Private or Public Adjudication? Procedure, Substance and Legitimacy

Abstract

This paper identifies the essential differences between public and private adjudication and their implications for legitimacy of dispute resolution institutions, the rule of law and facilitation of private ordering. Public adjudication comes at a significant cost for the taxpayers but helps secure a consistent body of case law, promotes public policy goals and allows third parties to know the rules of conduct in advance to prevent undesirable activities.

This paper shows that procedural rules in public and private adjudication (regardless of whether the procedure is called adjudication or arbitration) differ when it comes to the appointment of adjudicators, their professional background, and how long they serve. Public and private institutions consistently follow different approaches to transparency and confidentiality of proceedings, the application of primarily substantive rules or principles to resolve disagreements, and the extent to which decisions can be reviewed internally or externally.

By examining the procedural rules and practices of selected institutions, the paper asserts three main claims. First, the choice of public or private adjudication is likely to lead to different procedural outcomes, including the cost of the process and the duration. Second, legitimacy of any dispute resolution system must rest on both procedural and substantive aspects while in reality these two are often viewed in isolation. Finally, the paper argues that private and public adjudication institutions have much to learn from each other and proposes how institutions could learn from each other to become more efficient and strengthen their legitimacy.

Keywords: institutional design, choice of forum, protection of property rights, arbitration, courts and tribunals

JEL Classification: D63, K33, K40, K41