Complying in the Shadow off the Award

Scholars and practitioners routinely report that the rate of voluntary compliance with international arbitral awards is 90%, meaning that once an award is rendered, it is honored without the involvement of any domestic court 90% of the time. This statistic is often cited as one of the primary benefits of international arbitration. But despite frequent citations to it, the 90% voluntary compliance rate appears to be based more on “armchair empiricism” than rigorous testing. In this Article, we challenge earlier efforts to test the 90% rate. In doing so, we make three important contributions regarding award compliance: one empirical, one conceptual, and one prescriptive. Empirically, we develop a new methodology using an original dataset to test the 90% voluntary compliance rate. Our dataset is based on direct sources (International Chamber of Commerce (ICC) arbitration awards and court cases), not surveys that ask respondents to estimate rates. From this data, we calculate a maximum voluntary compliance rate of 74.2% for U.S.-seated ICC arbitrations. This rate is substantial, but also substantially below the 90% often cited in the literature. Conceptually, our data raise questions about the conventional meaning of “voluntary compliance” as pertaining only to awards with no court action filed. Our data (and other sources) indicate that losing parties frequently satisfy awards after a court action is filed but before formal legal compulsion. Accordingly, we reconceptualize unilateral voluntary compliance as a process of coordinated agreement between the parties that occurs along a spectrum. Prescriptively, our reconceptualization of voluntary compliance suggests opportunities for parties to increase award satisfaction without court involvement. The familiar theory of negotiation, bargaining in the shadow of the law, posits that parties reach agreements based on outcomes that are anticipated if they do not settle. We posit that parties can increase “voluntary compliance” with awards by facilitating immediate post-award communication, and by including in their arbitration agreements provisions for post-award interest and for shifting post-award costs.