ILAR Working Paper No. 25
74 Pages Posted: 25 Jan 2016 Last revised: 28 Sep 2016
Date Written: September 27, 2016
Three decades ago Owen Fiss published a landmark article - Against Settlement - which argued that the rising popularity of pretrial settlement and alternative dispute resolution was an unwelcome trend. It sacrificed the public benefits of complete and transparent adjudication for the private expedience of settling disputes. In this Article, we propose that international law is on the cusp of its very own settlement crisis.
As international governance is taking on increasingly more difficult and demanding topics, firms and governments have radically expanded the use of international courts to resolve complex legal disputes. In their effort to become more legitimate and effective, these bodies have adopted a wide array of reforms aimed at creating more systematic adherence to procedures as well as greater transparency - much as many national legal systems have undergone reform in response to Fiss-like concerns. Using a unique dataset on all investor-state arbitrations under the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), we show that those reforms are failing in part because parties have found ways to use pre-judgment or ‘out-of-court’ settlement to hide relevant information and halt inconvenient disputes. In fact, such settlements are the dominant means by which parties keep the outcomes of litigation secret.
We show, statistically, which factors are associated with secret settlement of investor-state disputes. We also show that those factors are closely related to the same factors that legal scholars have identified theoretically and empirically as important explanators of settlement in national courts. Scholars and practitioners of international law have tended to view dispute resolution as an unalloyed good even when it is done in private—exactly the bias Fiss warned about long ago. We argue that investor-state disputes increasingly entrain issues that are important for public policy and not merely matters that should be resolved in private. Reforms, such as stronger disclosure rules and supervised settlements, will be needed to stem the settlement crisis in international law and yield a more consistent, coherent, and legitimate corpus of foreign investment law.
Keywords: International Settlement, ICSID, Secrecy, International Adjudication, International Law
Suggested Citation: Suggested Citation
Hafner-Burton, Emilie Marie and Puig, Sergio and Victor, David G., Against International Settlement? The Social Cost of Secrecy in International Adjudication (September 27, 2016). 45 Yale Journal of International Law, 2016, Forthcoming; Arizona Legal Studies Discussion Paper No. 16-33; ILAR Working Paper No. 25. Available at SSRN: https://ssrn.com/abstract=2720706