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“Each problem that I solved became a rule, which served afterwards to solve other problems”: Is international arbitration stifling the development of precedent-based legal systems?

17 February 2020

René Descartes’ treatise “Discourse on the Method” (1637) was unusual for its time, being written in French (rather than Latin) so that it could be read by a wider audience than academics and fellow philosophers. Descartes’ stated intention in publishing “Discourse…” was that all who had “good sense” would, by reading his work, learn to think for themselves. 

Many of the principles espoused in “Discourse…” remain relevant today in many different contexts. The main quotation in the heading above, for example, provides an effective general method for problem-solving that encourages the application of past experience when dealing with new issues. 

That same method is adopted in precedent-based legal systems, where courts derive from the cases before them legal principles that can be applied to subsequent cases with similar issues or facts (thereby avoiding the need for the courts to re-evaluate legal principles and accepted doctrines in every new case). Additional benefits include certainty (since such an approach provides parties with a set of rules or principles and a reasonable degree of certainty that such rules will be applied consistently in future cases) and flexibility (since the system also enables the law to adapt to deal with new commercial developments or changing social values). 

However, as discussed below, a number of commentators have voiced concerns that the increased use of arbitration, a private method of dispute resolution, has had the effect of diverting cases away from the courts of precedent-based systems, with the consequence that (using Descartes’ language) the courts have fewer ‘problems’ to solve and, therefore, fewer new ‘rules’ are being created. In the context of arbitration, this can also mean that each problem solved does not become a ‘rule’ such that the decision of one arbitral tribunal is of no benefit to another arbitral tribunal solving a similar problem. 

This article will consider why arbitration is regarded as a threat to precedent-based systems and whether those concerns are reasonable.

(i) Why is arbitration regarded as a threat to the development of precedent-based systems?

Under precedent-based legal systems, the law develops in part through the accumulation of judicial precedents from decided cases. This requires the application of the doctrine of stare decisis (‘to stand by things decided’), which, in the context of the courts of England & Wales, has been described as follows:

“The doctrine refers to the fact that, within the hierarchical structure of     the English courts, a     decision of a higher court will be binding on a court lower than it in that     hierarchy. In general     terms, this means that when judges try cases, they will check to see if a similar situation has come     before a court previously. If the precedent was set by a court of equal     or higher status to the     court deciding the new case, then the judge in the present case should     follow the rule of law     established in the earlier case. Where the precedent is from a lower court in the hierarchy, the     judge in the new case may not follow, but will certainly consider, it.” see Slapper and Kelly, “ The English Legal System” (2013-2014).

As such, the judicial precedent system operates in a manner similar to Descartes’ method: each set of facts presents its own ‘problem’ and, where appropriate, a judgment may set out a principle of law (or, as Descartes may have it, a ‘rule’) that can be derived from the case.  Such principle may then be relied upon, as either binding or persuasive authority, by other courts and parties in relation to cases involving similar issues or facts. Contrarily, an inconvenient precedent that might otherwise be binding can also be circumvented by distinguishing it on the facts or principle involved.

In respect of precedent-based systems in general, and the English legal system in particular, it is arguable that one of its key strengths is the volume of previous decisions and the breadth of issues that those decisions cover. Arbitration (which some say diverts a large volume of cases away from the courts), is therefore regarded by some as a threat to the development of precedent-based systems. In further detail: 

  1.  The nature of the arbitral process means that, in the vast majority of cases that proceed to arbitration, the use of the courts is excluded entirely (in contrast to other forms of alternative dispute resolution, which might be said to be more complementary to court litigation).
  2. As arbitration is a private mechanism, any ‘problem’ solved by an arbitral tribunal will not become a ‘rule’ in the sense intended by Descartes. Instead, any ‘rule’ created by an arbitral tribunal will only be binding on the parties to that particular arbitration. This means that, even if a case involving an issue of material significance to a particular industry or area of the law proceeds all the way to an arbitral hearing, the resulting award carries no precedential value (even if published), and therefore does not contribute to the development of the common law. 
  3. The above issues are thought to be exacerbated in certain areas of law by virtue of the fact that international arbitration has become a popular (if not standard) method of settling disputes in select sectors, such as shipping, energy, construction and infrastructure

As a result, concerns have been voiced regarding the impact of arbitration on the development of precedent-based systems. 

