Barricades and Checkered Flags: an Empirical Examination of the Perceptions of Roadblocks and Facilitators of Settlement Among Arbitration Practitioners in East Asia and the West

• Citation: Vol. 19
• Publication year: 2010

§ 19 Pac. Rim L. and Pol'y J. 243. BARRICADES AND CHECKERED FLAGS: AN EMPIRICAL EXAMINATION OF THE PERCEPTIONS OF ROADBLOCKS AND FACILITATORS OF SETTLEMENT AMONG ARBITRATION PRACTITIONERS IN EAST ASIA AND THE WEST

WASHINGTON PACIFIC RIM LAW AND POLICY JOURNAL
Vol. 19 No. 2 April 2010

BARRICADES AND CHECKERED FLAGS: AN EMPIRICAL EXAMINATION OF THE PERCEPTIONS OF ROADBLOCKS AND FACILITATORS OF SETTLEMENT AMONG ARBITRATION PRACTITIONERS IN EAST ASIA AND THE WEST

SHAHLA F. ALI(fn*)

Abstract: Contemporary research on roadblocks and facilitators of settlement has thus far been framed by standard economic modeling and distributive bargaining theories. Each of these frameworks provides helpful insights into those elements that assist or hinder the settlement process. However, each of these models has thus far not examined how particular roadblocks and facilitators of settlement operate in the context of international commercial arbitration proceedings from a comparative cross-cultural perspective. How diverse regions approach roadblocks and facilitators of settlement in the context of the integration of global markets is a new arena for research and practice. To date, most research on international arbitration has focused exclusively on Western models of arbitration as practiced in Europe and North America. While such studies accurately reflected the geographic foci of international arbitration practice in the mid-20th century, in recent years, the number of international arbitrations conducted in East Asia has grown steadily and on par with growth in Western regions. This article presents a cross-cultural examination of how international arbitrators in East Asian and Western countries view the particular factors that help or hinder the settlement process in international arbitration. The result of a 115-person survey and 64 follow up interviews shed light on the underlying cultural attitudes and approaches to perceived roadblocks and facilitators of settlement in international arbitration. The findings indicate that arbitration practitioner's perceptions of the factors influencing the achievement of settlement as well as specific barriers to settlement demonstrate a high degree of convergence across regions. At the same time, regional and socio-economic distinctions are reflected in varying arbitrator perceptions regarding arbitrator proclivity towards making the first move towards settlement in arbitration, the degree of focus on past facts and legal rights as opposed to exploring creative solutions and orientation toward adversarial procedures.

I. Introduction

This article examines how distinct roadblocks and facilitators of settlement operate in the context of international commercial arbitration proceedings from a comparative cross-cultural perspective. Following an introduction, Part II of this article explores the relevance of the study of the roadblocks and facilitators of settlement to the field of the globalization of international legal practice. Current research from the fields of economic modeling, distributive bargaining, and psychology will be explored as they pertain to current findings regarding roadblocks and facilitators of settlement. The forces of "harmonization" and "legal diversity," as described by Anne Marie Slaughter, are examined as a possible explanatory theory for the impact of globalization on attitudes toward factors that facilitate or hinder settlement in international arbitration in East Asia and the West.(fn1) A general overview of the survey research is presented.

Part III delves further into the forces of "harmonization" and "legal diversity" by viewing both the impact of the United Nations Commission on International Trade Law on harmonizing procedural aspects of international arbitration practice as well as the diversity of arbitration and dispute resolution practices in East Asia and the West. This section examines how the historic prominence of conciliation or litigation has impacted the current structure and rules of contemporary arbitral institutions in these regions. This background provides a context for viewing survey findings regarding East Asian and Western arbitrator perceptions of roadblocks and facilitators of settlement.

Drawing on both the globalizing impact of United Nations Model Laws as well as the historic context of diverse dispute resolution preferences in East Asian and Western countries, Part IV presents survey findings regarding how international arbitrators in these regions view the particular elements that constitute roadblocks and facilitators of settlement in international arbitration. The results of a 115-person survey and 64 follow up interviews shed light on the underlying cultural attitudes and approaches to international arbitration as practiced in diverse regions. The findings indicate that arbitration practitioners' perceptions of the factors that facilitate international arbitration, such as the simultaneous attention of both parties to the dispute, and the fact that both parties become more realistic about their prospects for winning, demonstrate a high degree of convergence across regions. At the same time, regional and socio-economic distinctions are reflected in varying arbitrator perceptions regarding the barriers to settlement. In particular, greater proclivity toward making the first move toward settlement and a more forward looking approach to arbitration is regarded as having greater importance among arbitrators working in East Asia as compared with perceptions of counterparts working in the West.(fn2)

II. Overview of Relevance of the Study of Roadblocks and Facilitators of Settlement to Globalization of Law Literature

A. Roadblocks and Facilitators of Settlement

Contemporary research on roadblocks and facilitators of settlement has thus far been framed by standard economic modeling, distributive bargaining theories, and psychological explanations. Each of these frameworks provides helpful insights into those elements that assist or hinder the settlement process. However, contemporary research has thus far not examined how particular roadblocks and facilitators of settlement operate in the context of international commercial arbitration proceedings from a comparative perspective.

Economic models describing roadblocks and facilitators of settlement suggest that given a choice between trial and settlement, litigants form rational estimates of the economic consequences of both trial and out-of-court settlement, compare the two, and act solely on the basis of that information. George Priest and Benjamin Klein outline this standard economic model in their work on the Selection of Disputes for Litigation.(fn3) The Priest and Klein model asserts that a given plaintiff and defendant estimate their chances of success in court, the level of damages likely to be awarded, the costs of trial, and the costs of settlement before deciding whether to settle the dispute out of court.(fn4) So long as the costs of trial are higher than the costs of settlement, and as long as both sides make a parallel estimate of the likely outcome of the trial, the case should settle.(fn5)

Distributive bargaining theories conceptualize roadblocks to settlement as a miscalculation of potential joint gains from settlement. Recent work by Robert Cooter, Stephen Marks, and Robert Mnookin examine trials as a failure of effective bargaining.(fn6) While in most cases, settlement constitutes a joint surplus for all sides, nevertheless, due to breakdowns in effective bargaining through "hard" bargaining tactics negotiations fail.(fn7) In essence, therefore, trials are caused by distribution problems; specifically, parties agree that settling out of court would create a joint surplus, but they are unable to reach agreement on how to divide the surplus.(fn8)

Finally, psychological explanations of barriers to settlement focus on issues of how a settlement offer is framed, the status of the relationship between the parties, and who makes the settlement offer.(fn9) Psychological explanations focus on risk avoidance, whether the offeree sees the offer as either a gain or a loss, and whether the offeree's claim receives validity.(fn10) These factors all combine to act as either facilitators or barriers to settlement and ultimately determine whether an offeree will accept a proposed settlement.

Each of these theories illuminates useful insights into those elements that assist or hinder the settlement process. However, none of these models explains how particular roadblocks and facilitators of settlement operate in the context of international commercial arbitration proceedings from a comparative perspective. By drawing on survey research and interviews, the present study aims to examine commonalities and diversity of perspective regarding how arbitration practitioners in East Asia and the West view particular barriers and facilitators of settlement. Such commonalities and diversity of views are grounded in the larger issue of the impact of globalization on law as discussed below.

B. The Impact of Globalization on International Arbitration Practice

Examining the roadblocks and facilitators of settlement in international arbitration provides an avenue to understand the impact of globalization on the international practice of law.(fn11) Anne Marie Slaughter, in her book A New World Order, describes how legal networks such as those associated with...