The Social and Psychological Underpinnings of Commercial Arbitration in Europe

Businesses face a dilemma when disputes arise: they would like the certainty of a judicial decision, but often find courts to be slow, inefficient and/or inflexible. Commercial arbitration has developed as the leading solution to this dilemma, providing a private, flexible and user-controlled process, while also delivering a binding decision that will be enforced by courts. But commercial arbitration creates a dilemma for States: support of arbitration assists the business community and allows courts to redirect their limited resources to other areas, but the private and confidential nature of arbitration effectively allows businesses to operate an autonomous legal process, supported by the State but ultimately outside State control.

Commercial arbitration has a central place in contemporary dispute resolution, being used to resolve large numbers of disputes of both large and small value. In 2013, the ICC International Court of Arbitration received 767 requests for commencement of an arbitration, the London Court of International Arbitration received 301, the Stockholm Chamber of Commerce received 203 and the German Institution of Arbitration received 121. These were often disputes of considerable importance: 540 of the cases the ICC received in 2013 involved a dispute worth more than US$1m, 277 more than US$10m, and 63 more than US$100m. Yet these numbers represent only a fraction of the arbitrations occurring each year, with many more arbitral institutions operating in Europe, and a large number of arbitrations occurring without the involvement of an institution.

Yet despite commercial arbitration's prominent role in the delivery of civil justice, the actual practices of arbitrators, the mechanisms for career development in the field, and the character of the justice arbitration provides remain sealed inside what has been called a "black box". This is because research on arbitration suffers from the confidentiality of most arbitration proceedings and awards, and from the difficulty of collecting robust empirical data on a professional community that is heterogeneous, porous, multinational, and notoriously difficult to penetrate.

Through an innovative triangulation of methodologies, this project will open that "box". Commercial arbitration relies on an institutional structure that rests on three pillars: regulative (rules and norms), normative (training, compliance, internal rules), and cultural-cognitive (social capital, informal networks, symbolic orders). Now that arbitration has reached a level of maturity as a dispute resolution system these pillars are sufficiently marked out to be the focus of empirical research. This project will clarify how social norms and social connections impact on standards of practice and career development in arbitration, and thereby on the functioning of arbitration as a mechanism for the delivery of civil justice. In so doing it will achieve three things. Firstly, by developing an enhanced understanding of the processes through which commercial arbitration functions as a field of professional practice, it will make possible more effective approaches to the integration of commercial arbitration into civil justice systems. Secondly, it will contribute to a greater understanding of the impact of informal social norms and social connections on career development and standards of practice in professional fields. Finally, it will contribute significantly to methodological development in qualitative social science research.

Commercial arbitration is an ongoing area of concern for both governments and civil society across Europe, but remains poorly understood because of the confidentiality that dominates the field. This project will take advantage of the Principal Investigator's recognition amongst arbitration practitioners, and of the range of expertises of an interdisciplinary research team, to gain a clear understanding of this important, but controversial, area of civil justice.

Engagement with Legislative Activities:
The European Parliament has expressly identified commercial arbitration as a topic of future legislative activity, and in 2014 commissioned the P.I. to deliver a 278,191.00 Euro report on arbitration in the European Union as a foundation for that legislative work. While that report gave an overview of European arbitration, it could not provide the detailed and sophisticated information to be generated by the current project. This project will therefore ensure that EU regulation of arbitration is undertaken on the basis of an accurate and sophisticated understanding of what has long been a a poorly-understood field. The project will also benefit both the UK government and governments across Europe. Despite the important role that commercial arbitration plays in the resolution of commercial disputes, its confidentiality has meant that governments lack the information required to integrate commercial arbitration effectively into civil justice systems. As a result, they have consistently relied upon guidance from elite arbitration practitioners, whose experience reflects only a portion of an extremely diverse field. A parallel example would be if laws regulating driving on public roads were created solely based on input from Formula 1 drivers on their own experience and abilities. In a contemporary context of limited public funding and over-burdened court systems, this project will play an important role in ensuring that legislators have the information they need to better understand how arbitration functions, and how arbitral justice does and does not differ from justice delivered by a court.

Training and Professional Diffusion:
Commercial arbitration practitioners will benefit from the enhanced understanding of arbitration as a field of professional practice that the project will produce. The confidentiality of commercial arbitration limits the ability of those outside a core of elite "gatekeepers" to know with any confidence what norms guide the field and how career development is best pursued. This problem is receiving increased recognition within commercial arbitration, with leading arbitral institutions committing to broaden participation and opportunities in the field, and the launch of projects such as Arbitrator Intelligence and the Equal Representation in Arbitration Pledge. This project is ideally timed to contribute to these efforts to increase the diversity and quality of arbitration as a field of professional practice by providing a more detailed and sophisticated understanding of European arbitration than has previously been possible. Moreover, the project has particular importance for the United Kingdom due to Brexit. London is currently the leading arbitral centre in Europe, but it has achieved this position on the basis of free movement of workers within the E.U., as a large proportion of London-based arbitration practitioners originated elsewhere in the E.U. The expected loss of freedom of movement post-Brexit combined with the importance of cross-border social networking in building and maintaining a commercial arbitration practice means that the enhanced understanding produced by the project of the range of arbitration communities active across Europe, and of how arbitration functions through those networked communities, will be essential if London-based practitioners are to maintain their importance in arbitration across Europe despite limitations on free movement.

Communication, Publicity and Engagement:
Arbitration has received significant public attention in recent years, but is largely seen only through the controversial lens of investment arbitration. As a result, it is entwined in public consciousness with concerns about "secret courts" giving special rights to corporations. This project will assist in the important job of increasing public understanding of commercial arbitration, and of when arbitral justice should and should not be trusted.