(a vent about the integrity of arbitration confidentiality)
In the world of private arbitration, the courts serve an important role. They represent a check and balance, intended to keep what occurs in the shadow of the law honest. If a participant feels that an arbitral outcome is offside, they can ask a judge to set the award aside.
With this also comes concerns of abuse by participants engaged in the arbitration process. No one likes to be on the losing side of an adversarial proceeding. If the purpose of arbitration is to bring about closure, the notion of appeal rights threaten finality.
In theory, the decision of an arbitrator is difficult to appeal. At least, it is supposed to be harder to appeal than a court decision. The parties bound to an arbitration award typically have committed themselves to it in ways that do not apply to court decisions. That is, it is common for parties to agree to the appointment of an arbitrator and to enter into an agreement with the arbitrator to impose closure upon them. It does not quite work the same way with judges; in fact, the very notion of parties attempting to select their judge is problematic.
Together with this opportunity to select the decision maker, arbitration allows a matter to be addressed privately. The process and outcome are intended to be confidential. This is a selling point. It is often in the interest of conflicting parties to have their matter addressed outside of the public eye. Karen McPeak affirms this in a recent article about arbitration, considering How Confidential is Confidential?
So, what happens when a public court decision upholds or rejects an arbitration award? It seems the private aspect of the arbitration process is forgotten. The parties are identified. The nature of the dispute revealed. All too often, the identity of the arbitrator is also referenced in the public court decision.
Parties involved in an attempt to set aside an arbitration award can participate in that appeal process. They have the chance to present arguments about sealing the record should they so wish, to protect their identities and details of their dispute from public view. The arbitrator is lucky to even know an effort to set aside their decision exists. Rarely is there opportunity for an arbitrator to participate in a proceeding challenging their award. This seems natural. After all, judges do not participate in the appeals of their decisions. Why should arbitrators? I am not sure that they should but think it is a problem to view arbitrators and judges as the same type of adjudicator.
Judges have responsibilities that arbitrators do not. Perhaps most importantly, responsibilities to the public. The judge’s salary is paid by taxpayers. Where they land in the hierarchy of the public justice system is also a factor. A judge need not worry about marketing their services. Once assigned, like it or not, people are often stuck with their judge in a case.
Arbitrators, on the other hand, do not necessarily have a public duty. Their responsibility can be limited to only the parties involved in the dispute. Some arbitrators do not even see themselves as bound by precedent. There is not really a hierarchy to worry about. (That is, beyond the artificial hierarchy perceived through billing rates.) The parties who select the arbitrator feed them. The prospect of repeat engagements is real, as is the marketing of an arbitrator’s services. Those stuck with an arbitrator are typically stuck with them at their own doing. Even in the case of a court application to appoint an arbitrator, there is a chance to object and propose an alternate decision maker. Imagine getting to do that with the judge assigned to your case!
Irrespective of the degree to which you agree with my take on the difference between arbitrators and judges, people smarter than me have pointed out to me that it is customary for decisions about the appeal of court decisions not to name the judge being challenged. Why, then, this trend of naming the arbitrator when it is an arbitral award challenged?
I think I know what you are thinking. The arbitrator will only be upset if they are named in a court decision that sets aside their award.
R-E-S-P-E-C-T (just a little bit)
It goes both ways. For the focus of this column, it does not matter which way a court decides in considering the challenge of an arbitral award. The disrespect is there if the arbitral award is set aside or supported. It exists either way because the confidentiality is lost.
Of course, an arbitrator whose award is set aside and who finds themselves publicly named is more harshly burned. They are bound to be concerned about the outcome. Yet, even if the arbitrator’s award stands, it remains that the confidential dispute resolution process for which the arbitrator was engaged is compromised. Arbitrators are often embarrassed by appearing on the public record as a result.
When it comes to naming arbitrators in court decisions, my question is why.
Is the identity of the arbitrator relevant to a court’s consideration of holding up or setting aside the arbitrator’s award?
Are judges now tasked with offering reviews of arbitrators like we do our Uber Eats and Amazon purchases?
Remember, the arbitrator is not a party to the appeal proceeding. They do not have opportunity to truly have their credibility/competence assessed… but for what is presented beyond their control by those involved in the appeal.
Blueprint For Success
At the 2023 Golden Globe Awards, comedian Eddie Murphy received the Cecil B. DeMille Award for outstanding contributions to the world of entertainment. In his acceptance speech, Eddie offered to young people the advice of doing three things to succeed…
- Pay your taxes
- Mind your business
- Keep Will Smith’s wife’s name out your ******* mouth
Jada Pinkett Smith aside, the latter two parts of Murphy’s success formula are neglected when courts get involved in a private and confidential dispute resolution process and put the identity of those involved and details of the matter on the public record.
Is an arbitration award supposed to be written for the courts?
I suggest to you that the answer to the question varies. It is dependent entirely on what the parties who contracted with the arbitrator agreed to. Remember, a fundamental component of the arbitration process is self-determination. It is not uncommon for efforts to be made to eradicate appeal rights.
Unlike a court decision that has many audiences to consider in its composition – including audiences too often ignored in decisions written in legalese and at unrelatable reading levels – an arbitration award is usually focused on a more limited readership, for whom the extent to which details are offered vary. The most extreme example is in final offer selection, also known as baseball arbitration. The arbitrator does not even really write the decision themselves. There are also scenarios where parties opt to do away with or minimize reasons for a decision. What can a court really consider in the challenge of something like that?
And maybe there is the answer. If parties truly want private arbitration to conclude a matter, they may need to close out appeal loopholes. Do not give a court anything to really assess and perhaps you can get true closure. While, in truth, the process that gives rise to the arbitrator’s award is often taken into consideration in arbitration appeals, the notion would certainly underscore the intention of full and final closure in engaging arbitration in the first place.
Go Go Gadget Confidentiality
This makes me think about Inspector Gadget and the self-destructing messages he would get outlining missions. Or disappearing ink. Imagine an arbitration award that allows the parties to understand how the arbitrator got to the outcome without such being available to the courts to put on public display. Now, that could offer true confidentiality with closure! Maybe then there would be appreciation of the intention to keep arbitration quiet.