removed the Supreme Court and is evidently walking away from bilateral investment agreements. Poland is still day to day. (Moving down to the Mideast, I read recently where the Qatari Court of Cassation has recently decided the national courts are now in charge of arbitration matters, to the degree that it has stripped the arbitrators of the right to decide their own jurisdiction via competence-competence, full stop). I have not even addressed South America or other parts of the world.
In Washington DC and elsewhere, arbitration, somewhat paradoxically given its history, is getting a populist’s black eye, especially in consumer circles, with the latest announcement at the CFPB, and how this will out play out in Congress is not clear. (This in spite of some evidence the consumer actually does better in its claims in arbitration than in a class action in court). And should US and international lawyers be able to rely on the US federal judiciary, and its own Supreme Court, for continuing pro arbitration pronouncements such as the BG Group decision, when it is very possible a great percentage of the federal bench will change in this Administration?
What is at bottom causing this concern and ill feeling? It has to be the convergence of national determinism here and abroad and a distrust of the institution of the arbitral process. An example many critics turn to in the investment area is when a sovereign’s efforts to achieve a clean environment or provide essential services for healthy communities are under attack as violating an investor’s rights in contract, and huge taxpayer moneys are awarded by tribunals not even indirectly accountable to any electorate. In this situation, legitimate questions can be raised starting with whether the underlying process is fair, and ending whether the overall result is fair. Furthermore, much has been written and said about arbitrators not having the same robust effect to law development as do the national courts. Even, the Chief Justice of England and Wales, Lord Thomas, has weighed in famously, and recently spoken of the need and suitability for courts, not arbitrators, to develop the common law. However, in the international transaction, when a border is crossed, the advantages of a neutral forum seem to be compelling and greatly outweighs any negative in my judgment. Stephen Breyer has an excellent discussion on this in his recent book, The Court and The World, pp 179 et seq.
One of the countries’ leading thinkers on modern history and totalitarianism, Prof Timothy Snyder at Yale, has recently written that “(h)istory can familiarize, and it can warn.” Expansion of global trade in modern times, as it did in the 19th and 20th centuries, lead to heightened expectations of the people and also “perceived inequalities.” Leaders then emerge and put a “face on globalization” as resulting from a “conspiracy against the nation.” Professor Snyder’s short book, On Tyranny, offers twenty lessons from the 20th century to keep our liberty and freedom and combat tyranny, everything from making eye contact and small talk to remembering professional ethics to respecting and defending institutions such as “a court, a newspaper, a labor union—and take its side.” The book chillingly recounts the rise of Nazi Germany and how a leading newspaper for German Jews had been totally hoodwinked by the oncoming storm. Institutions do not “protect themselves” Snyder notes. They fall “one after the other unless each is defended from the beginning.” So it is and, as stewards of the institution of the arbitral process, a process which embraces freedom, we should be mindful.
For further reading: S. Breyer, The Court and the World, (2016). T. Snyder, On Tyranny, (2017).
– Posted on LinkedIn on 24th July 2017
