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Social Capital and Arbitral Decision Making

Published on September 24, 2014        Author: 

DDaphnaaphna Kapeliuk is a Senior Lecturer at Radzyner Law School, IDC Herzliya. Her research interest focuses on international arbitration in general and on arbitral behavior in particular and on private international law.

In his brilliant article “Social Capital in the Arbitration Market”, Sergio Puig seeks to map the social arrangements that result from interactions among ICSID arbitrators, as part of the social dynamics of international arbitration. Using data of all appointments of ICSID arbitrators made between 1972 and 2014 and applying a social network analysis methodology, Sergio sets out to understand the role of social capital in investment arbitration by relying upon proxy measures for social connectivity.

The sophisticated maps of the interactions among ICSID arbitrators represent a picture of the social landscape of the arbitration market. These maps are of great importance, especially since ICSID tribunals are composed of three arbitrators, and the dynamics between the arbitrators within the panels are important to understand the outcome of disputes. Sergio’s article joins prior scholarship that has claimed that ICSID arbitrations are handled by a closed group of arbitrators, sometimes referred to as “grand old men”, or “blue chip men”, who are being repeatedly appointed to decide large scale investment disputes. He argues that the network analysis of ICSID arbitrators “provides important evidence of a dense network”, in which a limited number of prestigious arbitrators increase in prestige, while the others remain in the periphery.

Sergio’s major contribution to understanding the interconnections among these arbitrators is presented in figures 4 and 6. Figure 4 focuses on the inside and outside of core ties and common cases of the 25 most central arbitrators, and figure 6 represents a sociogram of appointments of arbitrators (as presiding arbitrators) by other arbitrators to the same panels. These figures clearly show the strong ties between the central arbitrators within arbitration panels.
While the main objective of the article is to map the social dynamics of ICSID arbitrators, Sergio argues that the network analysis provides evidence that the dense network of arbitrators “reinforces prevailing norms and behavior and insulates its most important members from outside influence”. Although the social landscape presented in the article supports the claim that the core of the prominent ICSID arbitrators is small, that the article does not analyze how this network might reinforce prevailing norms and behavior. It does not define or analyze these terms. The remainder of this comment offers one possible mechanism for how the social structure might lead to the postulated outcome.
There is no doubt that the entry barriers to the investment arbitration market are extremely high. An arbitrator who wishes to be admitted to the core of the prestigious network, and thus repeatedly appointed, must establish a reputation that justifies a “membership” in the “club”. It is through his connections, behavior and decision making that he can establish such reputation. Sergio’s article focuses on the interconnections among arbitrators, but not on their behavior or decision making. Read the rest of this entry…

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Comments on Sergio Puig’s ‘Social Capital in the Arbitration Market’

Published on September 23, 2014        Author: 

Tom SchultzThomas Schultz is a Reader in Commercial Law in the Dickson Poon School of Law at King’s College London and a Swiss National Science Foundation Research Professor in the International Law Department at the Graduate Institute of International and Development Studies, Geneva. He is also the Editor-in-Chief of the Journal of International Dispute Settlement (Oxford University Press).

Professor Puig’s article ‘Social Capital in the Arbitration Market’ is a quite wonderful contribution to a number of things: our understanding of the dynamics of investment arbitration, the literature on arbitrator appointments, the methodological diversification of studies in international law, and certainly a few more. And it brings us rather convincing evidence, in a field where claims and representations (not to speak of copious discussions of what other people happen to have said) are more readily found than data and studies to substantiate claims. It is, in other words, intellectually edifying. The experimental design is well done, the plan well executed and the findings credible. In this, it is intellectually responsive to developments in the social sciences and the humanities. We don’t even need a mood-elevating metaphor to set great store by this sort of works, and this work in particular. (Incidentally, the study is also a formidable ‘who’s who in investment arbitration’, which undoubtedly will make for welcome entertainment in certain circles.)

A few small methodological points would probably deserve more discussion. (I said ‘would deserve’, not ‘would have deserved’: the article is long enough as it is and this is a law journal after all.) For instance, the author says that ‘The network analysis advanced in this article relies upon displayed preferences by the appointing entity (litigation parties, arbitrators, and the institution) to provide a larger picture of the network’s aggregate topology.’ But how do we know the preferences of the appointing entity? Right, by looking at appointments. But do effective appointments really tell us what the preferences are? What if individuals, who are the preferred choices of the appointing entity, refuse an appointment, and the appointing entity has to turn to their second or third choice? Never happens. Well… Actually, could such situations be statistically relevant?

