The Influence of Arbitrator Background and Representation on Arbitration Outcomes
Stephen J. Choi
New York University School of Law
Jill E. Fisch
Institute for Law and Economics, University of Pennsylvania Law School
Adam C. Pritchard
University of Michigan Law School
September 9, 2013
U of Michigan Public Law Research Paper No. 285
NYU Law and Economics Research Paper No. 12-17
U of Penn, Inst for Law & Econ Research Paper No. 12-35
We study the role of arbitrator background in securities arbitration. We find that arbitrator background is correlated with arbitration outcomes. Specifically, industry experience, prior experience as a regulator, and status as a professional arbitrator are correlated with statistically significant differences in arbitration awards. We find that the impact of these characteristics is affected by whether the arbitrator in question serves as the panel chair and by whether the parties to the arbitration are represented by counsel.
Our findings offer some preliminary insights into the debate over arbitrator bias. On the one hand, they suggest that the party selection process is relatively effective in screening for potential bias. FINRA has imposed increasingly more rigorous qualification requirements, specifically with respect to the independence of public arbitrators, but our study suggests that these requirements are unlikely to affect outcomes in most cases. On the other hand, party selection appears to be most effective when the parties are represented by counsel. Our findings highlight the importance of legal representation in the arbitration process.
Number of Pages in PDF File: 46
Date posted: July 16, 2012 ; Last revised: March 4, 2014
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