"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Monday, August 1, 2011

Monthly Roundup of SSRN Articles on Arbitration (July 2011)

This month is a Christopher R. Drahozal month. Drahozal, a prolific writer on arbitration, has posted several of his previous writings on SSRN. July 2011 has a couple of articles dealing with the recent US Supreme Court decision of AT & T Mobility v Concepcion. Also check out the empirical analysis by Drahozal on Business Courts and their Impact on Arbitration. With the Commercial Division of the High Courts Bill on the anvil,  it would be interesting to see the impact of Commercial Division of High Courts on arbitration. The article by Drahozal would help us answer the question. Students who see themselves as future experts on international arbitration might want to check out the autobiographical piece by Benjamin Davis and NaYoung Kim. Happy reading.
How Much Power Does a Labor Arbitrator Have? What the Latest Court Decisions Mean for Arbitrators, Employers, Unions and National Labor Policy?
Arbitration 2011: Varieties of the Arbitration Experience, Proceedings of the 64th Annual Meeting of the National Academy of Arbitrators , Buffalo Legal Studies Research Paper No. 2012 - 005
Lise Gelernter

Abstract:     
In 2009, in 14 Penn Plaza L.L.C. v. Pyett, the Supreme Court threw a curve at the collective bargaining world by holding (5-4) that unions could waive the rights of individual bargaining unit members to go to court to resolve employment-related statutory disputes and, instead, could require that such disputes be arbitrated. Pyett raised the specter of the Court taking the final step in merging the legal treatment of arbitration in the collective bargaining world with the treatment of non-labor arbitration, despite the clear points of tension between the basic public policy goal behind labor arbitration, which is to promote industrial peace, and the basic public policy goal behind all other kinds of contractual arbitration, which is to support and encourage private parties' freedom to contract for alternative ways in which to resolve contractual disputes.

This paper clarifies what the legal trends really are and what they mean for the 'big picture' in arbitration as well as for labor arbitrators and the parties who appear before them. After reviewing the history of labor and non-labor arbitration and outlining and comparing the core principles of each type of arbitration, I trace how recent arbitration jurisprudence has crossed the historical divide between labor and commercial arbitration and explore the problems that this creates for labor arbitration as an institution. The trend towards the convergence of labor and non-labor arbitration is not unstoppable, however, and I highlight the ways in which the courts have continued to view arbitration under collective bargaining agreements and non-labor contracts as dichotomous systems with different rules. I also discuss how to deal with the reality of the new hybrid commercial/labor arbitrator that Pyett appears to contemplate and address the ways in which employers, employees and unions can help to retain the procedural and collective bargaining benefits of labor arbitration.

The Possible Irony of AT&T versus Concepcion
Colin P. Marks
St. Mary's University School of Law

Abstract:     
Irony is defined as, “the use of words to express something other than and especially the opposite of the literal meaning.” Though many other definitions of the word exist, in light of the Supreme Court’s majority opinion in AT&T v. Concepcion, this definition comes to mind. Read broadly, the decision strikes a blow to the ability of consumers to bring suits against companies, both inside and outside of arbitration. But that was not the intent behind the federal act which the Court relied upon to justify its decision.

In 1925, when Congress passed the Federal Arbitration Act (FAA), its intended purpose was to promote enforcement of arbitration clauses. Congress did not sweep away all state-created defenses to contract; however; quite the contrary, Congress inserted a savings clause that arbitration provisions could be stricken just as any other contract could, “upon such grounds as exist at law or in equity.” It was upon this basis that the Ninth Circuit upheld a decision to strike down a clause in an agreement between AT&T and the Concepcions which required not only that the Concepcions submit all disputes to arbitration, but also forbade them from forming a class within that arbitration. On appeal to the Supreme Court, AT&T argued that the FAA preempted the unconscionably finding, despite the savings clause, as California law discriminated against arbitration clauses in violation of the FAA. Justice Scalia, writing for the majority, agreed that the unconscionably finding under California law was preempted by the FAA. In overruling the Ninth Circuit, he repeated the theme of the need to promote arbitration. Throughout the majority opinion, he introduced, as a corollary, the desire to promote expedited resolution of disputes.

The majority opinion is itself open to multiple interpretations, however. Read narrowly, the opinion may do nothing more than restate the already established principle that states cannot strike down arbitration clauses simply by virtue of their existence. But the decision can also be read much more broadly. A broad reading of the opinion suggests that any attempt by a court or state legislature to limit the method and means of arbitration in a way inconsistent with what Congress envisioned is preempted by the FAA. Thus, according to the majority opinion, Congress’ desire to promote bilateral arbitrations preempted the California courts’ rulings that clauses limiting the ability to form class actions are unconscionable.

And therein lies the irony.

If the opinion is read broadly, in striking down the defense of unconscionably to class actions waivers as inconsistent with the purposes of the FAA, the majority opinion, in effect, has denied a large swath of individuals the realistic opportunity to ever bring their claims, in arbitration or otherwise. In the aftermath of this decision, every corporation will be inserting class action waivers into their arbitration clauses, if they haven’t already, and may be emboldened to go much further. Thus, while the majority opinion cites, as the reason for its decision, to a broad policy of encouraging arbitration and the expeditious resolution of disputes, the effect will be quite the opposite.

This essay explores the possible dual readings of AT&T v. Concepcion in light of the FAA and its interpretation, including Supreme Court precedents. This essay concludes that, though there is support for interpreting the Concepcion decision narrowly, it is more likely that a broader interpretation was intended, but the metes and bounds of this opinion have yet to be explored. Nonetheless, under this broad interpretation, the effect on consumers will be to discourage individuals from seeking redress for their claims. The decision may actually encourage businesses to breach contractual obligations with impunity when the individual sums owed are too small to justify, in the mind of a reasonable consumer, the time and effort to seek a remedy.

