Part Three: Reflections on the State and Future of Commercial Arbitration

In Parts One and Two of this series, Disputing highlighted portions of Pepperdine University School of Law Professor Thomas Stipanowich’s research paper entitled “Reflections on the State and Future of Commercial Arbitration: Challenges, Opportunities, Proposals.”  The article and its companion piece, “Arbitration in Evolution: Current Practices and Perspectives of Experienced Arbitrators,” (coauthored by Straus Institute for Dispute Resolution Research Fellow Zachary Ulrich) discusses the survey responses provided by 134 members of the College of Commercial Arbitrators about numerous aspects of commercial arbitration practice in both the U.S. and international disputes.

Here is the third installment in this series:

In Part VI of “Reflections on the State and Future of Commercial Arbitration: Challenges, Opportunities, Proposals,” Professor Stipanowich “considers (a) the increasing incidence of settlement during arbitration and the implications for parties and arbitrators; (b) the growing use and impact of mediation in commercial disputes; and (c) the mounting emphasis on early case evaluation or case assessment.”  His proposals for addressing these changes include,

1.  Equip arbitrators to leverage the growing likelihood that cases will be settled prior to hearings by providing case management with an eye to helping facilitate settlement.

2.  Promote more effective interplay between mediation and arbitration processes. Encourage early use of mediation to lay an appropriate, tailored foundation for arbitration, as exemplified by the Guided Choice system.

3.  Encourage parties to use the experience and skills of arbitrators in early neutral evaluation or early case assessment.

Part VII of Professor Stipanowich’s paper examines the role of technology, behavioral science, and “big data” in conflict management. With regard to technology, he states,

Arbitration hearings in complex commercial cases are now often high-tech events, with arbitrators and counsel utilizing digital displays on two or three monitors at once. Lawyers and arbitrators are deriving important benefits from services such as LiveNote, which permits the viewing, highlighting and annotating of testimony in real-time, and may feature streaming video feeds permitting testifying witnesses to be observed long-distance. Electronic transcripts available via cloud offsite storage enable practitioners to search the content of transcripts from anywhere in the world with internet access. Moreover, transcripts in electronic formats are easily searchable, helping counsel locate and direct a witness’s or arbitrator’s attention to key portions of the transcript, and saving arbitrator time during award preparation.

Professor Stipanowich continues,

Thanks to the work of behavioral economists and others, we are coming to understand that far from being engines of rationality, human beings operate subject to the dictates of mental processes that skew our perceptions and steer us onto unpredictable paths. In one way or another many of these insights are relevant to managing and resolving conflict. Russell Korobkin and Chris Guthrie, among others, have advanced our awareness of dynamics at the bargaining table. Studies by Guthrie, Jeffrey Rachlinski, Judge Andrew Wistrich and others are deepening our appreciation of the psychological factors affecting judicial decision making.

These insights are reinforced by the parsing and rigorous assessment of available data. Susan Franck’s assessments of data relating to international investment arbitration offer a relatively nuanced understanding of those procedures. Randall Kiser has used datasets from VerdictSearch California to offer in-depth analysis of decision making by lawyers during settlement negotiations. Employing “neural networks, predictive modeling, and genetic algorithms,” Donald Philbin has isolated trends across groups of similar negotiations and within particular negotiations, and created Now Picture It Settled®, web-based software that allows negotiators to “optimize their concession strategies and predict where a round will end.”

Professor Stipanowich’s scholarly article concludes by stating,

Because systems of commercial arbitration are dynamic and constantly evolving, our ability to describe and to look forward is necessarily limited. Nevertheless, it is advantageous to periodically step back for the purpose of examining where we are and where we are tending.

The present and the future of commercial arbitration hinge on the exercise of choice by business users. But the effective exercise of choice depends on many things, including an informed and engaged user base; counselors and advocates equipped and incentivized to further client priorities; clear procedural options (including information on related costs, benefits and track records); and arbitrators with the skills and insights to facilitate the “fleshing out” and implementation of appropriate processes. Hopefully, the foregoing reflections and new data on the practices and perceptions of experienced arbitrators will further conversations about directions in commercial arbitration, encourage continuing research and investigation, and promote more informed and more reflective approaches going forward.

For more information about the implications of this landmark survey, please read the full text of Professor Stipanowich’s research paper.

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