I want to start by thanking each of the commentators for their kind, forgiving and thought-provoking comments on my article, and by recognizing that the work of Dapha, Michael and Tom set the foundations and served as the inspiration for this work. I will organize my responses into three different clusters: methodology, extensions and other, more general comments.
I will first address Tom’s comments on the record of appointment as a proxy for displayed preferences. Can we ignore the fact that an appointment does not necessarily indicate that the arbitrator was the appointer’s first choice? I like to think of this question as a job offer to a candidate who decides not to accept an offer. The truth may be that certain candidates are in high demand and that many companies are offering jobs to the same well-qualified candidates. Hence it is possible that parties who nominate arbitrators and may be trying to enlarge the diversity of the pool of arbitrators in ICSID may be somewhat restricted by the broader market of arbitration professionals. This is true especially where, as Michael points out (and as confirmed by arbitrators during my interviews), the compensation provided by ICSID is lower than that of other arbitration opportunities and venues. This is a limitation of the assumptions that can be made from the ICSID appointments. We are left with only the record of appointments as a second-best proxy.
A second point raised by Tom as to why the mid-2000s witnessed the first appointments of today’s power-brokers is also relevant. We must take into consideration that these years saw a boom of investor-state cases and, hence, more appointments. It is also true that this is when we started seeing more awards discussed publically. Although I did not report these statistics in this paper, measures that reflect the connectivity of the network start stabilizing and changing in less intense ways during this period. Thus I’m not surprised that the network acquired self-organizing qualities during this time. One plausible hypothesis for future exploration is how the development of transparency rules may have helped cement public knowledge of decisions and with that, some of the insights that come with understanding the decision-making philosophy of arbitrators.
On the methodology of determining the average compensation per arbitration of US$200,000, I admit that the number is not incredibly precise. However, it is the best approximation I could divine. I followed a complex, yet not foolproof strategy to arrive at what I consider a very rough average. First, I computed the amount in 2010 dollars from roughly 70 awards that provided information on compensation in my sample of ICSID and ICSID Additional Facility awards. I divided this amount by the months of duration of each case and averaged the result. Using the dollars per month estimate, I calculated the possible amount paid to an arbitrator on settled or dismissed cases based on an average duration of the case. I confirmed that this rough estimate was in the right ballpark with one scholar who has done extensive empirical work with ICSID data as well as through my interviews with arbitrators. It is not an exact appraisal, but what is relevant for the purpose of the article is whether ICSID’s rate completely changes the incentives to accept an appointment and hence whether the distribution of ICSID appointments is completely different from that of other institutions. We cannot know the answer to this question for certain, but with a grain of salt, my educated guess (taking into account what I gleaned from working at ICSID) is that it does not. Most appointments are accepted and most rejections occur when a conflict exists. In my experience it was only in very few cases that, for other reasons (such as being too busy) an arbitrator decided not to accept an appointment. Read the rest of this entry…