Arbitration from a Law & Economics Perspective

Abstract

International arbitration and Law & Economics (L&E) have two things in common. They have both been on the rise in the last decades; and they are both hotly contested and discussed in all their facets. 15 years ago, it was lamented that L&E had neglected (international) arbitration to large extent, focusing instead on judicial contexts. This chapter analysis international arbitration from an L&E perspective, including subsequent developments by behavioral economics relevant to arbitration.

After providing a general institutional economics perspective on arbitration, we go into greater detail concerning some questions where L&E can contribute by focusing on disputants involved in arbitration, their incentives and decision-making, including among types of dispute settlement, arbitrator appointment, incentives for settlement and third-party funding. We also discuss the incentives and behavior of arbitrators, including their cognitive abilities.

Keywords: International Arbitration, Law & Economics, Behavioral Economics, arbitrator appointment, third party funding