The Arbitration-Litigation Paradox

Abstract

The Supreme Court’s interpretation of the Federal Arbitration Act is universally touted as favoring arbitration. Its arbitration cases and decisions in other areas are also viewed as supporting the Court’s more general hostility to litigation. These pro-arbitration and anti-litigation policies can be mutually reinforcing. Moreover, they appear to be mutually consistent, in part because the Court describes the essential features of arbitration as being “informal,” “speedy,” “efficient”—in short, the categorical opposite of litigation.

This Article contends that the Court’s approach is not as “pro-arbitration” as it appears. 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 de novo 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.

This is the arbitration-litigation paradox: because courts play an important role in supporting arbitration, some litigation is needed to support arbitration. Efforts to limit litigation in U.S. courts and enforce distinctions between litigation and arbitration may in turn limit courts’ ability to offer this support. Moreover, the Court’s hostility to litigation—in arbitration cases and in other, seemingly unrelated contexts—weakens U.S. courts’ ability to prioritize arbitration values such as party autonomy and procedural flexibility. This Article advocates prioritizing such values over hostility to litigation. It considers several avenues for pursuing this approach and sets the stage for further research into the competitive relationship between arbitration and litigation.

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