Are Arbitrators Political?

Abstract

We examine the role of arbitrator background for outcomes in investment arbitration. Both the investors and the host states expend a great deal of resources to influence the arbitration outcomes, raising an important question: is an arbitrator‟s decision biased toward his or her appointing party? We construct a unique personnel data set of all 350 arbitrators who have been appointed to adjudicate the more than 400 arbitration cases before the International Centre for the Settlement of Investment Disputes, and provide evidence on how the appointment of arbitrators and personal background influence arbitration outcomes. We find that arbitrators routinely appointed by the investor scrutinize the actions of host states more closely, as compared to arbitrators typically appointed by host states. Arbitrators are more lenient to host countries from their own legal family. Other aspects of the arbitrators experience and training, such as the development status of their country of origin and full-time private practice, also play an important role in arbitration decisions. The results are robust to the inclusion of industry fixed effects and country characteristics such development level and political institutions.