The Arbitration-Litigation Paradox
59 Pages Posted: 2 Oct 2018 Last revised: 6 Nov 2018
Date Written: October 6, 2018
The Supreme Court’s interpretation of the Federal Arbitration Act is universally touted as favoring arbitration. In many contexts, such pro-arbitration decisions are viewed as supporting the Court’s more general hostility to litigation as a whole. Those pro-arbitration and anti-litigation policies appear to be mutually consistent because the Court describes the essential features of arbitration as being “informal,” “speedy,” “efficient,” and the categorical opposite of litigation.
This Article contends that the Court’s approach is not uniformly pro-arbitration. On the contrary, the Court’s pro-arbitration and anti-litigation values sometimes conflict. When they do, hostility to litigation wins. For example, consider an arbitration clause that explicitly authorizes extensive judicial review. Pro-arbitration policies favoring party autonomy would enforce the clause and allow judicial review, but anti-litigation norms would require the opposite. In that factual context and others, the Supreme Court’s hostility to litigation has overridden its support for arbitration. Such results are particularly problematic for international commercial arbitration.
The arbitration-litigation paradox is that because courts play an important role supporting arbitration, some litigation is needed in order to support arbitration. Thus, efforts to limit litigation in U.S. courts has side effects that limit courts’ ability to offer this support. Moreover, the Court’s hostility to litigation—in arbitration cases and in other seemingly unrelated contexts—has crippled U.S. courts’ ability to prioritize arbitration values such as party autonomy and flexibility in designing arbitration. This Article advocates recognizing that litigation is necessary to support arbitration even as the two compete with each other. It considers several avenues for pursuing this approach and sets the stage for further research into the relationship between arbitration and litigation.
This is a draft. Comments are welcome.
Keywords: arbitration, litigation, international commercial arbitration, transnational litigation, litigation isolationism, private international law, New York Convention, contracts, civil procedure
JEL Classification: K00, K10, K12, K33, K41
Suggested Citation: Suggested Citation