In recent years, governments from the state of Delaware to the Emirate of Dubai have created institutions specially designed to adjudicate transnational commercial disputes. These institutions are hybrids between courts and arbitration, or “arbitral courts.” Arbitral courts seek to adapt the most popular features of arbitral tribunals and courts in order to accommodate the growing challenges of such cases.
There is much to applaud about the innovation of arbitral courts. These institutions are the vanguard of international commercial dispute resolution institutional design. By borrowing from “the best” of both litigation and arbitration, as Hiro Aragaki has explained, courts like the Singapore International Commercial Court reject “an either/or choice between public and private adjudication; instead, they think of dispute resolution holistically, all the while borrowing one device from one process and glomming it on to another without so much as an afterthought.”
Indeed, arbitral courts are part of a wave of innovations in international commercial dispute resolution around the world, recently profiled in a symposium in AJIL Unbound called Global Labs of International Commercial Dispute Resolution. As Matthew Erie and I explore in that symposium, various legal hubs and other jurisdictions around the globe are experimenting “with legal reforms and institutional design in an effort to become world-recognized forums for international commercial dispute resolution.” Arbitral courts are at the forefront of these innovations.
But it is important to consider what limits should cabin these innovations as well. Arbitral courts, in particular, unsettle the traditional distinctions between public and private adjudication, and this blurring has significant consequences not only for understanding the state of the evolving international judicial system, of which U.S. courts have historically been an important part but also for the future of legitimacy and transparency in dispute resolution around the world.
Arbitral courts often claim legitimacy on grounds that combine arbitrators’ and courts’ claims to legitimacy. The legitimacy of arbitration mostly flows from parties’ consent to the arrangement, whereas courts’ legitimacy, at least those courts situated within democracies, derives more broadly from social compacts and customs, including from the democratic legitimacy of the state.
Standing at the crossroads of public and private adjudication, however, arbitral courts could abuse their position by exercising jurisdiction in contexts beyond the scope of what gives them legitimacy (e.g., parties’ consent) or by closing off public access. There is a significant risk that they will do both of these things. Like arbitration centers’ rules, arbitral courts’ rules tend to be flexible. The courts often have substantial discretion over issues like whether to join third parties who have not consented to jurisdiction and whether to grant parties’ requests to keep the proceedings and decisions confidential, which tends to result in keeping proceedings secret. Exercising exorbitant jurisdiction and proceeding in secret, however, could undermine an arbitral court’s reputation for evenhandedness, its perceived legitimacy, and its potential to develop transnational law.
In light of these risks, in a forthcoming article in the Virginia Journal of International Law, and in a companion article recently published in Judicature, I offer two suggestions for arbitral courts looking to build their own legitimacy and to contribute to improvements in judicial institutional design. First, arbitral courts should restrict their jurisdiction in light of their hybridized source of legitimacy that draws on their resemblance to both a court and an arbitral tribunal. Second, arbitral courts should prioritize the public nature of proceedings and decisions and not defer to parties’ requests for confidentiality. In both of these tasks, the role of arbitral court judges—who are often foreign nationals—will be essential.