The topic of arbitrator bias came up recently in two completely different settings — one, a presentation by a law professor to a group of lawyers, and one, in a conversation with a non-lawyer friend, a scientist. In both cases, the question posed was: Is there a tendency for arbitrators, knowing that certain parties and law firms are repeat players and thus more likely to reappoint them, to skew decisionmaking in a self-interested way? And the answer in both cases, for the law professor and my friend, was, “Well, yes, there must be some level of bias. If parties are paying the arbitrator, how could there not be?”

Having considered it from the perspective of both an advocate, who represents clients in arbitration, and as an arbitrator called upon to decide business disputes, I disagree. To me, the suggestion of this reappointment bias is a bit like the mythological Yeti –the topic of lots of lore and supposed sightings, but ultimately, not supported by data or logic and unverified. It is most often raised by those who, like my friend and the law professor I mentioned, do not practice in the area.

I would suggest that this supposed bias is not present consciously, or even unconsciously, on the part of competent and qualified arbitrators.

Still, how can I say that with confidence? Is what we’re dealing really more like Snuffleupagus — it exists, and though we’re told about it repeatedly, we simply don’t or won’t believe? Since the concern is one that recurs regularly, it is worth spending some time thinking through.

First, let’s separate what we’re not talking about: isolated instances of some arbitrator bias in favor of one party, industry, or point of view based on some life experience or belief. Human nature being what it is, it is going to happen, just as some judges will have certain conscious or unconscious biases. As lawyers in arbitration, we don’t have anything like a regular voir dire process that let’s us ask more searching questions. Instead, arbitrators are required by our canons of ethics and the very stringent rules of institutions like the AAA, to disclose anything that, from the perspective of the parties, might reasonably be a concern as far as impartiality or independence.

That process is largely effective but not perfect. In one dispute involving the breakup of a Chinese professional services firm in which I assisted, the arbitrator made some comments during the arbitration about previous work he had done in China, and his view of the Chinese business culture. Those views struck me as highly relevant to certain issues in the case, and in my view, should have been disclosed. Still, that had to do with the individual arbitrator, and had we wanted to raise the issue with the administering organization, we could have.

The more important “Yeti” question has to do with the institution of arbitration: Whether generally, or in some specific domain like financial services, there is something inherent, something systemic, something unavoidable, that creates a leaning one way or another. The general theory is that some types of industry participants, or even law firms, participate so regularly that there is an incentive on the part of the arbitrators to produce favorable decisions.

Apart from participation and observation in many arbitrated matters, the reason I don’t consider this criticism valid has to do with the number of built-in safeguards that exist.

There is professional pride and responsibility — arbitrators as a group want to in fact be, and be regarded as, good at what they do and thus, fair and impartial. The canons of ethics that bind commercial arbitrators are in my experience taken extremely seriously. More broadly, the culture of our commercial arbitration world is one in which the professional values of neutrality are prized — and to the extent self-interest comes into play, it is a beneficent and collective self-interest that recognizes that, for arbitration to thrive, there has to be widespread confidence in the process. The IBA Guidelines on Conflicts of Interest, for example, reflect this concern in the international context.

Even if that were not true on the part of an individual arbitrator, it is true at the organizational level, reflected and incorporated into the rules. There are the disclosure requirements I mentioned, which permit vetting of potential conflicts and biases on the front end. To address the concern with any leaning toward companies who are regularly initiating arbitration by industry insider arbitrators, for example, FINRA in its rules includes the concept of “public arbitrators,” and requirements for how a mult-member panel is composed.

Lastly, should bias emerge as an issue, the parties can raise it. The arbitral institutions themselves, for example in Rule 18 of the AAA Commercial Rules on disqualification, typically permit the institution, whether on the objection of a party or on its own, to remove an arbitrator. If that challenge is not successful, bias is also one of the limited bases for challenging an arbitration award. If necessary and appropriate, a court is even empowered to grant some level of discovery to explore and unearth an issue of bias.

Overall then, this progression, from an ethos and culture of neutrality and disclosure, to rules of ethics requiring disclosure, to the collective and widespread desire to improve the arbitration process and promote confidence in its use, to institutional and post-award challenges, creates systemic forces that should inspire our confidence.

Does that mean we can expect fewer sightings of this particular Yeti? The criticism has had a long shelf-life and admittedly, the lack of institutional data of any sort has not helped. If we had a better body of data about results in a given class of cases, even at a high level — for example, in x number of wrongful termination cases, arbitrators from Institution Y found for the claimant 45% of the time — it would allow a better understanding of this issue. The confidentiality and privacy of arbitral proceedings, and the large number and dispersion of arbitral institutions, makes that a challenge. Tracking that data, and considering releasing it would be one enhancement I would consider as a means of promoting public confidence.

In the meantime, the best service we can provide as practitioners is try to share what we know and impart our own reasons for confidence in the arbitral process. Have a very happy and joyous rest of the holiday, and my best wishes for a prosperous and successful New Year!