 (ii) Is it reasonable to regard arbitration as a threat to the development of precedent-based systems?

While the risk presented by arbitration can be expressed relatively easily, the question of whether the above concerns are reasonable is more difficult to establish due to the limitations of anecdotal and statistical evidence currently available. We begin with the anectodal:

Anecdotal evidence

On the one hand, some judges have noted that particular types of cases are being dealt with by courts increasingly rarely. For example, Beverley McLachlin, Former Chief Justice of Canada, stated in 2011 that “[t]he trend is clear. Fewer and fewer construction cases are reaching the courts where the law is developed…  construction disputes are being sent to mediation, arbitration…”.  Similarly, Lord Clarke of Stone-cum-Ebony, a former judge of the Supreme Court of the United Kingdom, noted in 2017 that “in recent years, since I have been in the Court of Appeal, and more recently the Supreme Court … [w]e have comparatively few maritime and commercial cases and live on a diet of judicial review and human rights cases”. Finally, Lord Thomas, former Lord Chief Justice of England and Wales, stated in 2016 that “across many sectors of law traditionally developed in London, particularly relating to the construction industry, engineering, shipping, insurance and commodities, there is a real concern which has been expressed to me at the lack of case law on standard form contracts and on changes in commercial practice”

With reference to shipping in particular, in the preface to the seventh edition of his book, ‘Laytime and Demurrage’, the author (Joh Schofield) stated that “In the preface to the fifth edition in 2005, I identified three areas of the law where I thought further judicial scrutiny would be of assistance. Unfortunately more than 10 years on, there has been no significant judicial intervention in any of the areas I identified.”

On the other hand, Sir Bernard Eder, a former High Court judge noted that a “quick glance at the law reports and forewords of the major textbooks over recent years would, in my view, show that the [English] common law continues to develop at a pace with a constant stream – indeed flood – of cases over a wide area of jurisprudence.”  The English Court of Appeal judge Sir Peter Gross disagrees that the “courts and arbitration are in a competition involving a “zero-sum” game, whereby the gain of one means a loss for the other”. Instead, he observed that, for English law at least, arbitration has provided “cutting edge cases for the courts to consider” and that, whilst the increased use of arbitration may lead to some loss of precedent, the English courts have derived indirect benefits as a result of practical experience gained by practitioners in arbitrations. Further, in a 2012 speech given by Lord Carnwath of Notting Hill (who became Justice of the Supreme Court of England & Wales in 2012) on the issue of ‘Judicial Precedent – Taming the Common Law’, Lord Carnwath referred to the “sheer volume of case-law with which the courts are increasingly burdened” and stated that his “own experience in the Court of Appeal and now the Supreme Court leads me to the view that the greater risk is from too many judgments, rather than too few.”

There does not appear to be a clear consensus among judicial commentators. However, it is clear that there are concerns that, even if the overall caseloads of certain courts may not be diminishing, there may be (i) fewer commercial cases at the appellate level, as well as (ii) a lack of diversity amongst the cases going before commercial courts (with fewer cases from industries that favour arbitration). We turn now to statistical evidence, to see what light it may cast on the issue. 

Statistics – what they do not tell us

Although courts and arbitral institutions now commonly publish statistics regarding their caseloads, unfortunately, the information available is not sufficiently granular to enable us to come to any reasonable conclusions regarding the impact of arbitration on precedent-based systems. In particular, it is difficult to draw any inferences as to (i) whether there is a general trend of declining caseloads for commercial courts in precedent-based systems as a result of the increased use of arbitration; and (ii) the number of cases that have proceeded to arbitration which had in issue a point of law that would have benefited from consideration by the courts (noting that many cases will simply require an arbitral tribunal to make findings of fact and/or to apply developed legal principles).

