The Arbitration Clause in Context: How Contract Terms Do (and Do Not) Define the Process
25 Pages Posted: 16 May 2007
Mandatory arbitration has engendered a significant amount of debate, much of which focuses on the proper response the law should make to "one-sided" clauses - i.e., those that restrict the remedies and procedures available to individuals in arbitration. But how do we identify one-sided clauses? The answer seems simple: collect and evaluate the contracts. Consider, for example, an employment contract that provides: "We agree to resolve any and all disputes by binding arbitration, to be conducted in Philadelphia, PA under the then-applicable rules of American Arbitration Association or JAMS. The arbitrator may not award punitive or exemplary damages." Because this clause appears to prohibit awards of punitive damages and to require significant travel for individuals who live far from Philadelphia, it might fairly be termed "one-sided."
This Essay suggests, however, that arbitration clauses may paint an incomplete or even misleading picture of actual arbitration procedures and remedies. Indeed, seemingly one-sided clauses, like the one in my example employment contract, sometimes may yield a relatively even-handed disputing process. Conversely, seemingly even-handed clauses may obscure a one-sided process. This Essay explores these possibilities and offers two related insights. First, arbitration clauses are incomplete and possibly inaccurate signals of arbitration "fairness." Second, understanding arbitration as a legal, social, and contracting phenomenon may require sustained inquiry into the relationship between arbitration contracts and the rules and practices of arbitrators and arbitration providers.
Suggested Citation: Suggested Citation