Ducks and Decoys: Revisiting the Exit-Voice-Loyalty Framework in Assessing the Impact of a Workplace Dispute Resolution System
Northwestern Law & Econ Research Paper No. 11-21
Zev J. Eigen and Adam Seth Litwin
Northwestern University School of Law and affiliation not provided to SSRN , Johns Hopkins

Abstract:     
Until now, empirical research has been unable to reliably identify the impact of organizational dispute resolution systems (DRSs) on the workforce at large, in part because of the dearth of data tracking employee perceptions pre- and post- implementation. This study begins to fill this major gap by exploiting survey data from a single, geographically-expansive, US firm with well over 100,000 employees in over a thousand locations. The research design allows us to examine employment relations and human resource (HR) measures, namely, perceptions of justice, organizational commitment, and perceived legal compliance, in the same locations before and after the implementation of a typical, multistep DRS that begins with informal reporting to local managers and culminates with mandatory arbitration. Even after holding all time-constant, location-level variables in place, we find that introduction of the DRS is associated with elevated perceptions of informal procedural justice and interactive justice, but diminished perceptions of formal procedural justice. We also find no discernible effect on organizational commitment, but a significant boost to perceived legal compliance by the company, raising important questions about the trade-off between voice and exit and formal versus informal aspects of dispute resolution mechanisms.

In Whose Shoes? Third-Party Standing and 'Binding' Arbitration Clauses in Securities Fraud Receiverships
Journal of Law, Economics and Policy, Forthcoming
Jared Aaron Wilkerson
William & Mary Law School

Abstract:     
This article exposes a question that has recently opened a circuit split: in whose shoes do federal equity receivers stand when disentangling a Ponzi scheme or other securities fraud through litigation? This question has enormous implications for any investors, employees, and service providers of failed schemes who have arbitration agreements with the entities in receivership and are added as defendants by a receiver: if the supervising court allows the receiver to stand in place of creditors, with whom the defendants have no arbitration agreement, then the defendants will not be able to arbitrate their claims and will instead be subject to summary proceedings as a group — an outcome that ignores arbitration for efficiency’s sake. Notwithstanding efficiency, however, federal courts have generally answered the receiver standing question by holding that receivers stand exclusively in the receivership entities’ shoes. One recent diversion from this rule is the Fifth Circuit’s decision in Janvey v. Alguire, in which the court allowed a receiver to stand in third-party creditors’ shoes to avoid 331 binding arbitration clauses. This article argues, contrary to efficiency, that courts should follow both the Federal Arbitration Act and the Supreme Court’s prohibition against third-party standing by holding that receivers stand only in the place of receivership entities and so must arbitrate according to binding agreements made by those entities. In cases with a large number of arbitration agreement-wielding defendants, such as Alguire, this solution is terribly inefficient, but it is, at least until Congress or the Court says otherwise, the only solution that respects both Article III and the FAA.

Affecting Impartiality of Arbitrator by Subsequent Appointment in a Dispute Relating to the Same Contract: A Commentary on the Cairo Economic Court Decision of April 12, 2011 (6th Appeal Circuit, Case 98/2) (in Arabic)
Journal of Arab Arbitration, Vol. 16, pp. 166-181, June 2011
Nader M. Ibrahim
Arab Academy for Science, Technology & Maritime Transport - College of International Transport and Logistics

Abstract:     
Case-law in Egypt, though not binding on subsequent courts, for Egypt being Civil Law country, helps interpreting new texts of law, when tested in real-life situations. In this line, the commentator traces, the application of the concept of ‘impartiality’ of arbitrator in contrast with his ‘independence’, regulated under the Egyptian Arbitration Act 27 of 1994 (Art. 16(3)); this is under a recent decision, rendered by the Cairo Economic Court, on April 12, 2011 (6th Appeal Circuit, Case 98/2), in an international arbitration case, taking place under the auspices of Cairo Regional Center for International Commercial Arbitration (CRCICA) Rules 2007.

The commentator supports the conclusion of the decision, expected to be a leading authority on Egyptian arbitration law, when it stressed on the importance of impartiality and independence of the arbitrator, and its consequential effect on this arbitrator’s continuous responsibility to disclose any circumstance that may raise serious doubt on his satisfaction of such qualities. In this case the court declared the arbitrator missing such qualities, and therefore accepted challenging his jurisdiction, due to the fact that he was appointed in a second case relative to the same first contractual dispute, in a different personal scope; such circumstance was not revealed to either cases’ parties or panels.

The commentator however criticizes the court’s decision, for its mixture between the concepts of ‘impartiality’ and ‘independence’, since the circumstance, in the dispute, relates to the ‘state of mind’ of the arbitrator, leading to ‘impartiality’, therefore reference to ‘independence’ was neither needed nor correct. Also, under the case in dispute, the arbitrator, by not disclosing the fact of his joint appointment, fails to adhere to his duty of disclosure. However, since the case was that of his ‘impartiality’ in the first case, his unqualified acceptance of appointment in the second case was irrelevant for the first case and which was the substance of the court decision. According to the commentator, courts’ focus should have been on the arbitrator’s failure to report his second appointment to the parties and Panel of the first case.

The commentator also made a plea for the activation of the arbitrator challenging rules that could be available under the rules of arbitration centers in Egypt, as is the case of CRCICA, especially after its amendments in 2011, in attenuation of the restriction established by the Egyptian Supreme Constitutional Court of November 6, 1999 and in application of Egyptian Arbitration Act (Articles 6 and 25), otherwise arbitration industry in Egypt will lag behind modern international arbitration law and practice; benchmarking was made with the recent UNCITRAL Arbitration Rules 2010 and French arbitration Decree 2011.

