Arbitration: A Creature of Contract?

38 Pages Posted: 22 Jul 2020 Last revised: 27 Jul 2020

Date Written: July 21, 2020

Abstract

The Supreme Court has repeatedly characterized arbitration as a “creature of contract,” and as the upshot of the parties’ pure, unfettered choice — which the Court must honor. Based on this metaphor, the Court has expanded the scope of arbitration even in employment and consumer contracts, giving broad authority to arbitrators and limiting parties’ access to procedural mechanisms like class actions and judicial review. This Article argues that the metaphor does not really fit the Court’s jurisprudence, which has pursued an aggressive pro-arbitration policy while paying lip service to notions of individual autonomy and contractual consent. The metaphor also rests on a mistaken view about the structure of contract law. It ignores that contract — and, therefore, arbitration — is a creature of law. The contractual view of arbitration also generates normative problems. It leads to a form of “everyday libertarianism” about arbitration, which shields arbitration law from critical scrutiny. It also generates significant problems in mandatory arbitration in employment and consumer transactions and leads even the Court’s critics to mistakenly assume that the problem in these situations is one of lack of consent. As the Article argues, the notion of arbitration as a creature of contract is mistaken not just at the domestic level—it also leads to a mistaken view of international arbitration. The Article offers a better account of the structure of arbitration, based on the notion that arbitration law is, like contract law, a compound rule that generates both powers and duties. Based on this more accurate picture of arbitration law, the Article offers two criteria for the evaluation of arbitration: its effectiveness as a device for producing law and its aptness as a rights enforcement mechanism. Ultimately, the Article argues that this more sophisticated account of arbitration, which sees it as a creature of law, shows that, because arbitration requires the law’s assistance, law has the authority and the responsibility to ensure that arbitration works adequately. As every exercise of legal authority, arbitration stands in need of justification; and should be subject to normative evaluation.

Keywords: Arbitration, Contract Theory, Federal Arbitration Act

Suggested Citation

Jiménez, Felipe, Arbitration: A Creature of Contract? (July 21, 2020). Available at SSRN: https://ssrn.com/abstract=3657506 or http://dx.doi.org/10.2139/ssrn.3657506

Felipe Jiménez (Contact Author)

USC Gould School of Law ( email )

Los Angeles, CA 90089
United States

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