Arbitration: A Creature of Contract?

Abstract

The Supreme Court has repeatedly characterized arbitration as a “creature of contract,” and as the upshot of parties’ voluntary choices that 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. The metaphor does not fit the Court’s jurisprudence and its aggressive pro-arbitration policy, and rests on a mistaken view about the structure of contract law, ignoring 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,” which shields arbitration law from critical scrutiny, generates significant problems in mandatory arbitration in employment and consumer transactions, and even leads the Court’s critics to mistakenly assume that lack of consent is the cause of the problems in these contexts. As the Article argues, the mistaken notion of arbitration as a creature of contract is not limited to the domestic level—it also extends to international arbitration. We thus need to replace the contractual metaphor. The Article offers a better account of the structure of arbitration, based on the notion that arbitration law, like contract law, is a compound rule generating both powers and duties. Based on this more accurate picture of arbitration law, the Article offers two criteria for the evaluating arbitration as a legal enforcement institution: its effectiveness as a device for producing law and its aptness as a rights enforcement mechanism. Ultimately, 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.