Arbitration and Consumer Credit
University of Kansas School of Law Working Paper No. 2011-3
Christopher R. Drahozal and Peter B. Rutledge
University of Kansas School of Law and University of Georgia Law School , Catholic University of America (CUA) - Columbus School of Law

Abstract:     
This paper uses a newly available database of consumer credit card agreements to take the first, in-depth empirical look at why credit card issuers use arbitration clauses. Based on a sample of credit card agreements made available by 298 issuers under the Credit Card Accountability Responsibility and Disclosure Act of 2009, it finds that while most credit card loans outstanding (95.1%) are subject to cardholder agreements with arbitration clauses, the substantial majority of credit card issuers (247 of 298, or 82.9%) do not use arbitration clauses in their credit card agreements. The paper also finds that credit card issuers are more likely to use arbitration clauses when they (1) specialize in making credit card loans; (2) make riskier credit card loans; and (3) have a larger credit card portfolio. Conversely, issuers are less likely to use arbitration clauses when they are (1) mutually owned (i.e., credit unions) rather than shareholder-owned (i.e., banks); and (2) are located in states in which class arbitration waivers are unenforceable. These empirical findings have potentially important implications for a number of timely policy questions, such as: what sorts of options are available to consumers who wish to obtain a credit card that is not subject to an arbitration clause; how increased regulation of arbitration (whether by Congress or by the Consumer Financial Protection Bureau) might affect the market for consumer credit; and how businesses are likely to respond to the Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion.

Investment and Sustainable Development: Developing a New Conceptual Framework
U. of St. Gallen Law & Economics Working Paper No. 2011-10
Anne van Aaken and Tobias A. Lehmann
University of St. Gallen - Law Department and affiliation not provided to SSRN

Abstract:     
International Investment Law (IIL), like international trade law, has an economic rationale as its background. Nevertheless, this economic rationale and the empirical insights into assumed causal links play a much smaller role than in trade law. Whereas in trade law economic insights have found entry into law application, this is true to a much smaller extent in IIL. Furthermore, the political economy rationale has been explored in trade law, but not in IIL. This article aims at filling this gap by surveying the economic insights into the link between foreign investment and sustainable development and suggesting adequate interpretative arguments and places (jurisdictional phase v. merits phase) in investment arbitration. Coupling IIL and economic insights might not only help to ground IIL firmly in the goals it pursues, but also change treaty making and treaty interpretation by putting them on an evidence basis.

The Myth and Reality of 'Shari’a Courts' in Canada: A Delayed Opportunity for the Indigenization of Islamic Legal Rulings
University of St. Thomas Law Journal, Forthcoming, Valparaiso University Legal Studies Research Paper No. 11-09
Faisal Kutty
Valparaiso University School of Law Valparaiso University School of Law

Abstract:     
The Ontario government’s passage of the Family Statute Law Amendment Act, 2005 ostensibly precluding the enforcement of faith-based decisions issued by arbitration panels pursuant to the Arbitrations Act, 1991, in the area of family law, brought to the fore a debate that has been raging in liberal democracies for some time.

Those opposed to allowing the use of religious principles in resolving family disputes using the Arbitrations Act, 1991, raised some legitimate concerns about gender rights within religious communities. They also questioned the role of religion in secular society and opposed what they saw as privatization of the legal system. Opponents contended that religious groups should be able to govern their lives according to their conscience within the parameters of law if the constitutional right to freedom of religion and association is to have any real value. Consenting and informed adults, they argued, must be able to make religious choices even if others do not believe these are “correct” choices.

The issues, of course, transcend dispute resolution and tug at fundamental tensions surrounding multiculturalism and national identity, the limits of accommodation and legal pluralism within a liberal democracy and the separation of church and state. I argue that Ontario lost a timely opportunity to devise a way to balance these competing rights and interests in a manner that respects all parties and protects the vulnerable.

The controversy was a prime case to examine whether Islamic law and liberal democracy can co-exist within a liberal constitutional framework. Moreover, I also argue that Ontario also delayed an opportunity to indigenize or Canadianize Islamic law rulings in a manner that would help in the integration process of its Muslim citizens.

The Family, the Market, and ADR
Journal of Dispute Resolution, Forthcoming
Amy J. Cohen
Ohio State University Moritz College
of Law

Abstract:     
This Article begins with the observation that in alternative dispute resolution (ADR) practice and scholarship, the family recurs as a model for thinking about other kinds of relationships, even in spheres that are commonly thought to be purely commercial or transactional in nature. This conflation of family/market paradigms is intriguing because, as Janet Halley has shown, for much of the nineteenth and twentieth centuries, American legal thought has virtually required “the division of intellectual labor” between the law of the family, on the one hand, and the law of the market, on the other hand. The Article thus explores the unexpected connections between models of the family and the market in contemporary ADR and compares them to earlier twentieth-century dispute processing reforms. Whereas Progressive era dispute processing reformers distinguished between the problems of the family (described as public and social) and the problems of the market (described as private and individual), contemporary ADR proponents describe problems in both domains as intensively interpersonal - and thus as both private and social, albeit social in a different way. Progressive era dispute processing reformers configured “the social” as a set of preexisting, collective policy concerns that encompassed the family and demanded a specific set of public interventions from the state. By contrast, contemporary ADR reformers have reconfigured “the social” into a set of affective, mutual relationships that individuals can and should build themselves - in the market, as much as in the home. In this sense, the Article argues, contemporary ADR has much in common with popular theories of societal self-regulation that weave together economic self-interest with more open-ended ideas of interdependence, affect, altruism, social capital, and trust. Using modern ADR as a case in point, this Article thus invites readers critically to consider the complex politics and potential distributional effects of contemporary governance regimes that aspire to integrate efficiency and relationality, individualism and altruism, economics and intimacy, the market and the family.

