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Innovation and Technology in International Arbitration: what lies ahead?

26 November 2019

“Innovation and technological progress [is] more important to growth than capital accumulation”. 
- Adam Ferguson

Is innovation and technological progress as important to International Arbitration?

Introduction 

While Adam Ferguson was born in 1723, his words have as much resonance today as they did at the time. Indeed, Bill Gates expressed much the same view in a Rolling Stone Interview in 2014: “Yes, stability and education are important—I'm not taking anything away from that—but innovation is the real driver of progress.” 

So, what drives innovation in international arbitration (IA)? 

More than anything, it is the necessity of change.  IA has always been a creature of necessity, its development driven by the rise in international trade. Private arbitration in Scotland can be traced back to the 12th century and from there it proceeded to develop apace with trade and commerce. The first and second industrial revolutions in particular transformed the process into a method of dispute resolution that was used across the globe. 

The modern industrial revolutions of our time have been equally significant. The third (digital) revolution has been globally transformative, and the fourth one promises to be even more so, delivering disruptive technologies such as AI, VR and blockchain. 

These developments, in particular the accelerating pace of digitalisation and how we, as humans, interact with data, are key factors driving change in global dispute resolution.

Digital natives will tend to choose “data first” services where these are available - and may seek to create or sponsor their creation where they are not.  There is technology already available that has, to an extent, already made the case for a break with traditional approaches to dispute resolution: Kleros is an online dispute resolution forum based upon blockchain technology that motivates jurors to make the right decision using game theory, and Smartsettle is a blind bidding system used to determine the optimal outcome in disputes.  These technologies are re-imagining the fundamental design of dispute resolution systems. 

This is unsettling for dispute resolution professionals, particularly when we see users seeking these alternatives out and even designing their own systems.  Ebay and PayPal have been using online dispute resolution platforms to deal with high volume customer complaints or disputes between sellers for some years now - they process more than 60 million cases a year online using a system called Squaretrade. In 2019, Indian Bank ICICI launched its “E-DR” challenge inviting innovators to set up an institution that will offer e-arbitration services. They have committed to send 10,000 of their disputes to the winning institution.

In this article we will look at the use IA currently makes of technology, how that might develop in the future, and what contribution arbitration practitioners can and should make to the exchange of ideas on this topic. 

Where are we now and how did we get here?  

IA as practised today is very different from the processes used centuries ago. However, it has certain “evergreen” characteristics that remain fundamentally important to its users: the private nature of arbitration, the ability of the parties to determine the procedural steps by which their dispute is to be resolved, and the scope for international enforcement. 

IA is, of course, already using technology. Tools that are regularly used include:

  • Online document repositories to manage pleadings and evidence;
  • Automated document analysis and AI tools to assist with voluminous document review exercises;
  • Project management tools;
  • Machine translation; and
  • Audio and video conferencing for hearings.

The IBA recognised the importance of these technological advances and arbitrators’ awareness of them in a recently published online guide of currently available tools that can be used to augment or assist IA.  

However, while time and cost savings can be achieved through using these tools, their focus does not go beyond improving current processes.  Even with the use of these tools, the fundamental shape of the arbitral process: the presentation of the case, the rules of evidence and method of decision making, remain largely unchanged.  A lot of arbitrations still broadly follow a process that is almost indistinguishable from a national court process with several rounds of written pleadings, thousands of documents and lengthy witness and expert testimony culminating in one or more substantive hearings. Cases still usually take several years to conclude.  

In the meantime, the challenges in managing this type of process have never been greater.  From the sheer volume of electronic data that large commercial disputes now generate, to the robust data protection systems that arbitrators must have in place, to climate concerns and political issues that make physical hearings impractical or undesirable.  

If arbitration practitioners are to remain relevant in the fourth industrial revolution, we need to do more than make efficiency savings to the current process. We need to consider the fundamental design of the system. IA gained traction because of its ability to meet its users’ needs. In any conversation regarding the future direction of IA, user needs should be front and centre.

System design: what do the users of IA need?

When arbitration practitioners are asked what the users of our services need, we tend to focus on the skills we provide rather than the outcomes our clients seek. We may talk about our ability to provide strategic and tactical advice, top-class advocacy and sophisticated litigation support tools. However, what users need has not fundamentally changed since the Age of Enlightenment. They still seek a process which

  • Gives a fair resolution to their dispute;
  • Is conducted privately and flexibly;
  • Gives rise to a result which is enforceable internationally; and
  • Is provided at a reasonable cost.

These needs are not always of equal priority. In some cases, a user’s need for a legally correct outcome may be less important than achieving swift closure of the dispute and minimising cost. In other cases, a legally correct outcome will be of paramount importance and may merit a higher legal budget provision. However, IA procedures do little to differentiate these needs or tailor the process to them.

The standard IA process remains close to the traditional court model. But is this what IA users actually need? In some cases it undoubtedly is, however, in others, certain users may prefer a slimmer process that prioritises swiftness and cost efficiency over other considerations. Such users may value the option of pre-emptively opting-out of certain cost-heavy and slow-moving aspects of the traditional model or having access to alternative options such as the ability to elect for an expedited online determination with no in-person hearings. 