Another methodological point: Figure 8 is puzzling. Not puzzling as in ‘probably wrong’. Puzzling as in ‘how come’? Here’s the author’s accompanying notes: “Figure 8 shows how, despite the fact that most ICSID cases were registered in the last 10 years, most ‘power-brokers’ or those arbitrators at the top of the profession entered the network in or prior to 2004.” In other words, the mid-2000s is the moment when you see the network effects. Why? Why did the network stabilise at that point in time? The network seems to have acquired self-organisational elements at that point in time, but, again, why then? Any hypothesis? Just happenstance? Just puzzling.

Beyond methodological considerations, we may also wonder–and perhaps the author wants to elaborate on this–why, in fact, it is a bad thing that a small number of arbitrators decide a great number of cases. Read the rest of this entry…

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Social Capital in the Arbitration Market

Published on September 22, 2014        Author: 

sergio puig-picDr. Sergio Puig is an Associate Professor of Law at the University of Arizona James E. Rogers College of Law.

I am grateful to Professor Weiler, the editors of EJIL and the organizers of EJIL: Talk! for hosting the discussion of my article. I am privileged to have Daphna Kapeliuk, Michael Waibel, and Thomas Schultz as collaborators in this endeavor.  This is a great opportunity to engage with wonderful scholars in the field of international law, all of whom have produced very interesting and inspiring empirically-based research in the field. Below I summarize the methodology and main arguments of this piece.

In this modest contribution, I try to bring together different scholarly traditions. In framing the question, I note that scholars with different academic traditions have provided diverse and, at points, conflicting explanations regarding why arbitration professionals are such a seemingly small and homogenous group in terms of gender, national origin and educational background. In this article, I seek to empirically assess this observation and to explore why this may be happening. Given the limited access to the record of appointments under most arbitration facilities, I used the data of the International Centre for Settlement of Investment Disputes (ICSID). In spite of critiques regarding ICSID’s practices with respect to transparency, it is the sole arbitration institution to publicize its entire record of appointments.

By surveying the list of ICSID appointments, I seek to operationalize the basic characteristics of the social structure of international arbitrators.  Anticipating some reactions, I must admit that this is an imperfect alternative. Ideally we would have more information about international arbitration appointments generally. But given the shared characteristics between general international arbitration and the more specific field of investor-state arbitration, I argue that ICSID’s record of appointment can imperfectly inform this scholarly debate. So, while the article focuses on ICSID arbitrators–a group that has not escaped controversy in recent years–my point is more general and tries to speak to a broader scholarly debate.

Applying network analytics (and some basic statistical analysis) to ICSID’s record of appointment, I confirm what we already knew: a few, socially prominent actors are dominant in the field. But not all arbitrators are equal; hence there are different sources of social capital. Read the rest of this entry…

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Discussion of Sergio Puig’s “Social Capital in the Arbitration Market”

Published on September 22, 2014        Author: 

Over the next few days, we will be hosting a discussion of Sergio Puig’s article Social Capital in the Arbitration Market, which was published in volume 25, no. 2 of the European Journal of International Law (2014). Sergio is an Associate Professor of Law at the University of Arizona James E. Rogers College of Law.  The commentaries on his article will be by Daphna Kapeliuk (Radzyner Law School, IDC Herzliya), Thomas Schultz (King’s College London), and Michael Waibel (Cambridge). We are grateful to all of them for participating in the discussion.

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ESIL Interest Group on Human Rights Launches Online Symposia on International Human Rights Law

Basak2 Dr. Başak Çalı (pictured above left) is Associate Professor of International Law at Koç Univerlmcgregor-53sity, Turkey. Lorna McGregor (pictured right) is a Reader in Law and Director of the Human Rights Centre at the University of Essex School of Law. Ivana Radačić (pictured below left) is a senior research associate at Ivo Pilar Institute of Social Sciences in Zagreb and Radacic_foto_CVa visiting lecturer at the University of Zagreb, the University of Osijek, the European Inter-University Centre for Human Rights and Democratisation (Venice). They are the Founding Co-Chairs of the European Society of International Law’s Interest Group on International Human Rights Law.

The theme of this year’s ESIL annual conference is ‘International Law AND …’  It takes place in a year of conferences seemingly devoted to ‘taking stock’ of the current state of international law and assessing the future opportunities and challenges it will face (see the recent ASIL-ILA conference on the Effectiveness of International Law and last week’s ILA British Branch conference on Foundations and Futures of International Law).

