Mind the settlement gap: a call for more effective judicialization of international commercial arbitration

Abstract

Despite pervasive judicialization along the lines of public-court litigation, arbitration has largely missed the ‘managerial turn’ in judging that since the 1970s has pushed judicial systems worldwide to shift focus from adjudication to settlement facilitation. Over the past two decades, a transnational consensus appears to have emerged that settlement facilitation is not only compatible with the arbitrator’s mandate but can actually sharpen arbitration’s promise of efficient dispute resolution. But recent statistics continue to confirm anecdotal evidence of a gap in settlement rates between commercial litigation and arbitration, suggesting that arbitrators still fall more into the mould of a passive umpire than a proactive settlement facilitator. This article sheds light on structural barriers to settlement facilitation in the procedural architecture of institutional arbitration rules, explores causes for the lingering underdevelopment of settlement culture in the community of arbitrators and investigates arbitration’s impact on the parties’ settlement negotiation dynamics when ‘bargaining in the shadow of the law’. Informed by insights from behavioural economics, the author develops a blueprint for building settlement facilitation more explicitly into institutional rules and makes the case for switching the default from requiring parties’ express consent to providing for settlement facilitation by arbitrators on an opt-out basis.