The future of arbitration in the world of Big Data

Where once knowledge was power, data now rules. With huge processing capabilities (literally) in the palm of the hand, the internet and ‘smart’ devices are changing ways of working and democratising information. Set against this technological revolution, the legal sector has long been ripe for ‘disruptive innovation’.

Artificial Intelligence and Big Data

From practice management software to e-discovery, IP management, document production and even qualitative contract review, start-ups offering tech-driven efficiencies have exploded. The artificial intelligence their algorithms create and exploit is increasingly capable of taking on the work of junior lawyers, presenting both a threat and an opportunity to the traditional legal powerhouses.

Technology now allows huge volumes of various data to be aggregated and processed rapidly with minimal margin of error. This is ‘big data’: volume, variety, velocity and veracity – the ‘four Vs’. For businesses it creates huge potential for database-driven relational decision-making based on analysis of hard facts.

In time it will lead to the automation of most human based tasks. AI is already capable of performing complex surgical operations or detecting disease with much more precision than the human margin for error. The change potential for all organisations (and for society at large) is enormous, and it is already happening in an arbitration-specific context.

Dispute Resolution Data is a US start-up that collates case data from a number of arbitral institutions (including the ICC, ICDR and CEDR) and claims to provide ‘insight through historic and current geographic and case-type reports on dispute resolution claims, durations and processes’ for ‘users to formulate strategies that transform levels of service’. For the time being, information covers industry type, claim amount, location, cost, duration and macro outcomes (settled, withdrawn, final award issued etc.). It provides a trend analysis tool for businesses to take decisions about whether, where, when and how to pursue arbitration effectively.

But the potential for big data to disrupt arbitration is potentially far larger when considered alongside the ongoing transparency debate.

The democratisation of arbitration data

At the same time that technology has been empowering the masses with information, arbitration has come in for criticism (fairly or not) as cliquey and shadowy; a private safe haven for commercial men to fight their battles out of the public eye. There has also been the fierce investor-state dispute (ISDS) debate, where the right of private investors to bring arbitration claims against foreign governments on the basis of policy decisions has been questioned.

Whilst public controversy has been at its highest in the investment context, it has also provoked inward reflection in commercial arbitration circles. ‘Transparency’ remains a buzz-word on the conference circuit without consensus as to what it should mean or how much is too little, too much, or about right.

Lord Thomas, Lord Chief Justice of England and Wales, cast attention on an important issue in this context back in spring 2016 when he suggested that the success and popularity of arbitration, combined with a presumption of the confidentiality of arbitration proceedings in English law, had been ‘a serious impediment to the development of the common law by the courts in the UK’.

The insight is an important one in support of the case for the democratisation of arbitration data to go further. Lord Thomas’ point was that there should exist a system of law that offers both clarity and predictability, at the same time as being capable of developing in a principled manner. Put simply, he argues that the development of the common law is hindered if too many important commercial decisions remain behind closed doors.

Others reasonably question whether  the decisions of private arbitrators, appointed by parties with a wide freedom to choose whosoever they wish, and with little independent vetting of their experience and expertise, should influence the development of the law.

However, there is an arguable case for change. One elegant proposal for shifting the balance, rather than rocking the boat, is to switch the default position in English law from a presumption of confidentiality to a presumption against. This would at least ensure more arbitrable decisions are public and, while not binding precedent, available to assist parties and arbitrators in dealing with and deciding complex and novel legal issues.

Hidden perils?

However, whilst improving access to justice and advancing the commercial law might be publicly desirable outcomes in the interests of the common good, they are both difficult to incentivise. For as long as there has been trade there have been disputes and there have been merchants wanting to resolve those disputes without resorting to the courts. There will always be business disputes that businessmen would prefer to keep confidential. This is a need that arbitration serves.

Further, might the democratisation of substantive arbitration data bring about unintended perils? There are certainly several important cornerstones of arbitration that will be fundamentally disrupted by a big data revolution in arbitration.

One obvious area is arbitrator selection. Many have written on the sanctity of the right to nominate an arbitrator, and arbitration awards have been challenged on the basis of alleged failures of party-nomination procedures. There are obvious parallels between what Judge Analytics does and the potential for big data to influence arbitrator selection but again, no wheel would be re-invented: already arbitrator due diligence is common practice (particularly in an investment arbitration context where past awards are public) and amounts to paying for research into whether a potential nominee has determined any issue or said anything publicly that might indicate a tendency towards a favorable position.

But would the potential of big data to provide instant insight into every opinion that every potential arbitrator has ever publicly expressed on every issue truly improve arbitration, or does it risk prejudice, unbalanced tribunals and more dissenting opinions?

All relevant information is already out there somewhere of course. The difference is that technology is making the information much more readily (and cheaply) available. Perhaps the real threat then is the pace of change, and the real question is whether the thinking and approach of arbitrators, practitioners and institutions can keep up with the inevitable advances and disruptions that technology will bring?

Longer-term (but potentially sooner than you think), might human arbitrators simply become irrelevant, as with the example of the surgeon? There will also be those who consider that human discretion will always be a necessary part of dispute resolution. But if arbitration exists to serve the interests of commercial business people, and when technology can or soon will offer solutions that are quicker, cheaper, data driven and reduce margin for error, then perhaps it is inevitable.

This post comes to us from James Rogers and Matthew Buckle of Norton Rose Fulbright, and is based on an article first published here.