It is true that a number of precedent-based systems have, in recent years, experienced declining caseloads. However, there does not appear to be any (i) thorough examination of the reason for such a decline (i.e. whether arbitration or otherwise); or (ii) detailed analysis of whether such a reduction has in fact lead to a stagnation of the law in particular areas. Indeed, whilst the English courts might be regarded as having the most to lose from the increased use of international arbitration (given their traditional role as a forum for the resolution of international disputes), the caseloads of the three specialist sub-divisions of the High Court of England & Wales which typically deal with commercial disputes (the Admiralty Court, Commercial Court, and Technology and Construction Court) had an “average, but increasing, annual caseload … of over 1,100 cases” between 2008 – 2012, with the number of cases involving foreign parties varying between 72% to 81% of cases. More recently, the Commercial Court Report (2017-2018) provides that between 2016 - 2018, almost 900 cases a year were commenced in the Commercial Court alone (70% of which were international in nature), whilst the number of cases brought in the Admiralty Court (which deals with shipping cases) increased from 163 to 165.

Further, it is not necessarily the case that the use of international arbitration is inexorably rising (such that we are faced with an ever-increasing arbitration case load and ever-decreasing court case load). Recent statistics setting out the numbers of new arbitration cases issued between 2016 - 2018 with six major international arbitral institutions (LMAA, ICC, SIAC, LCIA, HKIAC, and SCC) show no clear trend of growing caseloads. On the contrary, their caseloads appear to have broadly remained steady, with certain institutions even experiencing reduced caseloads. In particular, the LMAA experienced year-on-year decline between 2016 – 2018, with case numbers falling from 1,720 to 1,561. In addition, the case numbers for the ICC and LCIA both dropped between 2016 – 2017 (although have risen since), while the case numbers for the SCC, SIAC and HKIAC all dropped between 2017 - 2018.

Ultimately, however, there is a limit to the conclusions that can be drawn from the statistics currently available, because they tell us nothing about the types of matters being dealt with or the importance of the underlying issues involved. That is crucial because neither (a) larger caseloads which relate predominantly to issues or facts that are not particularly novel or have been considered by the courts recently; or (b) an increase in the number of cases going to arbitration where such cases stem from disagreements as to the facts or legal principles that are well developed, are likely to stifle the development of precedent-based legal systems. 


We therefore find ourselves in the rather unsatisfactory position of being unable to say, with any degree of certainty, whether international arbitration does or does not pose a threat to the development of precedent-based systems. 

However, what is clear from the foregoing is that certain eminent commentators do consider this issue to be one of concern, particularly in relation to certain industries, sectors or areas of law. 

One possible (and many would say disproportionate and unlikely) solution would be to loosen restrictions on appeals to the courts from arbitral tribunals. However, given the popularity of international arbitration and the competition various jurisdictions face in attracting parties, such an approach is more likely to lead to parties choosing to have their arbitration seated elsewhere, rather than solving the problem in any particular jurisdiction.

In any case, it is arguable that a more palatable solution already exists: to the extent that parties are finding that their chosen method of dispute resolution (arbitration) is such that, in the language of Descartes, problems once solved do not become rules, and that parties have, as a result, less certainty in the law, the solution, in England at least, might be said to lie in section 69 of The Arbitration Act (1996). However, this is a solution that parties must be willing to avail themselves of and which will necessarily involve ‘plugging’ of gaps in the law in a piecemeal or ad hoc fashion. 

Descartes, who noted in “Discourse…” that he preferred cities shaped by the vision of a single planner over those developed in piecemeal fashion, might have disapproved of such a solution. But that, one might say, is the difference between philosophy and reality. 

See cms.law/ICCA2020 for more information about CMS LLP and ICCA 2020

The authors wish to acknowledge the assistance of Carolina Roque in the preparation of this article



Portrait of Sarah Grenfell
Sarah Grenfell
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Anuj Moudgil
Senior Associate