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April 11, 2017 Articles

Arbitral Legitimacy in a Post-Truth Society

By S.I. Strong

Justice Brandeis once famously claimed that the best way to combat pervasive falsehoods and political misperceptions was through "more speech," but that strategy is built on the assumption that errors arise out of information deficits. Whitney v. California, 274 U.S. 357, 377 (1927) (Brandeis, J. concurring). According to empirical research, the Brandesian response is ill-suited to a world increasingly built on so-called "alternative facts." See Brendan Nyhan & Jason Reifler, "When Corrections Fail: The Persistence of Political Misperceptions," 32 Polit. Behavior 303 (2010); Brendan Nyhan & Jason Reifler, The Roles of Information Deficits and Identity Threat in the Prevalence of Misperceptions (Feb. 11, 2016); S.I. Strong, "Alternative Facts and the Post-Truth Society: Meeting the Challenge," 165 U. Pa. L. Rev. Online _ (forthcoming 2017) [hereinafter Strong, Alternative Facts]. Fortunately, interdisciplinary research not only explains why existing methods of persuasion fail, it also describes how to combat the problems associated with the modern legal and political climate.

One useful way of looking at the problem of pervasive misconceptions is through the lens of the ongoing debate about the legitimacy of international arbitration. As I discuss in an upcoming article (see S.I. Strong, "Truth in a Post-Truth Society: How Sticky Defaults, Status Quo Bias and the Sovereign Prerogative Influence the Perceived Legitimacy of International Arbitration," 2018 U. Ill. L. Rev. __ (forthcoming 2018) [hereinafter Strong, Legitimacy]), numerous empirical studies prove that international arbitration (meaning both international commercial (business-to-business) and investment (investor-state) arbitration) offers a fair and unbiased means of resolving complex, high-value legal disputes through sophisticated, highly formal procedures that more closely resemble judicial procedures in commercial courts than domestic arbitration. However, critics routinely ignore this data and continue to question the validity of the procedure. Why?

Empirical and theoretical studies conducted by political scientists, philosophers, psychologists and economists demonstrate how three phenomenon—sticky defaults, status quo bias, and the sovereign prerogative—work in tandem to create enduring, but demonstrably incorrect, perceptions about the legitimacy of international arbitration. It is impossible to summarize the entirety of the arguments contained in the article in this abbreviated format, but one of the elements of the discussion draws on the concept of implicit bias, a subject that often been discussed in other contexts.

Empirical studies clearly demonstrate that unconscious bias exists in all of us. The use of the term "bias" is in ways unfortunate since it carries a pejorative connotation, but the word, as used in its original psychological sense, simply refers to a way of thinking based on pre-existing and in this case unintentional (i.e., unconscious) beliefs. Most of us are not only unaware of our own biases, we actively work to avoid recognizing them in ourselves, leading to a phenomenon known as the "bias blind spot." See Lawrence M. Solan, "Four Reasons to Teach Psychology to Legal Writing Students," 22 Journal of Law and Policy 7, 10 (2013).

One way to determine the extent to which you yourself are influenced by unconscious bias is to take some of the electronic self-tests on the Project Implicit website. Project Implicit is run by researchers at Harvard and offers a number of Implicit Association Tests (IATs) placed in various contexts. The outcomes are often surprising, although the methodology appears irrefutable.

Although unconscious bias affects a wide variety of decisions and attitudes, the question for the current discussion involves the way that unconscious attitudes affect international arbitration. One key issue involves the status quo bias, which arises when an individual or institution prefers the established course of action over any available alternatives, even if those alternatives would increase the welfare of the decision maker. While most analyses of the status quo bias focus on questions of substantive law, the principles are equally applicable to procedural issues, including those involving arbitration.

According to William Samuelson and Richard Zeckhauser, "[t]he status quo bias is best viewed as a deeply rooted decision-making practice stemming partly from a mental illusion and partly from psychological inclination." (See William Samuelson & Richard Zeckhauser, "Status Quo Bias in Decision Making,"1 Journal of Risk & Uncertainty 7, 10 (1988). As pronounced as the status quo bias is in laboratory settings, the effect is often magnified in the real world because of the social, reputational and financial costs that are associated with deviating from the established course of action. Economists frame these concerns in terms of sunk costs, regret avoidance and a drive for internal or psychological consistency. Thus, one reason why people continue to question the legitimacy of international arbitration, despite evidence of its fairness and quality, may be because of their unconscious desire to maintain or elevate the perception of judicial procedures (the status quo) so as to justify the sunk costs in national courts.

The bias in favor of judicial proceedings as the status quo may be further exacerbated by the fact that many legal systems mention litigation, but not arbitration, in their constitutions (there are exceptions). Ozan Varol has argued not only that "[t]he prevailing orthodoxies in the existing constitutional order occupy an 'almost monopolistic position'" in terms of status and influence but that "[t]he repeated application of existing constitutional provisions elevates them to a higher position," making other alternatives "presumptively undesirable." Ozan O. Varol, "Constitutional Stickiness," 49 U.C. Davis Law Review 899, 939 (2016).

There may be those who do not believe that the modern world does not include a bias in favor of litigation. The IATs on the Project Implicit website are not helpful in testing this particular issue, but interdisciplinary research provides a potential solution in the form of a heuristic known as the Reversal Test, which acts as an objective diagnostic tool to identify the influence of unconscious cognitive distortions such as the status quo bias.

The Reversal Test was developed by philosophers Nick Bostrom and Toby Orb to determine whether the status quo bias is affecting a particular decision. The Reversal Test states that

[w]hen a proposal to change a certain parameter is thought to have bad overall consequences, consider a change to the same parameter in the opposite direction. If this is also thought to have bad overall consequences, then the onus is on those who reach these conclusions to explain why our position cannot be improved through changes to this parameter. If they are unable to do so, then we have reason to suspect that they suffer from status quo bias.

Nick Bostrom & Toby Ord, "The Reversal Test: Eliminating Status Quo Bias in Applied Ethics," 116 Ethics 656, 664–65 (July 2006).

In the current situation, international litigation reflects the status quo and changes to increase party autonomy through the expanded use of international arbitration are considered to have negative consequences (i.e., be in some way illegitimate) among the general population (i.e., non-specialists in the field). According to the Reversal Test, the existence of a bias in favor of litigation can be tested by asking whether it would be better to eliminate all autonomy in the resolution of international disputes and require all matters to be heard in court, thereby prohibiting international arbitration as well as international mediation and conciliation, which are the other forms of private (non-judicial) dispute resolution based on party autonomy. Given the current level of support for international arbitration among states and among parties, as reflected by the numerous signatories to the New York Convention and the extensive use of arbitration in bilateral and multilateral investment treaties, it is safe to say that any attempt to eliminate or even curtail international arbitration would be considered disastrous by both users and policymakers. Thus, the Reversal Test strongly suggests the existence of an unconscious bias favoring litigation in international commercial and investment matters.

My upcoming articles discuss these issues in more detail, but hopefully this short contribution has provided sufficient food for thought.

Keywords: alternative dispute resolution, adr, litigation, international arbitration, legitimacy, unconscious bias

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