A Game Theoretic Model for Determining When Baseball Arbitration Creates the Proper Incentives for Litigants
Aditya (Adi) Habbu and Paul V. Buonaguro
Fordham University - School of Law and Fordham University School of Law

Abstract:     
This paper creates a game theoretic model to determine how pendulum arbitration or baseball arbitration impacts the incentives of litigants. Pendulum arbitration is when both parties submit competing proposals and the arbitrator chooses only one of the bids, in its entirety, to be binding on both parties. Pendulum arbitration is most famous for its use in salary disputes between baseball players and their team when both parties can’t agree on contract terms. Many believe that pendulum arbitration incentivizes both parties to submit more “conservative” bids and, thus, creates the proper incentives for parties in a dispute. Our game theoretic model explains that this is not always the case. Whether or not pendulum arbitration will create the proper incentives for litigants is largely based on other factors such as the arbitrator’s error rate and the ability of the litigants to “lever up.” Using this model we are able to explain the success of pendulum arbitration in labor disputes and baseball. We can also use our model to explain why pendulum arbitration would not work in corporate valuation situations. Finally, we use our model to propose a few disputes such as marital asset distribution and consumer/business disputes which, according to our model, would be ideal for pendulum arbitration.

An Empirical Study of Pre-Dispute Binding Arbitration Agreements in Nursing Home Admission Contracts
Lisa Tripp
Atlanta's John Marshall Law School
Abstract:
    
The use of pre-dispute binding arbitration agreements has been commonplace in variety of commercial contexts, such as brokerage agreements, insurance contracts and credit card contracts for many years. Health care had historically been one of the fields that had not embraced pre-dispute binding arbitration agreements. The reluctance to use pre-dispute binding arbitration agreements appears to be changing in at least one sector of the health care field. An examination of admission contracts used by North Carolina nursing homes and telephone survey of North Carolina nursing homes revealed that 43 percent of nursing homes now incorporate pre-dispute binding arbitration provisions into their admission contracts. All of the major nursing home chains operating in North Carolina use pre-dispute binding arbitration agreements in at least some of their facilities, while smaller operators use them sporadically.

The terms of these agreements vary considerably. The large chains tend to incorporate some of the provisions in the model arbitration agreement drafted by the American Health Care Association (AHCA), the nursing home industry trade organization. AHCA’s model language includes a 30-day rescission period and language that acceptance of the arbitration provision is not a precondition to admission. Some of the large chain facilities also include a provision that the arbitration will be conducted at the facility if the parties can’t agree on another location. Some of the smaller operators include provisions that limit damages and discovery, prohibit punitive damages, and expressly condition entry to the facility on signing the pre-dispute arbitration agreement.

The implications of the rising use of pre-dispute binding arbitration clauses may be significant. There are many counties in North Carolina where 50-100 percent of all of the nursing home operators use these agreements. With so many operators selecting pre-dispute binding arbitration, this may have the effect of forcing some vulnerable elders out of the public court system with all of its safeguards, and into private arbitration without those protections.

Although some of these agreements contain language stating that the agreement is voluntary or may rescinded, this language, by itself, provides no guaranteed protection that facilities are enforcing the contracts as written. This study found incidents where nursing homes were requiring new residents to sign pre-dispute binding arbitration agreements as a condition of admission, even though the language in those facilities’ agreements stated that signing the agreement was voluntary. This study also found evidence of a significant amount of confusion among staff of nursing homes using these agreements about whether their facilities were using them at all and what arbitration agreements really meant.

Contracting Out of National Law: An Empirical Look at the New Law Merchant
Notre Dame Law Review, Vol. 80, No. 2, 2005
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
A hotly debated topic in the international arbitration literature is the ability of parties to contract to have their dispute resolved without consideration of any national law whatsoever - on the basis of “general principles of international trade law,” the “lex mercatoria,” the “new law merchant,” “transnational commercial law,” or the like. An extensive scholarly literature explores the theory of transnational commercial law and seeks to derive its governing principles from international arbitration awards and other sources. Arbitration rules permit parties to contract for application of transnational law to resolve their disputes, and national courts have enforced awards made by arbitrators on the basis of transnational law.

Implicit in the views of both supporters and critics of the new law merchant is an empirical assumption: that a significant number of parties contract for application of transnational law in lieu of national law in their international commercial contracts. This Article examines that assumption empirically and finds little support for it. Few parties contract out of national law (whether for better or for worse) by agreeing to have their dispute resolved using principles of transnational law. Even when parties do rely on transnational law, they often do so to supplement rather than displace national law. Procedural reasons, rather than substantive reasons, seem to predominate when parties to international contracts choose between arbitration and litigation.

Investor-State Arbitration Revised: A Critical Analysis of the Revisions and Proposed Reforms to the ICSID and UNCITRAL Arbitration Rules
NAFTA: Law and Business Review of the Americas, Vol. 13, p. 885, 2007
Andrew P. Tuck
affiliation not provided to SSRN

Abstract:     
Considers the history and purpose of ICSID and the UNCITRAL Arbitration rules. Examines ICSID's limited jurisdictional scope using regional developments in Latin America as a case study.

Arbitration and Consumer Credit
University of Kansas School of Law Working Paper No. 2011-3
Christopher R. Drahozal and Peter B. Rutledge
University of Kansas School of Law and University of Georgia Law School , Catholic University of America (CUA) - Columbus School of Law

