In Part 1 of this article we considered the sources of informal precedent that exist in commercial arbitration. In this second part, we look at the way practitioners and arbitrators create and use precedent and consider whether this system of informal precedent creates consistency.
Practitioners' use of precedent
Practitioners' own experience
While the precedent of a binding decision may not pass from one arbitration to another in that the arbitrators must be bound by it – the experiences of all those involved passes from one arbitration to the next.
Looking specifically at arbitral awards - while prior awards may not be binding on a future tribunal, they will still form part of the legal research undertaken to advise clients and structure arguments. Given however the vast number of awards rendered globally, the majority of which are confidential, it is impossible to say that they are capable of creating a formal precedent system of any type – the precedential value comes from those which are published (such as the ICC selection, see Part 1 of this article) and those which the participants in the arbitration have been exposed to.
Looking more generally at arbitral practice, arbitration practitioners rely on texts books for guidance as to how tribunals will interpret points of practice and consider applications made. As discussed in Part 1 of this article, the guidance given in such texts is borne of practice and experience and the weight of authority of the authors of renowned texts may weigh heavily on a tribunal.
Practitioners also research arbitrators to identify previous cases they have acted in (which may also assist in conflict searches) and to identify any pattern in the arbitrator's decision-making processes.
Practitioners also research arbitrators' publications that may indicate their position on a certain issue. There is little so satisfying as quoting an arbitrator to him or herself on a given point!
When arbitrators are or have been counsel or judges there is even further research to conduct looking at decisions they have made and/or points they have argued.
In this regard, new resources are available to including the valuable work undertaken by Arbitrator Intelligence in collating and analysing information about arbitrators which is then made available for others to learn and benefit from.
In certain specialist arbitrations arbitrator 'shopping' is made possible through closed lists and publication of awards. Taking the Court of Arbitration for Sport as an example, under this system there is a closed list of arbitrators and previous decisions in Appeal Arbitrations (as opposed to Ordinary Arbitrations under the CAS Rules) are published such that parties can see how arbitrators (including those you seek to appoint or are before) have decided issues previously.
Information from previous disputes may well be available from court judgments but it may also be available in arbitration. Reports on disputes to which your opponent was previously a party can provide useful insights into what steps they took in the case, what scuffles they got into and importantly the outcome of the arbitration which may influence their strategy in this dispute.
Arbitrators' use of precedent
In the same way as practitioners, arbitrators will inevitably bring their experience of previous arbitrations with them and apply it to the next arbitration they work on.
Gabrielle Kaufmann-Kohler's research in 2006 having surveyed several hundred commercial arbitration awards concluded that arbitrators do what they want with past cases and there was no clear practise as to whether arbitrators rely on past awards or create rules that have effects beyond the dispute submitted to them. There is no reason to believe that in the subsequent 11 years the practice has changed although increased public access to information about past awards will increase party pressure on arbitrators to promote consistency.
The impact of a panel of arbitrators on each other must also be considered – both positive and negative. Panels of arbitrators not only learn by their own experience but also that of others. They cannot gain this experience from reading awards or even participating in arbitrations as counsel. This is a 'hidden' form of precedent that shapes the arbitral process.
Does informal precedent create consistency?
On the one hand as arbitration, grows more 'repeat' situations will occur and 'repeat' decisions be made. This does not necessarily mean orders or awards alone, the impact can be more subtle. For example, perhaps one arbitrator is seen to never order security for costs so practitioners before them will most likely stop applying and thereby incurring costs or will not nominate/appoint (assuming they are in a position to do so) that arbitrator if they think they will need to make such an application.
The sharing of experience amongst arbitral tribunals perform a key role in the development of arbitration practice and procedure and interpretation of factual and legal situations. This 'secret' system of precedent could never be captured and codified but nevertheless arbitrations benefit from 'what has gone before' and the whole arbitral process develops accordingly. This may not be consistency to the extent advocated by those who see the need for arbitral precedents, but it does take steps in that direction.
On the other hand, while ad-hoc consistency will occur, the pool of arbitrators and arbitration practitioners is too big for consistency overall to be achieved. Unless regulation is put in place and there is a fundamental shift in the nature and laws surrounding arbitration to force publication there will never be a formal system of precedent. Similarly, in terms of certainty, we cannot guarantee that two clients running the same arguments before different arbitrators will reach the same conclusion. In identifying good arbitrators we hope they will come to the right conclusion on the facts and law before them but this cannot be guaranteed (this potentially leads to challenges/appeals in courts which are reported as discussed above).
An arbitration does not standalone; each is influenced by a myriad of others.
The type of precedent discussed looking at previous awards and information about arbitrations being used for research, in preparing cases and in arbitrators sharing experiences is inevitable and as a benefit may to some extent give some consistency in arbitration. As a practitioner, it is not about looking for binding arbitration precedents but at looking at what has happened in the past and using it to predict how issues might be approached in the future.