Copyright (c) 2005 Duke Law Journal
Duke Law Journal
ARTICLE: DETERRENCE AND IMPLIED LIMITS ON ARBITRAL POWER
55 Duke L.J. 547
Michael A. Scodro+
Commercial arbitration has undergone a remarkable transformation.
1 Up until just twenty years ago, U.S. courts generally refused to enforce "predispute" arbitration clauses - contract provisions requiring parties to resolve any future disputes in arbitration rather than in court - when doing so meant ordering parties to arbitrate antitrust, securities fraud, or other examples of what are sometimes termed "public law" claims. Courts enforced such predispute clauses when disputes arose over the meaning of contract terms. Judges feared that arbitrators might not fully vindicate public law rights, however, and courts therefore refused on policy grounds to order binding arbitration when such rights were at stake. 2 This was the state of the law throughout much of the twentieth century, notwithstanding the 1925 enactment of the Federal Arbitration Act (FAA or the Act), 3 legislation that on its face requires courts to enforce predispute arbitration clauses as they would enforce any other contract, without regard to the substance of the parties' underlying disputes. 4
Judicial concern for the fate of public law claims in arbitration was not unfounded. In addition to various procedural differences between judicial and arbitral proceedings, it was often said that commercial arbitrators were not bound to apply substantive law. At the same time, the FAA enumerates only very narrow grounds for disturbing arbitral awards - gross procedural defects such as arbitrator corruption, fraud, or unauthorized conduct. 5 Therefore, substantive review for decades has been chiefly the province of a purported judge-made addition ...
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