In establishing the ESIL Interest Group on Human Rights, we wanted to ‘take stock’ of International Human Rights Law and in doing so, to ask the big structural, procedural and substantive questions that are necessary to determine its future.  We plan to hold conferences like our inaugural roundtable on ‘International Human Rights Law AND…’ at the ESIL annual conference in Vienna in September and to encourage debate and discussion through online symposia, particularly on EJIL Talk! and other academic and practical projects.

Before our discussions even begin, however, we have to be clear on how we understand international human rights law. We regard international human rights law as a field that is simultaneously positioned both within public international law and across other disciplines.   International human rights law is substantial but nonetheless a sub-branch of public international law as well as part of a large and growing interdisciplinary ‘field’ of human rights.  Characterising international human rights law in this way is often overlooked but gives a much more textured and nuanced picture of its operation and the challenges it faces through resistance to containment as a sub-branch; internal-fragmentation; and interdisciplinary expansion.

Resistance to Containment to a Sub-Field  

The presentation of international human rights law as a sub-branch conceals its dominance within public international law making it a much bigger project than a ‘sub-branch’ would suggest.  Read the rest of this entry…

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Arbitrator Independence and Academic Freedom

Published on May 30, 2014        Author: 

In international law, members of the discipline often fill a variety of professional roles. Many are scholars and practitioners at the same time; some even act in capacities that are mutually incompatible at the domestic level, such as being counsel and decision-maker at the same time – albeit in different proceedings. Investment arbitration is an area where this “double-hat problem” is vividly discussed. The main concern is the independence of arbitrators in light of interests that that individual may have in fulfilling other professional roles. What is less debated is how practice involvement can affect the role of the international lawyer as academic and how practice affects, and risks compromising, the independence of international law as an academic discipline. This is the theme underlying the following discussion of a recent challenge in CC/Devas and others v. India, which was decided by ICJ President Peter Tomka in an UNCITRAL arbitration under the Mauritius-India bilateral investment treaty (BIT). It is an abbreviated version of my thoughts from the first Editorial of the new Journal of World Investment and Trade that just came out.

Challenge in CC/Devas and others v. India

In CC/Devas and others v. India, two arbitrators, Francisco Orrego Vicuña and Marc Lalonde were challenged because they had, in the Respondent’s view, prejudged the meaning of the essential security-clause in the applicable BIT: Mr. Lalonde because he sat in both CMS v. Argentina and Sempra v. Argentina where a similar essential security-clause from the US-Argentina BIT had been an issue; and Prof. Orrego Vicuña because he sat, together with Mr. Lalonde, in the same two arbitrations, as well as in Enron v. Argentina, which also involved the US-Argentina BIT. On top, Prof. Orrego Vicuña had written a chapter on ‘Softening Necessity’ in the Liber Amicorum for Michael Reisman, in which he analyzed the tribunals’ approach to the necessity defense under customary international law and to the essential security-clause.

While ICJ President Tomka rejected the challenge against Marc Lalonde, stating that merely expressing prior views on an issue in an arbitration did not result in a lack of impartiality or independence, he upheld the challenge against Francisco Orrego Vicuña, because the latter had stuck to his approach to interpreting essential security-clauses through three arbitrations and in the academic article in question, although all three awards had been partially or totally annulled precisely on that point. Comparing the two challenges, the article written by Prof. Orrego Vicuña made all the difference. The case may therefore be read as boiling down to upholding a challenge of an arbitrator based on a view he or she has taken in academic writing. This decision is alarming, in my view, not only for investment arbitration, but for scholarship in the field. Read the rest of this entry…

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Holding Lawyers Representing States to a Higher Standard

Published on September 20, 2013        Author: 

Gibson photoCatherine H. Gibson is a Legal Adviser in the Iran-United States Claims Tribunal and a former Trial Attorney in the Civil Division of the U.S. Department of Justice.

Many thanks to EJIL:Talk! for the opportunity to blog. This post and the article on which it is based are written in my personal capacity, and all opinions are my own.

In my recent article in the Georgetown Journal of International Law I argue that attorneys representing States in international tribunals should act as ministers of justice, rather than as zealous advocates for their clients. My article focuses on U.S. government lawyers, but the underlying principles apply equally to all counsel appearing before international tribunals on behalf of States.

