Sergio Puig

Affiliation Bias in Arbitration: An Experimental Approach

A characteristic feature of arbitration, a growing form of legal adjudication, is that each disputing party appoints an arbitrator. Commentators, however, suggest that party-appointed arbitrators tend to be biased in favor of their appointers. Evaluating this claim from data on historical disputes is problematic because of nonrandom selection of arbitrators. Here we use a novel experimental approach to estimate the causal effect of the appointing party. Using survey experiments with arbitration experts around the world, we show that professional arbitrators suffer from affiliation effects—a cognitive predisposition to favor the appointing party. At a methodological level, we offer a solution to the problem of measuring this effect when credible observational designs are lacking.

Imperfect alternatives: institutional choice and the reform of investment law

Abstract This Article applies the theory of comparative institutional analysis to evaluate the trade-offs associated with alternative mechanisms for resolving investment disputes. We assess the trade-offs in light of the principle of accountability under the rule of law, which underpins the goals of fairness, efficiency, and peace that are attributed to investment law. The Article makes two recommendations: first, reforms should address complementarity between domestic and international institutions; second, institutional choices should respond to the different contexts that states face.

The David Effect and ISDS

The legitimacy of international investment law is fiercely contested. Chiefly, scholars argue that investor–state dispute settlement empowers corporations from rich nations over governments of poor ones. Some also assert that poor nations facing investment claims have limited ability to improve their standing in this setting of adjudication. Based on a first-of-its-kind experiment conducted on 257 international arbitrators, this article argues that one avenue to improve standing is for developing countries to exploit their ‘underdog’ status. We presented arbitrators with a vignette describing an investor–state dispute and randomly assigned different features to test their effect. Our results suggest arbitrators are prone to a particular type of bias – surveyed professionals were more likely to grant poor respondent states reimbursement of their legal costs compared to wealthy states when the respondent won the dispute. Based on this ‘David effect’, we argue for re-conceptualizing investor–state arbitration as a tool for partially mitigating power imbalances. David reached into his shepherd’s bag, took out a stone, hurled it from his sling ... The stone sank into Goliath’s forehead.

The Role of Procedure in the Development of Investment Law: The Case of Section B of Chapter Eleven of NAFTA

Many scholars argue that the emergence of multiple and varied mechanisms for the settlement of economic disputes and of treaties providing for investment arbitration may be exacerbating what it is called a “fragmentation” process of international law. Today, economic actors seeking relief under international law may be forced to go to different courts or tribunals in order to seek compliance (i.e., conformity to the rules of a particular regime, including dispute resolution and interpretation provisions) and/or economic compensation for the State’s breach of its obligations. This may be increasing the risk that tribunals will come to inconsistent, conflicting and incompatible decisions. Faced with this danger, the question addressed in this chapter is as follows: in the absence of a homogeneous, hierarchical meta-system capable of doing away with problems derived from multiple and varied mechanisms for the settlement of economic disputes, can agreed procedural tools be a source of coordination?

The David Effect: Underdogs and Investment Arbitrators

The legitimacy of investor-state dispute settlement or ‘ISDS’ is fiercely contested. Chiefly, scholars argue this arbitration mechanism empowers investors from developed states over governments of developing host states. In response, investors (mostly) from developed states argue that without adequate protections, including investor-state arbitration, they would be unable to prevent and resist opportunistic actions like expropriations by developing host states with weak rule of law and institutions. In the resulting setting, developing states facing claims by investors seem to have limited ability to improve their standing in litigation. Based on an experiment conducted on 266 arbitrators, we argue that one potential avenue is for developing host states to exploit their ‘underdog’ status. Our results show that arbitrators may be prone to the ‘David Effect’ — a bias to favor the perceived weaker party in the arbitration. Surveyed arbitrators were more likely to award low income respondent states reimbursement of their legal costs compared to middle income states. Likewise, investors from less developed economies were also more likely to have their costs reimbursed when they win compared to investors from wealthy economies. Our study suggests that the legitimacy of legal regimes depends, in the minds of decision-makers, on a minimum expectation of fairness. This hints at the importance of arbitrators’ beliefs about the distribution of power among litigants in explaining the functioning of the investor-state arbitration system.