Counterpoise Between Fairness and Efficiency

ARBITRATION’S DISCONTENTS: OF ELEPHANTS AND PORNOGRAPHY*

A. Abuse in Arbitration

Sources of unhappiness

Arbitrators often complain about frivolous motions and excessive requests for documentary discovery. Scholars worry that arbitration allows business managers to evade statutory norms that further vital public policies. Winning claimants complain that judicial review of awards impairs neutrality and finality. Losing litigants grumble that arbitrators apply the law either too strictly or not strictly enough. Discontent aims principally at the abuse of otherwise legitimate procedures, whether in arbitration itself or in related court actions.

Arbitrators and judges are increasingly aware of the need to discourage litigants from frustrating the basic aims of business arbitration: dispute resolution that is both relatively efficient and reasonably free from excessive judicial intervention. Although these aspirations do not lend themselves to facile analysis, they can help frame a dialogue that promotes reasonable choices about acceptable tactics, with sensitivity to the inevitable cultural predispositions existing in today’s global commercial community.

“We know it when we see it”

For better or for worse, international commercial arbitration lacks any universally recognized standard-setting body. No arbitral “Miss Manners” sets worldwide procedural etiquette. Statutes and conventions contain only general principles (arbitrators must be free of bias, respect the limits of their authority, and give each side an opportunity to present its case), and arbitral institutions leave arbitrators wide discretion in establishing facts and interpreting contracts. Treatises on international arbitration have only persuasive authority.¹

Attempts to define “abuse” in arbitration bring to mind the line by U.S. Supreme Court Justice Potter Stewart reversing a movie theatre’s obscenity conviction. Admitting an inability to define “hard core” pornography, Stewart added, “But I know it when I see it.”²

British judges sometimes apply a similar (but less risqué) characterization test. In deciding that a floating crane was not a “ship or vessel” for purposes of insurance policy, Lord Justice Scrutton referred to the gentleman who “could not define an elephant but knew what it was when he saw one.”³

Like elephants and obscenity, abuse in arbitration is often easy to recognize but hard to define, leaving many fuzzy edges that frustrate rigorous discussion. A “We-know-it-when-we-see-it” approach has merit faute de mieux, as an analytic starting point that serves until something better appears. However, arbitrators and judges who apply such subjective tests for abuse must do so humbly, with awareness of their own cultural blinders and predispositions.

Baselines

As Einstein reminded us, most things are relative. To speak of a practice as abusive requires some contemplation of alternatives: abusive compared to what? Since no consensus exists on what should be included within the malleable notion of abuse, conduct usually gets labeled “abusive” when pushed just a bit further than the observer’s comfort level.

In some instances pettifoggery pure and simple (what the French call objections de pure chicane) results in costly time-wasting motions.⁴ More often, however, perceptions of abuse rest on cultural assumptions about the baselines and yardsticks that measure “normal” procedure.⁵ Thus procedural diversity in arbitration serves both to enliven the game (allowing constant reinvention of civil procedure) and to frustrate the players (creating divergent perceptions of fairness that lead to a sense of abuse). Presuming one’s own conclusion poses a constant risk.⁶

In a legally heterogeneous world, unfamiliar fact-finding techniques may leave litigants feeling short-changed or mistreated with respect to cross-examination, witness statements, experts (party-appointed and tribunal-selected), and the way law is proven.⁷ It is as if one is playing both American football and British rugby at the same time, never knowing whether the ball can be thrown forward.

Documentary discovery

Seeking a cautionary tale about the importance of cultural baselines in arbitration, it would be hard to do better than documentary discovery, always a fertile source of irritation and conflict.⁸ In many parts of the world, discovery means no more than giving the other side any documents to be relied upon during the hearings, so as to avoid undue surprise. In the United States and England, however, lawyers must often produce documents to prove the adversary’s case.⁹

For Americans, discovery sometimes serves as a vacuum cleaner to suck up all the minimally relevant pieces of paper that might possibly yield “information … reasonably calculated to lead to the discovery of admissible evidence.”¹⁰ Analogous practices in England exist notwithstanding recent Woolf reforms abrogating the “Peruvian Guano rule” that gave entitlement to documents leading to a “train of inquiry” toward evidence.¹¹

In dealing with requests for documents, the concept of “proportionality” is often invoked. Arguably, the time and expense of producing documents should bear a reasonable relationship to the expected enlightenment. However, assumptions about what type of discovery is normal inevitably affect conclusions on this cost-benefit calculation. At the heart of this divergence lie fundamentally different ideas of what commercial dispute resolution should be. Is the arbitrator actively seeking to learn the truth? Or is the arbitrator’s role simply to see whether one side can support a claim or defense using its own resources?

Costs