While domestic legal systems may generally prescribe specific, enforceable ethical duties for lawyers, no such formal standards exist under general international law or in the rules of most international tribunals. As discussed here, this gap may be partly filled by international courts’ rules of evidence and procedure and the reputational effects of repeat player relationships. This gap remains problematic generally, however, because lawyers of differing legal backgrounds may have divergent views of their duties and ethical obligations. In cases involving States, this gap is particularly troubling due to the high stakes for those involved and these cases’ potential importance in international law.

Fortunately, international law of lawyers’ conduct is developing. Read the rest of this entry…

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Beyond Courtroom Arguments: Why International Lawyers Need to Focus More on Persuasion, Part II

Published on September 11, 2013        Author: 

PersuasionIn my last post, I noted several gaps in the literature on legal persuasion, notably the reasons actors make legal arguments, the forms those arguments take, and their effectiveness.  In this post, I want to express a few views on the first two of these questions, based on research that reflects my experience in-house at several international institutions whose mission includes encouraging compliance with international norms.  In brief,  I’ve tried to develop a theory under which an international actor (government, NGO, non-state actor, corporation, etc.) seeking to persuade another actor to comply makes decisions about the sort of strategy it will use based on four inputs:

  • Ÿ the nature of the compliance dispute;
  • Ÿ the parties to the dispute;
  • Ÿ the institutional setting for the persuasive process; and
  • Ÿ the traits and sense of identity of the persuading entity.

These inputs will affect all aspects of its persuasive strategy — the timing of the intervention (i.e., the ripeness issue), the specific institutional players it will deploy (e.g., high vs. low-level actors), as well as the substantive content of the argumentation — including, of course, its legal component. (image: illustration of a scene from the novel Persuasion, entitled, “The Unwelcome Hints of Mr. Shepherd, His Agent,” credit)

The legal arguments used by the persuader – the outputs — will also fall along four dimensions.  Those arguments will vary according to what I have termed their:

  • publicity (from secret all the way to public);
  • density (from sparse in terms of detailed legal interpretation all the way to thick with it);
  • tone (from gentle and educative all the way to confrontational); and, most critically for our purposes,
  • directness.

By directness, I mean the centrality that law will assume within the argument for compliance.  The concept of directness helps us understand the nuances of legal argumentation as a way to promote law compliance.  Three options for directness are possible, where, let’s say, X is the behavior required by the law. (I am simplifying based on a notion of law as imposing obligations.) Read the rest of this entry…

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Beyond Courtroom Arguments: Why International Lawyers Need to Focus More on Persuasion, Part I

Published on September 10, 2013        Author: 

Steve RatnerSteven Ratner is the Bruno Simma Collegiate Professor of Law at the University of Michigan Law School.

Persuasion is at the heart of the lawyer’s – including the international lawyer’s – task.  The lawyer may be persuading a decisionmaker of the merits of her client’s case; or persuading another party, or even her own client, of the need to follow the law; or persuading lawyers on the other side, or even her own side, of the best legal strategy to pursue to resolve a problem.  For the international lawyer, like the domestic lawyer, most of that persuasion takes place outside any courtroom, whether in negotiations, hearings, private meetings, or public statements.  Those institutions or individuals making the decisions on a client’s interests are far more likely to be regulatory or political actors than they are to be judges – particularly in the international context, where the nuts and bolts of legal claim and counterclaim are still beyond judicial scrutiny. Critical to the lawyer’s role in that process of persuasion is the question of whether, in those settings, a legal argument really works – whether it actually convinces the audience.

Lawyers do not generally ask this question when it comes to courts.  We assume that international and domestic courts will be persuaded by legal arguments because their mandate is to decide cases based on the law alone – such that we’d question their legitimacy if they overtly set aside legal arguments in favor of non-legal arguments (moral, economic, or otherwise, though there can be recourse to ex aequo et bono).  And we would all be guilty of malpractice if we did not present that best legal argument to a court.

But what about the lawyer’s role in persuading all those non-judicial actors – the ones that are more likely to make a difference to the client’s interest?  In the international realm, whatever the client, lawyers have to persuade governments, international organizations, powerful nonstate actors, and the general public.  Beyond the client’s interests, as international lawyers, we are also presumably committed to the idea that international actors follow the rules.  If an actor is violating the law or contemplating doing so, do we know what works to convince it to stop doing so?  How helpful is legal argumentation? Read the rest of this entry…

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