Originally from Limits to Party Autonomy in International Commercial Arbitration

INTRODUCTION

The principle of party autonomy in international arbitration rests on the premise that individuals are rational maximizers of their own welfare.  It presupposes rational agents with the capacity to make informed choices.  Once these requirements are fulfilled, the invisible hand of the market allows parties to tailor the perfect dispute resolution mechanism that best suits their needs. In an ideal world, such dispute resolution mechanism would hardly need to be subject to any form of State control at all.  

However, our world is far from ideal. There are a number of actors who are neither rational agents nor endowed with the capacity to make informed choices. Depending on the individual circumstances of each concrete case, they suffer from imperfect information, from the absence of expertise to test information against their preferences, or from the lack of power to actually implement their choices in practice. Granting these “weak parties” an unfettered right to party autonomy  bears a significant risk of market failure: strong opportunistic actors may exploit the weakness of their counterparty for their own benefit.  In a worst-case scenario, this may result in undermining the weak party’s fundamental right of access to justice.

Legislators have reacted to this with different policies. At one end of the spectrum one finds approaches that may be designated as “paternalistic.” According to a definition offered by Gerald Dworkin, paternalism is the “interference with a person’s liberty of action justified by reasons referring exclusively to the welfare, good, happiness, needs, interests or values of the person being coerced.”  At the other end of the spectrum, one finds approaches that are an expression of liberalism. Unlike paternalism, liberalism favors the absence of interference with a person’s freedom of action.   It rests on the assumption that everybody – be it a weak or a strong person – is responsible for his or her own welfare. 

The present paper will examine the different instruments that legislators may use to implement these policies in practice. This will be done by distinguishing between instruments that regulate access to arbitration proceedings on the one hand (see I.) and instruments that regulate the conduct of arbitration proceedings on the other (see II.). It is submitted that these instruments are interrelated. A more liberal approach in granting access to arbitration would risk triggering more paternalistic responses during the course of the arbitration. This may affect strong business parties who are and should remain the primary beneficiaries of a system of arbitration that is based upon party autonomy (see Conclusion).