On “Forced” Arbitration

Over the past year or so, critics of consumer and employment arbitration have coined a new term for what ADR scholars have historically called mandatory pre-dispute arbitration: “forced arbitration.” The most prominent example appears in the recent film produced by the Alliance for Justice titled Lost in the Fine Print. Narrated by Robert Reich, the movie draws on three cases to make the argument that “forced arbitration is taking away your most basic rights.” As readers of this blog know, I’ve been a critic of consumer and employment arbitration, and I’m glad that AFJ is publicizing the issue. But I have concerns about the use of the term “forced arbitration,” both because it may confuse the public and because it suggests that the only problem with arbitration is a lack of consent.

The movie opens with person-on-the-street interviews in which subjects are asked whether they have heard of “forced arbitration.” One interviewee responds that he has heard of arbitration, but not forced arbitration. That’s a reasonable response. Indeed, I might have answered the same way. Contracts do not use the term “forced arbitration”–they simply refer to arbitration. There is no distinct species of arbitration called forced arbitration. Individuals concerned about forfeiting their rights to judicial process might come away from the movie thinking, “I’ve got to be careful not to agree to a contract that says anything about ‘forced arbitration’,” not realizing that plain old arbitration is the real problem.

More problematic is the focus on consent that the term “forced” arbitration connotes. If our only concern is that people are being compelled to arbitrate, then the easy fix is to make arbitration optional, by either including an opt-out or offering financial or other incentives to agree to arbitration. But a lack of meaningful consent is only a part of the problem. As extensive research by scholars like Imre Szalai and Hiro Aragaki has shown, the FAA was intended to apply only to the arbitration of routine contract terms that would otherwise be subject to default rules of the common law. It was never intended to enforce arbitration agreements where claims arose under mandatory rules of law. And for good reason. The rule of law presupposes citizen access to public adjudicative process for the resolution of disputes covered by mandatory legal rules. Arbitration of those disputes raises concerns about the rule of law regardless of consent.

To be sure, the question of whether claims arising under mandatory legal rules should be arbitrable is a difficult one. After all, citizens can choose not to enforce their legal rights, and litigants routinely settle viable claims outside of trial. Moreover, the global economy depends on a robust system of private dispute resolution, with international commercial arbitration at its core. A blanket refusal to enforce arbitration of claims arising under mandatory legal rules could compromise that system.

Still, we should not lose sight of the procedural guarantees that undergird the rule of law, and we should be careful about using terms, such as “forced arbitration,” that obscure the issues at stake.

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