Challenges facing international arbitration and their possible solutions

Dealing with Diversity in International Arbitration

INTRODUCTION
International arbitration is a process of dispute resolution that works in a similar way to
arbitration in the U.S. In international arbitration, disputes are settled by a specific process
that includes an arbitrator. The purpose of international arbitration is "to provide businesses
engaged in international transactions with a neutral forum for dispute resolution.
International arbitration is arbitration between companies or individuals in different states,
usually by including a provision for future disputes in a contract.1
The predominant system of rules is the UNCITRAL Arbitration Rules, as well as the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958
(the "New York Convention").2 The International Centre for the Settlement of Investment
Disputes (ICSID) also handles arbitration, but it is particularly focused on investor-state
dispute settlement and hears relatively few cases.
The New York Convention was drafted under the auspices of the United Nations and has been
ratified by more than 150 countries, including most major countries involved in significant
international trade and economic transactions.3 The New York Convention requires the states
that have ratified it to recognize and enforce international arbitration agreements and foreign
arbitral awards issued in other contracting states, subject to certain limited exceptions.4 These
provisions of the New York Convention, together with the large number of contracting states,
have created an international legal regime that significantly favors the enforcement of
international arbitration agreements and awards.5 It was preceded by the 1927 Convention on
the Execution of Foreign Arbitral Awards in Geneva.

 HOW IT GET STARTED

With the increasing globalization of trade and business after World War II, the need for an
arbitration process that could work between companies in different countries was seen. A
treaty called the New York Arbitration Convention6 was agreed upon in 1959. The New York
Convention has been adopted by 154 of the UN members, and more than 65 countries have
participated in arbitration decisions.

1 Gary B. Born, International Commercial Arbitration, 187, 197, 217 (2009); Julian M. Lew, Loukas A.
Mistelis & Stefan M. Kröll, Comparative International Commercial Arbitration 1-10 to 1-11, 6-1 to 6-6 (2003)
2 Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New York
Convention”), June 10,
1958, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html
3 Jason Fry, Recognition And Enforcement Of Foreign Arbitral Awards: A Global Commentary On The New
York Convention Foreword (Herbert Kronke, Patricia Nacimiento, Dirk Otto & Nicola Christine Port eds.,
2010)
4 New York Convention, arts. II, III & V, June 10,
1958, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html; Fouchard Gaillard
Goldman On International Commercial Arbitration ¶¶ 250-252 (Emmanuel Gaillard & John Savage eds.,
1999)
5 Gary B. Born, International Arbitration and Forum Selection Agreements: Drafting and Enforcing 10-11,
123-124 (3rd ed. 2010)
6 7 June 1959 (article XII)
Since that time, other conventions have been established. In the U.S. the Federal Arbitration
Act7 includes the New York Convention, which states that this convention "shall be enforced
in United States courts.

Use of International Arbitration

The primary benefit of international arbitration is that it is enforceable, where litigation (court
cases) between business entities in different countries may not be. It also is set up with the
consent of both parties, and results are kept private in most cases. Other benefits are similar
to arbitration in the U.S.: it is a faster and less expensive process than litigation.

Without international arbitration, the only way to take someone to arbitration in another
country would be to use that country's laws. This is often not a workable option. Let's say you
wanted to use arbitration with a customer in Germany. That means finding an arbitrator who
can speak German and who can work in Germany. You would be at a disadvantage because
German laws and arbitration procedures might favor the customer.

How Does International Arbitration Work?

Imagine a dispute between companies in two different countries. Which court has
jurisdiction? Which country's laws should be followed? In these cases, having a neutral
process that everyone accepts makes settling these between-country disputes much easier.

There are multiple arbitration associations that operate under the New York convention or
other conventions. To begin an arbitration, a request for arbitration must be filed with one of
these associations. One of the largest of these associations is the International Chamber of
Commerce (ICC); we'll use their process to describe what to do.