Abstract:     
This paper uses a newly available database of consumer credit card agreements to take the first, in-depth empirical look at why credit card issuers use arbitration clauses. Based on a sample of credit card agreements made available by 298 issuers under the Credit Card Accountability Responsibility and Disclosure Act of 2009, it finds that while most credit card loans outstanding (95.1%) are subject to cardholder agreements with arbitration clauses, the substantial majority of credit card issuers (247 of 298, or 82.9%) do not use arbitration clauses in their credit card agreements. The paper also finds that credit card issuers are more likely to use arbitration clauses when they (1) specialize in making credit card loans; (2) make riskier credit card loans; and (3) have a larger credit card portfolio. Conversely, issuers are less likely to use arbitration clauses when they are (1) mutually owned (i.e., credit unions) rather than shareholder-owned (i.e., banks); and (2) are located in states in which class arbitration waivers are unenforceable. These empirical findings have potentially important implications for a number of timely policy questions, such as: what sorts of options are available to consumers who wish to obtain a credit card that is not subject to an arbitration clause; how increased regulation of arbitration (whether by Congress or by the Consumer Financial Protection Bureau) might affect the market for consumer credit; and how businesses are likely to respond to the Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion.
Abstract:     
This paper discusses the provisions on arbitration of the European Commission’s December 2010 draft review of Reg. (EC) 44/2001 against the backdrop of the earlier proposals on the inclusion of arbitration within the scope of the Regulation. The analysis focuses principally on the functioning and implications of the lis pendens mechanism laid down by Article 29(4) of the draft, pointing out the analogy between the role conferred on the law and forum of the seat of the arbitration and the mechanism of home country control that is at the heart of European Union law. The article also analyzes the reasons and positive consequences of the Commissions’ restraint in not extending the scope of the Regulation to other arbitration - related issues, especially the circulation of judgments dealing with the validity of arbitration agreements and awards. The article’s conclusion is that the Commission proposal is well balanced. Whilst it does not solve all problems relating to conflicts between court proceedings and arbitration within the EU, it addresses the most pressing one, that of concurrent court and arbitration proceedings. Moreover, it does so in terms which, in contrast to the use of anti-suit injunctions in aid of arbitration, are reconcilable with the basic tenets of European Union law. Its approach is indisputably favorable to the development of arbitration and does not jeopardize the acquis in terms of arbitration law of the more advanced member States.

Consumer Arbitration in the European Union and the United States
North Carolina Journal of International Law and Commercial Regulation, Vol. 28, p. 357, 2003
Christopher R. Drahozal and Raymond Friel
University of Kansas School of Law and affiliation not provided to SSRN

Abstract:     
This article examines the differing legal treatment of pre-dispute consumer arbitration agreements in the European Union and the United States. Under the E.U. Directive on Unfair Terms in Consumer Contracts (particularly as implemented in the United Kingdom), most such agreements are invalid. In the United States by contrast, most pre-dispute arbitration agreements are valid, even in consumer contracts, unless some other provision in the arbitration agreement renders it unenforceable. In our view, the differing legal treatment likely stems from differing legal traditions between the European Union and the United States with respect to consumer protection legislation, and key differences between the legal systems in the European Union and in the United States. More specifically, in European legal traditions, consumer interests generally are more highly protected than in the United States (particularly given that the coverage of consumer arbitration by the Federal Arbitration Act evolved through court decision rather than legislative action). Meanwhile, the greater availability of jury trials, class actions, and punitive damages in the United States gives American businesses more incentive to oppose regulation of pre-dispute consumer arbitration agreements. However, increased demand for regulation in the United States, from consumer groups and trial lawyers, may result in a greater convergence of European and American regulation in the future.

Contracting Around Hall Street
Lewis & Clark Law Review, Vol. 14, No. 3, 2010
Christopher R. Drahozal
University of Kansas School of Law
Abstract:
    
This Article examines the extent to which expanded court review of arbitration awards remains available after the Supreme Court’s decision in Hall Street Associates, L.L.C. v. Mattel, Inc. - that is, whether parties can contract around Hall Street. It finds only a limited likelihood that expanded-review provisions are enforceable after Hall Street in federal court, but a greater likelihood in state court (assuming the state arbitration law permits parties to contract for expanded review). First, contract provisions limiting the arbitrators’ authority to make legal errors should permit expanded review under the FAA (in both federal court and state court), but courts since Hall Street have not been receptive to the argument. Second, under a narrow interpretation of the Supreme Court’s decision in Volt, parties are unlikely to be able to contract out of the FAA altogether. As a result, confirmation of an award in federal court under the FAA likely would preclude a court from relying on an expanded-review provision authorized by state law to vacate the award. Third, whether expanded review is available in state court depends on (1) whether state arbitration law authorizes expanded review; and (2) the scope of FAA preemption. Under at least some theories of FAA preemption, state laws authorizing expanded review would not be preempted by the FAA in state court.

Abstract:     
Under both federal and state arbitration law, arbitrators are generally understood to have the authority to rule on their own jurisdiction in the first instance, including ruling on whether the parties have agreed to arbitrate. A party that asserts it has not agreed to arbitrate is entitled to have a court adjudicate that issue (assuming the party has not waived it), either before an award is made (on a motion to enjoin the arbitration) or after (on a motion to vacate the award). In MBNA America Bank N.A. v. Credit, however, the Kansas Supreme Court asserted that the arbitration proceeding must stop once a party argues to the arbitrator that it has not agreed to arbitrate - i.e., that the arbitrators lack the authority to rule on their own jurisdiction. If followed, this assertion would put Kansas out of step with well-accepted principles of American arbitration law. The assertion was dictum in Credit and should be rejected in future cases.

Treaty Arbitration from a Japanese Perspective
Bulletin for International Fiscal Documentation, Vol. 58, No.1, pp.14-16, 2004
Yoshihiro Masui
The University of Tokyo, Graduate Schools for Law and Politics

Abstract:     
This article argues that treaty arbitration may be permissible under Japanese Consitution if it satisfies certain conditions.

A Humanist Vision of International Commercial Arbitration
Proceedings of the Actes de Colloque Conference, Black Law Student Association, March 10, 2011
Benjamin Davis and NaYoung Kim
University of Toledo College of Law and affiliation not provided to SSRN

Abstract:     
This article looks back on 30 years in international commercial arbitration. The article discusses key persons who influenced me. I discuss power and values in international commercial arbitration and the role of neutral dispute resolution. I advise law students and professionals about making a career on the international plane, in particular if one is from an underrepresented group in that arena. The advice may be relevant to all types of students seeking to make a career path on the international plane. The advice is based on advice received that has stood the test of time.

