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Mitigating AI-based challenges in arbitration: delegation limits, transparency and AI clauses for terms of reference and procedural orders, with lessons from Lapaglia v Valve and EU AI Act risks

Published on: 23 January 2026

Published by a Law360 reporter

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Article summary

That urgency is visible both in evolving best practice—like adding AI clauses to terms of reference and procedural orders—as well as in the first tranche of objections claiming improper dependence on AI. A 9 December 2025 ruling by the US District Court for the Southern District of California, Lapaglia v Valve, 3:25-cv-00833, shows how even untested assertions that an arbitrator ‘ghostwrote’ an award with AI can bleed into collateral litigation, trigger due process worries, and pose reputational exposure. It is an early warning that clearly underscores the pressing need for explicit AI protocols, human‑in‑the‑loop safeguards, and transparent disclosures aligned with party expectations and applicable law. This article summarises Lapaglia v Valve and distils practical guidance from earlier, closely analogous practice on tribunal delegation and nascent generative AI recommendations, setting out a clear, forward‑looking framework for what tribunals and counsel should appropriately embed in their arbitration engagement rules now to reduce the risk of AI‑based challenges later.

Lapaglia v Valve

Lapaglia concerned a consumer arbitration administered by the American Arbitration Association, stemming from alleged antitrust breaches and warranty issues tied to a PC game purchase. Multiple consumer claims were combined. In January 2025, the sole arbitrator rejected the claims...

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