The Major Challenges for Arbitration In 2023 – Mealey’s International Arbitration Report
Daniel R. Guadalupe, Partner at Pashman Stein Walder Hayden, contributed to Mealey’s International Arbitration Report on the topic of “International Arbitration Experts Discuss the Major Challenges for Arbitration In 2023.” Dan has arbitrated commercial and construction matters in the United States and internationally and is currently an arbitrator with the American Arbitration Association. He has also served as an ICC arbitrator and litigated before the ICOR. Mealey’s is a leading publication on international arbitration.
The year 2023 will see continued developments and disputes involving artificial intelligence, climate change, and ESG (environmental, social and governance) standards. Arbitration has not lost its appeal as a private, confidential, efficient, and expedient way of adjudicating complex disputes with expert arbitrators, but challenges remain.
A major challenge will be how courts and legislatures may try to limit the reach of arbitration tribunals allowing some discovery. In the U.S., for example, expect efforts to circumvent the landmark U.S. Supreme Court’s June 2022 decision in ZF Automotive, holding that Section 1782 of the U.S. Code does not apply to private international tribunals and thus, federal courts cannot order discovery to be turned over to parties in proceedings before those tribunals. Parties will try to use state arbitration statutes (some modeled after the Uniform Arbitration Act) to avoid Section 1782 and persuade state court orders to order such discovery. Expect practitioners using arbitral subpoenas to obtain evidence for final hearings instead of relying on Section 1782.
Artificial intelligence will become more relevant than ever, now with the wildfire caused by chatGPT, the conversational, seemingly all-knowing AI tool. Far beyond AI’s role in ESI software, expect advances to detect bias in arbitration awards and algorithms to predict how arbitrators will rule. Affected parties will argue that AI could never replace the judgment of a trial court in confirmation proceedings. Expect to see AI used as a research tool sourcing large data sets from arbitral awards from all over the world that have become public by way of published confirmation or vacatur proceedings. These developments will challenge the notion that arbitration is a confidential process with little risk of public exposure.
Other challenges will be the increasing role of litigation funding in international arbitration allowed by some countries (U.S. and the UK) and viewed with suspicion by the EU, which passed a resolution in 2022 urging robust regulation; cross-border cryptocurrency arbitrations that may clash with countries’ investment regulatory policies; arbitration awards advancing ESG standards that will present enforceability challenges in countries not embracing those standards; and disputes arising out of climate change policies meant to stop investment in fossil fuel projects (e.g., cancellation of pending or existing projects, such as government-mandated closures of coal plants or oil pipeline projects). Promotion of diversity and inclusion will also face challenges, as traditional tribunals may be slow to establish a diverse pool of international arbitrators.
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