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Florida Tax Review

Abstract

This Article assesses a concrete proposal that may address some of the current backlash against international courts and tribunals: baseball arbitration, also known as final offer arbitration (FOA), where disputing parties each offer an answer to the dispute (their “final offer”) and the adjudicator’s task is strictly limited to picking one or the other answer (“hit or miss”). FOA preserves a crucial role for neutral, third-party adjudication but puts more responsibility on states to work out positive solutions themselves. When carefully calibrated, FOA can, at least for some types of disputes (especially numerical ones between two parties), enhance both efficiency (speed, reduced cost, and complexity) and accuracy (reasonable party offers versus tribunals splitting the difference between extreme demands). In addition, FOA should facilitate, rather than chill, settlement and long-term cooperation, and it puts states rather than tribunals in the driver’s seat. FOA can also reduce certain sovereignty costs (no giving reasons or setting precedential value for awards) and may unlock state consent to arbitration where traditionally it is lacking or heavily contested. Although FOA would seem to be particularly suited to settling international law disputes (where sovereignty costs and suspicion toward tribunals run high), surprisingly, FOA is virtually unknown to international lawyers. Ironically, it is also exactly where FOA is now being confirmed in treaty practice—to settle international tax disputes—that FOA shows its limits. In other settings where FOA is not currently practiced, such as certain trade or investment disputes, FOA has great potential. Neither “hit” nor “miss,” the choice should, in most cases, not be between opting into either reasoned arbitration or baseball arbitration. An optimal dispute resolution mechanism is likely a combination of both reasoned arbitration (on threshold issues) and FOA (on numerical questions).

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