Nappert: International Arbitration as a Tool of Global Governance: The Use (and Abuse) of Discretion

Sophie Nappert (Three Verulam Buildings) has posted International Arbitration as a Tool of Global Governance: The Use (and Abuse) of Discretion (in The Oxford Handbook on International Governance, forthcoming). Here's the abstract:

It has been posited that the international arbitration process, as do other international courts and tribunals, carries with it not only fact-finding and law-making functions, but also a governance function insofar as “arbitrators (…) can and do engage in autonomous normative action while still adhering to the rule of law.”

The arbitral process, though widely chosen as a means of dispute resolution in international business, is not without its critics. Arbitrators are regularly engaged in adjudicating international cases with high financial, and often political, stakes – the USD 50 billion Awards issued in July 2014 in favour of the Yukos shareholders against the Russian Federation, and the 2008 arbitration award ordering the French State to pay Bernard Tapie EUR 405 million, are two well-known such instances. The method and basis for choosing arbitrators, historically by reputation and word-of-mouth, have come under increasing scrutiny in a field often accused of clubbiness and opacity. Questions are being asked on what, if any, quality control and accountability mechanisms apply to the arbitrator function.

This is particularly so regarding the exercise of discretion by arbitrators in rendering their decisions. The procedural rules applying to arbitration proceedings generally endow arbitrators with “the widest discretion” in deciding on matters such as efficiency and fairness of process and the allocation of the costs of the proceedings, with little apparent fetter or guidance.

This contribution explores the role and ambit of the exercise of arbitral discretion and its interplay with the governance function of arbitral tribunals as arbitrators must consider “the impact of their rulings on states, persons or entities not directly represented in the case before them.” It questions whether, in light notably of the visible example of the Yukos case, the exercise of arbitral discretion is suited to the governance role of arbitral tribunals and serves, rather than compromises, its effective exercise. It asks what measures ought to be considered to make arbitrators better prepared for the exercise of their governance function.