Diversity in international arbitration

Diversity in international arbitration is one of the key areas of development in the past few
years. While arbitral institutions are willing to contribute to diversity through promoting
underrepresented groups in arbitrator appointments and publication of data related to
arbitrators in the past few years, academic institutions and law firms conduct surveys with
respect to conceptions on this issue, as well as the paths to be followed to enhance diversity.
The current status on diversity across arbitral tribunals shall be analyzed in this article.

In General
The notion of diversity may be defined as the fact of many different types of things or people
being included in something; a range of different things or people 8. In terms of diversity in
arbitration, diversity can be reviewed under different groups, such as gender and age
diversity, or geographic, cultural, and ethnic diversity.

As arbitral tribunals are decision-making authorities, the importance of diversity across

arbitral tribunals cannot be underestimated. International arbitrations involve parties having
different nationalities, cultures and backgrounds. This diversity in backgrounds of the parties

7 The United States Arbitration Act, more commonly referred to as the Federal Arbitration Act or FAA,
is an act of Congress that provides for judicial facilitation of private dispute resolution through
arbitration.
8 Definition of diversity, Cambridge Dictionary, https://dictionary.cambridge.org/dictionary/english/diversity.
should be supported and enhanced by different perspectives presented by the members of
the arbitral tribunal, as well. If diversity in arbitral tribunals can be assured, each member
would bring a different perspective to the table, which in turn would be beneficial towards
resolution of the dispute.

Diversity in the composition of arbitral tribunals would be ensured in the phase of

appointment of arbitrators; therefore, any party having an effect on the appointment, such as
arbitral institutions, parties and co-arbitrators all play an important role in ensuring this
diversity.

When it comes to arbitral institutions, we conclude that there is a will in taking necessary
measures in this aspect. For instance, the International Chamber of Commerce ("ICC")
introduced a policy in 2016 to publish information relating to arbitrators sitting on ICC cases,
with an aim to provide incentives to promote regional, generational, as well as gender
diversity in the appointment of arbitrators9. Again, the London Court of International
Arbitration (LCIA) regularly publishes casework reports, including detailed information about
gender diversity10.

Gender Diversity
Among the various components of diversity in arbitration, gender diversity attracts
considerable attention. It would be safe to conclude that efforts are being made as to gender
diversity coming from different actors taking part in arbitration. A recent survey conducted on
current issues in arbitration set forth that almost half of the users taking part in the survey
stated that progress has been made in gender diversity in arbitral tribunals over the past five
years11.

On the other hand, even though many efforts have been made in this issue, women continue
to be underrepresented in international arbitrations.

As stated, above, arbitral institutions are making considerable strides to increase diversity,
as well as to promote transparency by publishing data on the specifics of arbitrator
appointments. The latest data published by the ICC for 2017 reveals that among 1.488
arbitrators, 249 were women, which represents a percentage of 16.7% of all arbitrators
nominated or appointed12. Among these appointments, the ICC Court appointed a higher
percentage with 45%; whereas, the parties appointed 41%, and co-arbitrators, 13.7%13.

