Arbitration: Governance Benefits and Enforcement Costs

Abstract

These remarks, presented at the 2004 AALS Annual Meeting panel on civil procedure, review the economic theory of arbitration and related empirical evidence. For parties who can choose between alternative legal regimes, the key determinants of that choice are the governance benefits and enforcement costs connected to the rules under each regime. The choice between arbitration and litigation should be made on the same basis. The empirical literature, though sparse, suggests that superior governance benefits provide a significant reason for arbitration agreements.

Keywords: arbitration, governance, enforcement, norms, choice between arbitration and litigation

JEL Classification: K00, K13, K14, K42