Arbitral Interim Measures and the Right to Be Heard
CZECH (& CENTRAL EUROPEAN) YEARBOOK OF ARBITRATION, Vol. 1, pp. 71-86, A. Belohlavek & N. Rozehnalova, eds., JurisPublishing, Inc., 2011
Matija Damjan
Institute for Comparative Law at the Faculty of Law in Ljubljana

Abstract:     
If arbitration is to be equally efficient as judicial mechanisms of dispute resolution, it must provide an equivalent system of immediate interim protection of parties’ rights and property until the decision on the merits of the case. Therefore, modern arbitration legislations recognise the right of arbitral tribunals to issue interim measures and provide the possibility of enforcement of such measures. A delicate balance needs to be reached between the need for swift action on one hand and the protection of constitutionally guaranteed procedural rights (such as the right to be heard) on the other hand. The article discusses the problems that arise in this sphere, taking into account the latest changes to the UNCITRAL Model Law on Arbitration and their implementation in Slovenian law.

Arbitration Costs and Forum Accessibility: Empirical Evidence
University of Michigan Journal of Law Reform, Vol. 41, No. 4, 2008
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
Is arbitration cheaper than litigation, or more expensive? Does arbitration enhance access to justice for consumers and employees, or does it prevent them from vindicating their legal rights? Subject to the standard caveats, the available empirical evidence suggests the following tentative conclusions on those two questions. First, the upfront costs of arbitration will in many cases be higher than, and at best be the same as, the upfront costs in litigation. Whether arbitration is less costly than litigation thus depends on how attorneys’ fees and other costs compare, and the evidence here is inconclusive. Second, for employees and consumers with small and mid-sized claims, the availability of low-cost arbitration makes arbitration an accessible forum, and possibly a more accessible forum than litigation. But for consumers with large claims, and for employees not able to use low-cost arbitration, the evidence is less clear. For such claimants, administrative fees and arbitrators’ fees likely will exceed court filing fees. The question is whether other cost savings in arbitration offset the higher upfront costs. Moreover, even if arbitration is more affordable on net, it still may not be a more accessible forum than litigation. Accessibility depends not only on dispute resolution costs, but also on expected recoveries. Third, whether arbitration is an accessible forum for claims that can only be brought on a class basis remains uncertain. The extent of such claims, as well as whether class arbitration is a suitable substitute for class actions, needs further research.

Private Ordering and International Commercial Arbitration
Penn State Law Review, Vol. 113, No. 4, 2009
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
With its focus on private legal systems, the private ordering literature sets up a seeming dichotomy between public court adjudication of disputes, applying publicly created laws, and private arbitral adjudication of disputes, applying privately developed rules. Trade association arbitrations fit neatly into the latter category; public courts fit almost as neatly into the former. But while the dichotomy highlights the cases of most interest in the private ordering literature, it is too simple. It gives the appearance of an all-or-nothing choice - all public dispute resolution or all private dispute resolution - when in fact hybrid choices are common.

This article seeks to add to the private ordering literature in two ways. First, it argues that international commercial arbitration, while sometimes cited as an example of private ordering, is in fact - a hybrid case - with important elements of public involvement supplementing the use of a private decision maker. Too often, international arbitration is grouped with trade association arbitration in ways that blur the important distinctions between the two. Not all arbitration is alike, and not all parties that agree to arbitrate opt out of the legal system altogether.

Second, this article examines attributes of international transactions that help explain party choice among these different mechanisms of resolving disputes. It considers four attributes: (1) distance - geographic, as well as cultural and political - between the parties; (2) the complexity of the good or service; (3) the clarity of the applicable national law; and (4) the importance of speedy resolution of disputes. Trade association arbitration is most likely to be used for transactions in simple goods, although less likely in international transactions involving greater distances than domestic transactions. International commercial arbitration is the more likely choice for international transactions, except in cases in which the applicable law is clear or emergency relief is likely to be needed. In such cases, parties are more likely to choose litigation in national courts. The attributes thus prove useful in explaining differences in the choice of enforcement mechanism across various types of international transactions.

Reflections on Arbitration Proceedings: A Chance for Dispute Resolution Missed Forever?
CYARB - CZECH (& CENTRAL EUROPEAN) YEARBOOK OF ARBITRATION - THE RELATIONSHIP BETWEEN CONSTITUTIONAL VALUES, HUMAN RIGHTS, AND ARBITRATION, Juris Publishing, Inc., 2011
Regina Palkova and Jozef Suchoza
affiliation not provided to SSRN and affiliation not provided to SSRN

Abstract:     
Arbitration practice has been evolving over time, in line with the historical and socio-political backdrop (the latter being an important aspect of commerce and trade in many legal systems), up to a point at which it is common practice for contractual parties to “promise” each other that such disputes as may arise from their business relationship will not be resolved in court proceedings, but be brought before a special body – a permanent arbitration court or an ad hoc arbitrator. Th e institution of arbitration proceedings – as a part of a larger dispute resolution system and an alternative to judicial proceedings in general courts – confronts potential participants in arbitration with a dilemma: which of the dispute resolutions methods on off er should they use?

It is not easy to resolve the above-described dilemma of having to choose in favour of one method of dispute resolution or the other, nor is it easy to come to a final conclusion as to what direction should generally be taken by parties for resolving their disputes, as to what form of dispute resolution could be recommended as “more ideal” – that is, whether to take, at those metaphorical crossroads, the classic (and in some ways safer) route of court proceedings or to venture down a new “turning in the road” and take the risk of experimental alternative dispute resolution.

