Neutrality, Predictability and Economic Cooperation

NEUTRALITY, PREDICTABILITY AND ECONOMIC COOPERATION*

International business lawyers generally seek to minimize the uncertainty and potential bias inherent in the cross-border legal environment. These lawyers draft arbitration and jurisdiction clauses, sometimes linked to choice-of-law agreements and treaty enforcement mechanisms, in order to foster a more neutral and predictable mode of dispute resolution than otherwise available to their clients.

To some, the merit of these commitments to a relatively neutral forum and determinate substantive law would seem self-evident. No econometric model should be required for the proposition that merchants and investors will be less likely to enter into business transactions abroad if they fear that potential disputes will be settled by biased judges of the other side’s home courts. While some deals may promise profits great enough to lure adventurous entrepreneurs to take wild litigation risks, other transactions will not. Less reliable forum selection mechanisms will mean either fewer cross-border ventures, greater costs, or a temptation to sloppy contract performance for want of realistic enforcement sanctions.

In contrast to the predictability-maximizing approach of international business lawyers, many American legal scholars have been intrigued by methodologies that seem to reduce certainty and impartiality. Some emphasize “choice-influencing considerations” and justice in the individual case, or a search for a result that furthers the “inherent morality that should be part of the relationship between the parties.”¹ Others favor a “government interest analysis” that requires courts to inquire into the reasonableness of applying policies behind foreign laws,² or a “teleological” approach that looks principally to the better law in the specific case.³

Certain American jurisprudential thinkers have gone further and emphasized what they perceive to be the inevitability of law’s uncertainty and bias.⁴

International forum selection provides a prism through which to refract many of these jurisprudential questions related to law’s determinacy and neutrality. My purpose here is not to join the general debate about the nature of law,⁵ but rather to suggest that insights from thinking about international forum selection can be brought home to inform our understanding of when and why legal certainty and neutrality matter. Cross-border transactions illustrate how relative measures of neutrality and determinacy can and do meaningfully exist, and why they ought to serve as aspirational models for authoritative adjudicatory systems.

A. Neutrality Revisited⁶

Questioning impartiality

Anyone concerned about enhancing legal neutrality and predictability in dispute resolution must recognize that many scholars have launched a critique of determinacy and impartiality in the legal process. In the context of choice-of-law analysis, domestic conflicts scholarship has often emphasized methodologies that enhance social justice and the “right result” in an individual case at the expense of certainty-promoting rules.⁷ More generally critical legal studies,⁸ feminist scholarship,⁹ and critical race theory¹⁰ point out the effect of white middle-class male perspectives in filling gaps in the law.¹¹ In the tradition of legal realism, Critical Theorists see something other than principle as driving judicial decision-making. Pretensions at objective application of the law, they say, reveal themselves as masks for preserving the status quo. Fear that rights-based discourse may lead to misleading categories¹² has led some scholars to favor communitarian justice,¹³ or to take into account an “inherent justice and morality” that should be part of legal relationships.¹⁴ Others reject objectivity¹⁵ in order to deconstruct texts¹⁶ or demythologize rights.¹⁷

Critical Theory has sensitized lawyers to the temptation to confuse preferences with precedent, perhaps providing a useful corrective to doctrinal smugness. However, Critical Theory may have overstated its case, leaping from easy observations (disinterested decision-making is difficult) to a broad condemnation of aspirations toward principled adjudication.¹⁸ Indeed, some scholars have expressed concern that such disparagement of Western legal tradition could serve as an excuse for ignoring individual rights.¹⁹

What is interesting about Critical Theory in connection with international forum selection is how its reaction to bias differs from that of the international commercial community. While international lawyers elaborate specific mechanisms aimed at eliminating bias (choice-of-law clauses, forum selection agreements, and arbitration treaties²⁰), Critical Theorists suggest less rather than more neutrality, embracing empathy (the right kind of bias?) in its stead.²¹ While many start with a concern about substantive rules rather than the adjudicatory forum, it is hard to imagine divorcing one from the other. If legal doctrine lacks determinacy, it is at least in part because adjudicators are not neutral.

The internationalist perspective

The descriptive and normative perspectives of international lawyers are marked by more relativity of tone than the discourse of many Critical Theorists.²² Assuming that some adjudicatory processes are more neutral and reliable than others, international business lawyers seek to emphasize the neutrality and predictability of one decision-making mechanism over another. Even if complete objectivity will be elusive, they see a measure of fairness through independent, relatively neutral tribunals as both possible, and desirable.²³

The type of neutrality sought by internationalists focuses on what might be described as “reversibility.” An adjudication process is neutral if the parties’ nationalities could be reversed (French plaintiff becomes American, and American defendant becomes French) without changing the result in the case.²⁴ In this respect, one judge or arbitrator will be neutral only in comparison with alternatives. In a dispute between an Israeli seller and an Egyptian buyer, a Swiss arbitrator can usually be characterized as more neutral than an Israeli or Egyptian. A Spanish buyer and a North African seller accept arbitration in Geneva as comparatively more neutral than litigation before national courts in Algiers or Madrid. In seeking compensation for a business nationalized by Iran, an American buyer will feel more comfortable before the Iran-U.S. Claims Tribunal in The Hague than before an Iranian judge in Tehran.

Critical Theory, on the other hand, has tended to characterize all decision-making as biased.²⁵ Some Critical Theorists assure us that when legal doctrine is “exposed” as indeterminate, its legitimacy will “evaporate.”²⁶