A Presumptively Better Approach to Arbitrability

38 Pages Posted: 16 Aug 2013 Last revised: 8 Oct 2013

John A. E. Pottow

University of Michigan Law School

Jacob Brege

University of Michigan Law School

Tara J. Hawley

University of Michigan Law School

Date Written: August 1, 2013

Abstract

One of the most complex problems in the arbitration field is the question of who decides disputes over the scope of an arbitrator’s purported authority. Courts in Canada and the United States have taken different approaches to this fundamental question of “arbitrability” that necessarily arises when one party disputes the contractual validity of the underlying “container” contract carrying the arbitration clause. If arbitration is a creature of contract, and contract is a product of consensual agreement, then any dispute that impugns the underlying consent of the parties to the container contract implicates the arbitration agreement itself (i.e., no contract, no arbitration agreement).

The U.S. approach of “separability” dates back a half-century to a Supreme Court case that was controversial when it was decided and remains so today. The Supreme Court has added several more decisions trying to clarify its arbitrability rules within just the past few years. The Canadians too have tried to sort out this mess, seizing upon the hoary legal distinction between law and fact, also offering recent Supreme Court pronouncements. Neither country’s approach is normatively or functionally satisfying.

After discussing and critiquing the two approaches comparatively, we offer our own proposal. We too deploy legal presumptions, but in our case we focus on what we contend are the two most relevant criteria: (1) the nature of the legal challenge to the underlying container contract, and (2) the type of contract at issue. Challenges to consent in contract formation and contracts involving adhesion should be specially scrutinized by the courts before carting parties off to arbitration, whereas commercial agreements between sophisticated actors should presumptively be for arbitral resolution, even for “constitutive” challenges to the underlying contract.

Keywords: arbitration, authority, courts, Canada, United States (U.S.), contracts

JEL Classification: K1, K12, K41

Suggested Citation

Pottow, John A. E. and Brege, Jacob and Hawley, Tara J., A Presumptively Better Approach to Arbitrability (August 1, 2013). Canadian Business Law Journal, Vol. 53, No. 3, March 2013; U of Michigan Law & Econ Research Paper No. 13-012; U of Michigan Public Law Research Paper No. 339. Available at SSRN: https://ssrn.com/abstract=2310206 or http://dx.doi.org/10.2139/ssrn.2310206

John A. E. Pottow (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-3736 (Phone)

Jacob Brege

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

Tara J. Hawley

University of Michigan Law School ( email )

500 S. State Street

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