Buckeye Check Cashing and the Separability Doctrine
Yearbook on Arbitration and Mediation, Vol. 1, p. 55, 2009
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
In Buckeye Check Cashing, Inc. v. Cardegna, the Supreme Court held that arbitrators, not courts, are to decide whether a contract that includes an arbitration clause is illegal as usurious; and that the separability doctrine applies in state court as well as federal court. This article examines various implications of Buckeye, which can be summarized as follows: (1) Buckeye was one of a series of class actions filed in Florida challenging as usurious the fees charged on payday loans. Despite the fact that most payday loan contracts included arbitration clauses and most arbitration clauses included class arbitration waivers, the plaintiffs were able to obtain a court adjudication of the usury issue and class relief for most individuals (albeit for many in arbitration instead of in court). (2) After Buckeye, the question of whether a court can resolve a challenge to the main contract (which includes an arbitration clause) likely depends on whether the challenge is one that undercuts a party's assent to the main contract. If so, the defense - such as lack of assent or fraud in the execution - is one that courts can decide. If not, the defense - such as fraudulent inducement or illegality - is for the arbitrator. The defenses of lack of capacity and duress sometimes, but not always, undercut a party's assent to the main contract. (3) Buckeye’s holding that the FAA’s separability doctrine applies in state court not surprisingly has triggered responses from state courts seeking to avoid the decision and by Congress seeking to overrule it. The Supreme Court has already resolved one post-Buckeye case and may well face others. Congress’s attempt in the Arbitration Fairness Act to overrule the separability doctrine should be rejected. (4) Other contract clauses - in particular, forum-selection clauses, choice of-law clauses, and jury-trial waivers - raise separability issues similar to those raised by arbitration clauses. Courts have regularly applied the separability doctrine to those types of contract clauses, supporting the suggestion by some commentators that separability can be derived from the expectations of the parties to the contracts, rather than just from the text of the Federal Arbitration Act.

Business Courts and the Future of Arbitration
Cardozo Journal of Conflict Resolution, Vol. 10, p. 491, 2009
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
The future of arbitration depends not only on arbitration but also on its competitors—the public courts, including business courts. The creation of business courts incorporates some of the preferred characteristics of arbitration (in particular, expert decision making and expedited case management) into litigation, making litigation a more effective competitor to arbitration. Litigation in business courts has some advantages over arbitration (such as lower upfront costs), while arbitration retains some of its advantages over litigation (such as choice of decision maker and confidentiality).

Given this structural comparison, one would expect on the margin for business courts to make litigation a more attractive forum for resolving business disputes than arbitration. But the limited empirical evidence available does not show any significant move away from arbitration to business courts as yet. Certainly the analysis here does not resolve as an empirical matter the potential effect of business courts on the future of arbitration. Rather, my hope is to begin the discussion, and to prompt others to examine the issue more systematically.

Contracting Around RUAA: Default Rules, Mandatory Rules, and Judicial Review of Arbitral Awards
Pepperdine Dispute Resolution Law Journal, Vol. 3, No. 3, p. 419, 2003
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
By specifying that its provisions generally are default rules and listing particular exceptions, the Revised Uniform Arbitration Act (“RUAA”) provides much needed certainty and avoids unnecessary litigation, at least compared to the Federal Arbitration Act, which does not always identify which of its provisions are default rules. In one important respect, however, RUAA jettisons that valuable certainty. The RUAA drafters left open (or at least sought to leave open) the question whether parties can contract to expand the grounds for judicial review of arbitration awards beyond those set out in the statute. In other words, the drafters purported not to resolve the extent to which judicial review standards are default rules under RUAA. This article argues that parties may be able to obtain court review of arbitral errors of law under RUAA by defining legal errors as beyond the scope of the arbitrators’ authority. A court then can vacate an award on the basis of legal error under the statutory ground that the arbitrators exceeded their authority. If so, then the RUAA standards for judicial review are default rules (at least in part), and parties can contract around those standards even though RUAA does not clearly so provide.

Regulatory Competition and the Location of International Arbitration Proceedings
International Review of Law and Economics, Vol. 24, No. 3, 2004
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
This article examines the effect of regulatory competition in international arbitration law on the parties’ choice of the place of arbitration – in other words, the extent to which countries that revise their arbitration statutes succeed in attracting parties to hold more arbitration proceedings in the country. Using a panel of countries that enacted new or revised arbitration statutes from 1994 through 1999, the article finds that a country which enacts a new or revised arbitration statute experiences a statistically significant increase in the number of ICC arbitration proceedings held by party agreement in the country. Because the published data are only for ICC arbitrations and not arbitrations administered by other institutions (or ad hoc arbitration proceedings), the estimates here likely reflect the minimum increase that results. In absolute numbers, the estimated increase is small, with roughly two additional arbitrations in the full sample and from eight to ten more arbitrations in major arbitration countries. That is not surprising, given the relatively small number of ICC arbitration proceedings held worldwide in any given year. In percentage terms, by comparison, the estimated effect is greater, ranging from 18.39 percent for the full sample to 26.95 percent for the major arbitration countries. Because of the small number of arbitrations involved, the estimated economic benefit to arbitral sites from new or revised arbitration statutes is substantially smaller than some have suggested, although data limitations make translating the increase in the number of arbitrations into monetary terms inexact.

The Finality Question: Appellate Rights and Review of Arbitral Awards in the Americas
NAFTA: Law and Business Review of the Americas, Vol. 14, p. 569, 2008
Andrew P. Tuck
affiliation not provided to SSRN

Abstract:     
Examines the rights of appeal and review of arbitral awards in the United States, Mexico, and Chile.

The Making of the Award: Comments on Case Law Developments Under the UNCITRAL Model Law
International Arbitration Law Review,Vol. 8, p. 183, 2005
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
This article discusses selected cases interpreting and applying Arts 28-33 of the UNCITRAL Model Law on International Commercial Arbitration, which deal with (in the words of the UNCITRAL Secretariat) the ‘‘not unimportant’’ topic of the making of the award. It addresses four questions: (1) When can the tribunal resolve disputes on the basis of equity and fairness (ex aequo et bono or amiable compositeur)? (2) Can the parties agree to have the tribunal rely on the lex mercatoria as the basis for its decision? (3) Under what circumstances can the tribunal revisit its prior rulings (that is, when does the tribunal’s authority terminate)? (4) To what extent can courts review a tribunal’s ruling that it lacks jurisdiction over the dispute? In addition, the article offers some brief comments on the limited role the Model Law has played in American arbitration law (and hence the limited contribution American case law has made in interpreting the Model Law).

