Vanderbilt University Law School
If a pollster asked a random selection of Americans for a one-line verbal portrait of arbitration, common responses might include the following: (i) private litigation arising for construction and business disputes; (ii) a mechanism to resolve workplace tensions between management and labor; (iii) a process by which finance companies and stock brokers shield themselves from customer complaints; (iv) a way to level the playing field in deciding commercial controversies among companies from different parts of the world; (v) the way big corporations use NAFTA to escape regulation. To some extent all would be correct.'
Unfortunately, these different varieties of arbitration have all been squeezed into the same antiquated arbitration statute. Enacted 75 years ago as a simple procedural device to enforce arbitration in federal courts, the Federal Arbitration Act (FAA) has now been pressed into service as a body of substantive law that binds state courts as well, requiring that arbitration agreements be enforced on the same footing as other contracts.2 The Act is as ill-suited to such use as an all-terrain vehicle. As drafted, the FAA ignores critical distinctions in the level of judicial supervision suitable to different types of cases. The laissez-faire court scrutiny appropriate to an international proceeding, between sophisticated business managers with access to competent counsel, may be quite misplaced in a consumer case, where an arbitration clause might require an ill-informed individual to seek uncertain remedies at an inaccessible venue.3 Moreover, basic arbitration notions are hidden in a maze of inconsistent cases that are anything but user friendly: they disorient and confuse litigants from abroad, adding significant transaction costs to the choice of arbitration in the United States.4
The time has come to consider amending the FAA to provide greater clarity for international arbitration. One springboard for reform can be found in the UNCITRAL Model Arbitration Law, 5 which has already engendered a rich case law that could serve as a prism to separate and identify many of the interrelated themes in cross-border arbitration.6 The Model Law, however, should not be imported wholesale. 7 Any amendment of the Federal Arbitration Act must take account of homegrown arbitration concerns and precedents. 8 Part of the peculiar U.S. genius has been our ability to adapt (rather than adopt) inventions from abroad. 9
The most critical need is for limitations on judicial review of international arbitration awards, permitting international arbitration law to evolve free from whatever paternalistic measures might be appropriate to domestically cultivated concerns. 10 Such reform would facilitate efficient and neutral dispute resolution by keeping judges from second-guessing arbitrators on the merits of a dispute, while still permitting courts to support arbitration by enforcement of agreements and awards, as well as through interim measures in aid of arbitration.'
It is well known, of course, that certain arbitration service providers and industry groups oppose change. 12 They justify their reform-phobia by reference to the vagaries of the U.S. legislative process.13 Once Congress goes into motion (so some fear), a Pandora's Box of special interests will open to unleash forces that would eviscerate arbitration's effectiveness. Such skepticism of the democratic process is misplaced. There is no reason to think that Americans today are less capable of intelligent legislation than they were in the past. Moreover, the winds of change are already blowing, and the question is no longer if but how reform will occur. 14
William W. Park,
The Specificity of International Arbitration: The Case for FAA Reform
Vanderbilt Journal of Transnational Law
Available at: https://scholarship.law.bu.edu/faculty_scholarship/3710