When it comes to Turkey, the percentage of appointment of female arbitrators through the
Istanbul Arbitration Center (ISTAC) arbitrations reveals that the participation of women
arbitrators is above the numbers revealed by the ICC statistics. Accordingly, in ISTAC
Arbitrations, 30% of arbitrations have been conducted with a female chairman and, again, in
30% of the cases, the majority of arbitral tribunals were composed of female arbitrators14.
9 "Diversity in Arbitration," official website of the ICC. Source: https://iccwbo.org/global-issues-
trends/diversity/diversity-in-arbitration/.
10 "LCIA Releases 2017 Casework Report," official website of the LCIA. Source: http://www.lcia.org/News/lcia-
releases-2017-casework-report.aspx.
11 2018 International Arbitration Survey: The Evolution of International Arbitration. ("Arbitration Survey"), p. 18.
Source: https://www.whitecase.com/sites/whitecase/files/files/download/publications/qmul-international-
arbitration-survey-2018-18.pdf.
12 ICC Announces 2017 Figures Confirming Global Reach and Leading Position for Complex, High-Value
Disputes, ("ICC Figures – 2017"). Source: https://iccwbo.org/media-wall/news-speeches/icc-announces-2017-
figures-confirming-global-reach-leading-position-complex-high-value-disputes/.
13 ICC Figures – 2017.
14 Umut Kolcuoglu, Sayilarla Istanbul Tahkim Merkezi (Istanbul Arbitration Center with Numbers), Source:
https://www.dunya.com/kose-yazisi/sayilarla-istanbul-tahkim-merkezi/423171.
Another development on gender diversity across arbitral tribunals is the Equal
Representation in Arbitration Pledge ("Pledge"). As of July 23, 2018, there are 2,926
signatories to the Pledge, including many arbitral organizations, academic institutions, as
well as individuals. It is also worth mentioning that the Pledge has been awarded as the best
development in arbitration by the Global Arbitration Review (GAR) Awards in 2017.

The Pledge seeks to increase, on an equal opportunity basis, the number of women
appointed as arbitrators in order to achieve fair representation as soon practically possible,
with the ultimate goal of full parity15. The solution proposed by the Pledge on equal
representation of women is worth analysing. Firstly, it is stated that the Steering Committee
and the consultants discussed the possibility of setting a quota or target to ensure equal
representation; however, this proposition has not been adopted. Instead of a quota, a more
flexible standard acceptable to all stakeholders 16 has been adopted, which is based on the
standard of equal opportunity, which provides that arbitral appointments should be based on
equal qualifications. This standard of fair representation requires fact-specific determination,
which depends on the context of the opportunity.

Geographical Diversity
This type of diversity may be ensured through the appointment of arbitrators from various
geographical areas, with different legal backgrounds. However, it should also be considered
that the appointment of a certain arbitrator from a certain country has to do with the
education and legal background of the arbitrator. For instance, in accordance with the ICC
statistics, cases filed in 2017 involved 2.316 parties, and 784 of these parties were from
North and West Europe. Accordingly, the nationalities with the most arbitrators taking a role
in ICC proceedings are British and French arbitrators, followed by Swiss, US and German
arbitrators17, which probably has to do with the specifics of the cases filed.

Diversity and Quality of the Arbitrators' Decision-making

The efforts to ensure diversity, especially coming from the users of arbitration as a dispute
resolution mechanism, depend largely on whether they see diversity as a factor contributing
to the quality of decisions. A recent study reveals that there are different views concerning
the causal relationship between the diversity in a panel of arbitrators and the quality of its
decision-making18. More specifically, one quarter of the users taking part in this study stated
that this issue depended on the particularities of the dispute in question; whereas, 40% of
the users stated that there was some, or even significant, improvement in quality with
diversity. Again, approximately one-fifth of the users see this effect as irrelevant, since
diversity is inherently valuable, and 13% believe that there is no appreciable difference in
quality.

Conclusion
Diversity in arbitration is among the issues within the realm of debate in international
arbitrations. The efforts of arbitral and academic institutions, as well as arbitration
practitioners and users, cannot be underestimated. There are many efforts being made to
promote diversity, which show that the participation of some underrepresented actors, such
as women arbitrators, is gaining momentum. However, it would not be realistic to conclude

15 Commentary to the Equal Representation in Arbitration Pledge. Source:

http://www.arbitrationpledge.com/about-the-pledge.
16 Commentary to Equal Representation in Arbitration Pledge.
17 Commentary to Equal Representation in Arbitration Pledge.
18 Arbitration Survey, p. 16-17.
that the diversity goal has been reached in arbitration. Keeping this in mind, there should be
more collaborative efforts among various actors taking part in international arbitration; such
as parties, their counsel, arbitral institutions, corporate entities, states, academics, and
members of arbitral tribunals. We are hoping that these collaborative efforts will contribute to
the diversity goal in arbitration.