The Neutrality Paradox: How Repeat Players and Institutional Incentives Shape Bias in Arbitration

Abstract

Arbitration is based on the twin pillars of independence and impartiality. Yet, as arbitration becomes more professionalized and commercialized, there are legitimate concerns about whether these values are being adhered to in practice. This paper explores the "neutrality paradox" of arbitration, i.e., the balance between impartial adjudication and the systemic pressures of a model where participation is far from equal. An important feature of the model is the "repeat player problem," where corporations, state entities, and institutions are regular participants, while individuals or small entities are sporadic participants at best. Such a model creates systemic pressures, especially in relation to the choice of arbitrators, where parties have influence over appointments. What are the implications of an arbitration market where reputation and the chances of reappointment are critical? What are the implications of "double hatting"? What are the differences between actual bias and perceived bias? Can the appearance of partiality negate the legitimacy of the arbitration process? What are the implications of recent institutional innovations in relation to disclosure of arbitrator appointments?