The Arbitration Fairness Act: Unintended Consequences Threaten U.S. Business – Vol. 18 No. 4


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Author: Edna Sussman*

Published: February 2009

Jurisdiction:
United States

Description:

Don’t throw the baby out with the bathwater”
–Thomas Murner, Die Narrenbeschwörung (1512)

Various proposed bills to amend the Federal Arbitration Act are gaining support in Congress. The bills’ proponents do not intend the bills to interfere with international arbitration, but the amendments do not distinguish between domestic and international disputes. The bills would have the unintended consequence of severely reducing the efficacy of arbitration as a dispute resolution mechanism for international disputes and inflicting significant damage on U.S. business interests.

Various proposed bills to amend the Federal Arbitration Act are gaining support in Congress. The bills’ proponents do not intend the bills to interfere with international arbitration, but the amendments do not distinguish between domestic and international disputes. The bills would have the unintended consequence of severely reducing the efficacy of arbitration as a dispute resolution mechanism for international disputes and inflicting significant damage on U.S. business interests.

I. INTRODUCTION

The most prominent of the bills introduced in the U.S. Congress is the Arbitration Fairness Act of 2007 (the “Arbitration Act” or the “Act”), introduced in the 110th Congress in the House and the Senate and reintroduced at the time of this writing in the House of Representatives. While other bills target specific industry sectors such as long-term care facilities, livestock and poultry growers, and automobile sales, the Arbitration Act focuses on categories of persons whose contracts often contain arbitration clauses. The proposed Act provides that no predispute arbitration agreements shall be valid or enforceable with respect to consumer, employment or franchise disputes. It further provides that pre-dispute arbitration agreements are void if they concern disputes arising under civil rights statutes and statutes intended to regulate contracts between parties of unequal bargaining power.

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*Edna Sussman is an independent arbitrator and mediator specializing in domestic and international commercial disputes. She is the principal of SussmanADR LLC  and the Distinguished ADR Practitioner in Residence at Fordham Law School. She serves on the arbitration and mediation panels of many dispute resolution institutions, including the AAA, ICDR, CPR, WIPO, CEAC and FINRA and the mediation panels of the federal, state and bankruptcy courts in New York. The author is indebted to Professor William W. Park, Mark Kantor, Mark Friedman and Floriane Lavaud for their review and comments on this paper and thanks all those who contributed excellent research assistance.