International arbitration is often referred to as an area of globalisation par excellence. It is an institution of global civil society. It is living proof that global society can freely govern itself, even in such vital areas as the adjudication of legal disputes, including those involving public and politically sensitive matters.
But Brexit and Donald Trump’s election in the US are symbols of the backlash against globalism. They are the crowning achievements of self-styled patriots, as Greg Ip called them in his 2017 article, “We Are Not the World,” who have striven to “take back control” from the confounded globalists.
Therefore, although Brexit will not, as such, have much impact on international arbitration, the socio-political trend that it represents will. Anti-globalism will not spare globalism’s darling.
Just as with anti-globalism’s impact on other institutions of global civil society, its impact on arbitration will depend on how arbitration globalists react to anti-globalist criticism. They have two options.
They may claim—as many do in the case of Brexit or Trump—that those behind the backlash are all irrational, xenophobic, and “confused by misleading campaigns and foreign hackers.”
This sort of rabid approach is occasionally visible in the arbitration milieu, such as when the Achmea case is discussed. It is almost a professional faux pas to even begin to suggest that the CJEU’s judgment, stating essentially that the traditional system of intra-EU BITs is at odds with the EU’s system of values and current requirements of its political morality, might in fact have some sense. One may immediately find oneself in the economic-nationalists’ box if trying to air such thoughts.
This approach is based on the false dichotomy that if one is sceptical about some aspects of the way international arbitration is developing, one is not “arbitration-friendly.” Ip observes that a similar reflection-preventing false dichotomy underpins some globalists’ reactions to anti-globalist criticism: if you are not for open borders, you are a racist. Just as this false dichotomy led to votes in favour of Brexit and Trump, its arbitration equivalent is leading to mass protests against investor-state dispute settlement and the popularity of initiatives such as the Prague Rules in commercial arbitration, which are the arbitration world’s equivalent of the yellow vests movement.
Hence, the second option for globalists, including arbitration globalists, is to acknowledge that there is some merit to anti-globalist criticism, and this is exactly why populists, who prey on this criticism and can easily mythologise it when it is discredited too lightly, have been so successful and dangerous.
According to Ip, “globalists would be wise to face their own shortcomings.” The economic argument for globalisation is impeccable. But more solidarity is needed with those who cannot share fully in its benefits, and more determination is required in eliminating globalism’s obvious abuses (such as those which led to the 2008 global financial crisis).
International arbitration will have to face its own shortcomings in the same way.
We need to have a serious discussion on whether the traditional system of investment arbitration, which creates pockets of justice for foreign investors while leaving the host state’s nationals at its mercy, is reconcilable with current political morals.
Law firms, especially in countries like Poland, where the system of justice has been struggling and arbitration has become the “sweet spot” of dispute resolution practices, will need to reflect on whether their preoccupation with lucrative international arbitration, which serves the few, does not mean that they are neglecting their mission to serve the many as officers of the state courts.
All arbitration practitioners will have to undertake a self-examination and consider whether the system is as good as advertised, and efficient enough to deliver value for money, or if a Woolf Reform of arbitration is called for. We will need to consider whether there is enough accountability and scrutiny in the process and whether the benefits of the finality of arbitral awards still outweigh the risks of injustice.
I believe that, following Brexit, international arbitration will be a more socially responsible system that will return to its core values. This is the only way arbitration may protect itself, as an institution of global civil society, against the anti-globalist populists.