LAWRENCE — In international arbitration cases, billions of dollars and the validity of government regulations can be at stake, so it is imperative parties are able to choose the best arbitrator to settle their disputes. A University of Kansas law professor is part of a project working to improve the information available to parties in such cases, making the process fairer and more efficient and increasing the diversity of people deciding international arbitration cases.
Christopher Drahozal, the John M. Rounds Professor of Law, is a member of the board of directors of Arbitrator Intelligence, Inc., also known as AI, an entity affiliated with Penn State University that aims to promote fairness, transparency and accountability in the arbitrator selection process. When disputes arise under international treaties, contracts and investment deals, the parties often choose to submit the dispute to arbitration, where an independent third-party rules on the case, instead of the traditional court system.
“Arbitration is different from litigation in court because in arbitration the parties pick the person who resolves their dispute (the arbitrator). But arbitration can become less fair if one party has better information about prospective arbitrators than the other,” Drahozal said. “AI seeks to equalize the information available to parties selecting arbitrators by collecting and disseminating feedback on how international arbitrators manage and decide cases.”
The centerpiece of AI’s innovation is the Arbitrator Intelligence Questionnaire, or AIQ. The AIQ is a questionnaire is designed to be administered to parties at the end of a case to collect information on how the arbitrator managed and decided the case. In February, AI posted the AIQ for public comment on its webpage, and the public comment period closed March 17. AI then will incorporate the feedback into a version of the AIQ it plans to make publicly available in June.
The AIQ is designed to gather unbiased information about the arbitrator by asking parties a series of specific, typically objective questions. AI will then make the information available to parties who are seeking to select arbitrators through AI Reports, which will be a substantial improvement over the current method of gathering information about prospective arbitrators, which is through ad hoc person-to-person phone calls.
“More, and more accurate, information will empower parties, counsel, institutions and even arbitrators, to make better-informed choices in selecting arbitrators and constituting tribunals,” said Catherine Rogers, professor at Penn State Law School and founder of Arbitrator Intelligence. “It will also reduce information asymmetries that undermine the fairness of arbitrator appointments and will facilitate greater diversity by allowing newer arbitrators meaningful opportunities to establish reputations based on their actual performance.”
AI will roll out the AIQ beginning in June with events in Singapore, Malaysia, Hong Kong, Peru, Panama and Mexico. By beginning in locations other than the traditional centers of arbitration in Europe and the United States, the rollout plan reflects AI’s goal of increasing the diversity of international arbitrators, Drahozal said. A recent survey by Berwin Leighton Paisner on diversity in international arbitration found that 92 percent of respondents wanted more information about new and less well-known arbitrators, and 81 percent wanted to give feedback about arbitrators at the end of cases. The 2015 Queen Mary Survey found one of the worst characteristics about of the process was “lack of insight into arbitrators’ efficiency,” and a majority of responses about improving the process listed providing more information about arbitrators, how they are appointed and their decision making.
Multinational treaties, contracts, investment and other cases can have significant stakes, both financially for the parties involved and for everyday citizens. Improving the information available about the arbitrators who decide the cases can improve the process for all involved.
“There are literally billions of dollars at stake in these cases,” Drahozal said. “In international arbitration, it’s not just about the money, but government regulations can be at stake as well. Having better information about the arbitrators deciding these cases will be very beneficial.”