These issues are best dealt with at the system design level since, once an individual dispute is up and running, there is limited scope for parties to reach agreement on procedural short-cuts or innovative approaches. Users need to know what the options are at the outset, when dispute resolution clauses are being negotiated. The designers of those options can then take all the priorities of the users of IA into account and offer meaningful, informed choices to those users based on factors such as how time-sensitive resolution is for their business/this contract, what level of resource they consider proportionate in the event of a dispute, and the methodologies they wish to adopt in assessing evidence.

Institutions have been making steps in this direction in recent years, for example the ICC, SCC, ICDR and SIAC now all have expedited procedures.  The ICC’s procedure (adopted in 2017) automatically applies for claims of up to £2m (or higher on an opt-in basis). This procedure offers a much swifter process to final award with strict time limits. However, the process has been (rightly) criticised for determining suitability for expedition purely by value. Given that one of the most fundamental cornerstones of IA is party autonomy, it is antithetical to impose any type of process on users. A better approach, as advocated above, would be to facilitate and enhance party autonomy by creating more structure and clarity around what options parties have.  Alternatively, arbitrators could be given a greater role in leading discussions around more innovative approaches to dispute resolution.

What role can technology and innovation play in IA in the future?

Historically, arbitration practitioners have largely sought to use technology to make existing processes more efficient. This is the wrong focus. We need to move our thinking away from incrementally improving what we already do and address the fundamental question of how we can most effectively deliver what the users of IA need. Given the potential application of disruptive technologies, that means being open to the possibility of delivering our services in significantly different ways in the future. It means being prepared to engage in discussion of ideas that we may find uncomfortable. 

The fourth industrial revolution is the age of the disruptor. Uber, Airbnb and blockchain technology are successful not because they provide an existing product or service more cheaply or at a higher quality but because they saw they could provide something fundamentally different to the users of certain products and services. They looked at those users’ needs and found a new way of meeting them that the incumbent providers had not considered and/or could not replicate. 

We need to have the confidence to ask ourselves whether, at least for certain cases, there are other methods of determining disputes that may have the potential to produce not only more efficient outcomes but possibly better and more reliable ones. Perhaps methods that would address some of the limitations of the processes we currently use.

For example, human decision makers may have a complex understanding of nuance and an ability to judge witness credibility that current AI systems could not hope to match. However, they also bring a measure of subjectivity and unconscious bias to the table. In the case of expert evidence, fairly superficial matters such as how individual experts present themselves, how articulate they are, whether they are using their first language (or how their evidence is translated) can influence not only decision makers, but the parties who select experts in the first place. 

Moreover, some of the work that such experts do, such as the review and analysis of primary source material and the application of statistical information, has the potential not only to be more efficiently carried out by technology but also, arguably, more objectively assessed. It is critical to note here that pursuing a different approach would not render either arbitration practitioners or experts irrelevant at least initially —for instance, parameters for this technology would still need to be designed. The criteria, content and assumptions to be applied would still need to be agreed upon or determined by human beings. However, there may be greater scope with such technology to narrow the areas in dispute to those where there is a greater element of opinion or subjectivity.  

AI technology may also be capable of contributing to factual decision making, for instance in adopting statistical sampling in determining fact heavy disputes where it is difficult or inefficient for either party to prove or respond to every assertion made.  This is already being used to a limited extent in construction disputes before the English Court although such an approach requires agreement on the sample by the parties and tribunal alike (cf. Amey LG Limited v Cumbria City Council [2016] EWCH 2856 (TCC)).  Similar innovations could allow certain factual issues of complex disputes to be determined entirely separately by AI technology which might then provide the parties with a set of findings-in-fact on which to base their legal arguments.

These are radical ideas, no doubt, and they will undoubtedly sound alarming to many practitioners—possibly for good and justifiable reasons. Nevertheless, we need to be willing to talk about them and to add our voices to the marketplace of ideas. We need to be prepared to open our minds to the possibility of adopting new and unfamiliar methods and processes of dispute resolution if we are persuaded that those will meet our clients’ needs. And if, ultimately, we have solid and genuine concerns about some of the new tools being advocated, we need to be able to explain our concerns to IA users. 

Is innovation and technological progress important to the growth and development of International Arbitration?

Yes. And Adam Ferguson would agree. At this point in time, innovation and technological progress is the most important challenge—and opportunity—that IA faces. Arbitration practitioners need to  work with professionals in other disciplines,  who may not currently be involved in the dispute resolution industry. We need to fully understand how technology could transform IA in the future, so that we can judge how such innovations might impact the system, for good or ill, and meaningfully contribute to its future design. 

If we do not do this—if we are not prepared to even have the conversation—the dispute resolution world will move on, leaving IA behind. 

Authors

Picture of Colin Hutton
Colin Hutton
Partner
Edinburgh
Picture of Rob Wilson
Rob Wilson
Partner
London
Laura McEwen
Laura West
Senior Associate
Edinburgh