Busting Arbitration Myths
Kansas Law Review, Vol. 56, No. 3, 2008
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
This paper presents an arbitration version of the MythBusters television show. It employs a MythBusters-type approach - subjecting commonly held views to empirical testing - to examine several commonly held myths about arbitration. It finds: (1) the myth that the number of arbitration proceedings held in a country increases after it enacts a new arbitration statute is confirmed, although to nowhere near the extent predicted by some supporters of new arbitration laws; (2) the myth that parties commonly agree to have their disputes resolved under the new Law Merchant in lieu of national law is busted; and (3) the myth that arbitrators "split the baby" - i.e., make compromise awards - is busted as well.

Federal Arbitration Act Preemption
Indiana Law Journal, Vol. 79, No. 2, p. 393, 2004
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
Taking as given the existing Supreme Court case law, this Article seeks to develop an overall framework for analyzing when the Federal Arbitration Act preempts state law. The framework is not conclusive but instead highlights areas of uncertainty for future legal development. Some fundamental principles of FAA preemption are resolved: State laws that single out arbitration are preempted when they invalidate arbitration agreements; general contract law defenses, even when applied to invalidate arbitration agreements, ordinarily are not preempted; and parties can incorporate by reference state arbitration laws into their contracts and avoid FAA preemption. As the analytical framework developed here illustrates, however, a number of issues remain unsettled. The lower courts are divided on whether the FAA preempts state laws that apply to arbitration agreements and to some other contract clauses, but not to contracts generally. Questions remain to be answered as to when general contract law defenses, while ordinarily saved from preemption, may nonetheless single out arbitration agreements and be preempted after all. Finally, the Supreme Court still has to decide how to deal with “second generation” FAA preemption cases - cases involving state laws that regulate the arbitration process rather than invalidating the parties’ arbitration agreement. The Article identifies and categorizes five alternative theories of FAA preemption and examines how selected second generation preemption cases likely would be decided under each of those theories.

Franchising, Arbitration, and the Future of the Class Action
Entrepreneurial Business Law Journal, Vol. 3, p. 275, 2009
Christopher R. Drahozal
University of Kansas School of Law

Abstract:     
In this article, we consider whether arbitration clauses are likely to result in the extinction of the class action. In our view, the answer is no. We reach that conclusion for two main reasons. First, at least some parties that draft standard form contracts prefer class actions to class arbitrations. This preference is illustrated by the growing use of nonseverability provisions, which provide that if the class arbitration waiver is held unenforceable the entire arbitration clause should be stricken. As a result, the recent court decisions invalidating class arbitration waivers will result in the invalidation of arbitration clauses as well, so that the cases will proceed as putative class actions in court. Second, and more fundamentally, arbitration clauses bundle a variety of characteristics - including but not limited to acting as a class action waiver - into a single means of dispute resolution. Not all drafting parties will agree to arbitration, even if they might prefer individual arbitrations to class actions. The empirical evidence is consistent with this view, as the use of pre-dispute arbitration clauses varies widely in consumer, employment, and franchise contracts. So long as not all contracts include arbitration clauses, and we see no evidence suggesting that they will, class actions will not become extinct.

The Privatization of Military and Security Services and the Limits of Contract: Lessons from the US
EUI Working Papers MWP 2010/31 - Max Weber Programme
Valentina Calderai
University of Pisa, Faculty of Economics

Abstract:     
A consistent body of literature has focused in recent years on the potentialities for market mechanisms to improve the enforcement of international human rights law against the breaches committed by private military and security companies (“PMSCs”) employed by sovereign entities. Yet, of all the avenues known by the law of contract to increase the degree of compliance with international law, none is ever included in the contracts between PMSCs and their major sovereign customers.

This paper gives an account of this reluctancy on the part of the States, based on a survey of the contracts concluded by the U.S. administration during the first stage of the Iraq occupation and the comparative analysis of public and private organizations. In contrast to domestic outsourcing, the provision of military force takes place in conditions of high bilateral dependency, social embeddedness, specific contractual hazards, that taken together deter from traditional methods of contract enforcement (litigation and arbitration) and emphasize mechanisms based on reputational mechanisms and hierarchy.

These limitations should be attentively considered in shaping the role of contract standardization into a comprehensive regulatory strategy at national and international level.

Holding Counsel to Account in International Arbitration
Leiden Journal of International Law, Vol. 24, Issue 2, pp. 491-512, 2011
Sam McMullan
affiliation not provided to SSRN

Abstract:     
Counsel are regulated the world over in their dealings with a court of law through the enforcement of ethical duties that are owed by them. With the increased prevalence of arbitration in resolving disputes internationally, the question then arises: how are counsel kept in check when appearing before an arbitral tribunal? The issues involved are magnified when one considers the question in the context of international arbitral tribunals. This paper considers these issues by analysing them in three parts. First, is ethical regulation necessary in international arbitration? Second, does an arbitral tribunal have jurisdiction to consider and enforce ethical obligations owed to it by counsel? Third,what ethical obligations should be applied to counsel?
Abstract:     
The arbitration process is widely used to resolve legal disputes that arise in the economic and civil inter-relations of parties. The recognition and enforcement of Arbitral Awards is, as an outcome of an arbitration process, an essential part of the international legal system, providing the final legal mechanism for the conclusion of disputes determined by an arbitration clause. No legal solution or framework for the recognition or enforcement of arbitral awards existed, the arbitration process would be of insignificant value to anyone.

Once an arbitral tribunal has made its award, it has fulfilled its function and its existence comes to an end. The tribunal’s award, however, gives rise to important and lasting legal consequences. If it is not carried out voluntarily, then courts of law shell take further steps for the performance of an award. This paper will consider the role of courts of law in recognition and enforcement of arbitral awards internationally and possible other forms of enforcement. In addition, the enforcement of awards by legal proceedings both locally and internationally will be determined.

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