Copyright (c) 2006 The American Society of Comparative Law, Inc.The American Journal of Comparative LawSupplement, Fall 200654 Am. J. Comp. L. 233LENGTH: 11813 wordsSECTION II: CIVIL LAW, PROCEDURE, AND PRIVATE INTERNATIONAL LAW: New Experiences of International Arbitration in the United StatesNAME: CHRISTOPHER R. DRAHOZAL*BIO: * Professor of Law, University of Kansas School of Law.SUMMARY:... The use of arbitration to resolve international commercial disputes has grown substantially over the past decade. ... In Prima Paint Corp. v. Flood & Conklin Mfg. Co., the Supreme Court recognized the doctrine of separability under the FAA, holding that the defense of fraudulent inducement of the underlying contract (the contract containing the arbitration clause) was for the arbitrator, and not the court, to decide. ... American involvement in international arbitration dates back to the Jay Treaty of 1794, which established arbitral commissions to resolve claims by British creditors against United States nationals. ... " Thus, so long as the arbitration agreement is within the scope of section 2 - which most consumer and employment arbitration agreements are - they are governed by the New York Convention. ... But to the extent the employment contract is in internationalrather than interstate commerce, two U.S. Courts of Appeals have held that the exception does not apply and that the arbitration clause is enforceable. ... TEXT: [*233] Introduction The use of arbitration to resolve international commercial disputes has grown substantiallyover the past decade. n1 Between 1993 and 2003, the number of international arbitration proceedings administered by leading institutions almost doubled. n2 During that same period,the international arbitration caseload of the American Arbitration Association (AAA) more than tripled, n3 prompting the AAA to announce in 2002 that it had "become the largest international commercial arbitral institution in the world." n4 The growth of the AAA caseload (in both absolute and relative terms) hints at an increasing American involvement in international arbitration - one that other information (both anecdotal and empirical) confirms. This increasing U.S. involvement is itself a new experience of international arbitration. Other new experiences with international arbitration in the U.S. - such as investor-state arbitration and arbitration of electronic commerce disputes - mirror similar experiences elsewhere in the world. But some U.S. experiences - particularly with consumer and employment arbitration - are unique, or at least highly unusual, compared to the rest of the world. [*234] Part I of this report provides an overview of international arbitration law in the United States, highlighting some currently unsettled issues. Part II describes the growing American involvement in international arbitration. Part III then examines "new experiences" with international arbitration in the U.S.: (1) investor-state arbitration,particularly under the North American Free Trade Agreement (NAFTA); (2) the interrelationship of new information technologies and international arbitration, focusing on the formation of arbitration agreements in electronic commerce transactions; and (3) the use of arbitration to resolve consumer and employment disputes in the United States, which to date has largely been a domestic undertaking but increasingly shows signs of becoming internationalized.I. Overview of American International Arbitration Law The statutory framework governing arbitration in the United States has remained largely unchanged in recent years, although American arbitration law continues to evolve through court decisions. This part first describes the legal framework governing international arbitration in the United States, and then discusses some current issues in American international arbitration law. n5A. Legal Framework Treaties. The United States is a party to the New York Convention (which entered into force for the U.S. on December 29, 1970), n6 and the Panama Convention (which entered into forcefor the U.S. on October 27, 1990). n7 The United States also is a party to the ICSID Convention, which established the International Centre for Settlement of Investment Disputes. n8 In addition, Chapter 11 of the North American Free Trade Agreement (NAFTA) provides for arbitration to [*235] resolve disputes between investors and state parties, n9 asdo several other Free Trade Agreements entered into by the U.S., such as the recent Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). n10 Finally, the UnitedStates is party to over 40 Bilateral Investment Treaties (BITs), which likewise provide for arbitration to resolve investor-state disputes. n11National Legislation. In 1925, the United States adopted the Federal Arbitration Act, which remains the central statutory authority governing arbitration in the United States. Chapter 1 of the FAA contains the basic provisions of the Act, which make arbitration agreements and awards enforceable. n12 Chapter 2 of the FAA implements the New York Convention, n13 while Chapter 3 implements the Panama Convention. n14 Many commentators have called for reform of the FAA, particularly as it applies to international arbitration, viewing it as archaic and incomplete. n15 But prospects for revision of the Act appear limited. The ongoing controversy in the United States over consumer and employment arbitration, discussed in more detail below, n16 discourages efforts to amend the FAA as it applies to international arbitration. n17State Legislation. In addition to the FAA, several American states have adopted their own statutes applicable to international arbitration, some of which are based on the UNCITRAL Model Law on [*236] International Commercial Arbitration (UNCITRAL Model Law). n18 But because the FAA preempts inconsistent states laws, n19 so far the state international arbitration laws have had "only marginal impact." n20B. Current Issues in International Arbitration Law in the United States By modern standards, the Federal Arbitration Act is a "bare-bones statute directed primarily at insuring that courts give effect to arbitration clauses and awards, and prescribes no significant procedural standards." n21 The FAA makes arbitration agreements enforceable, andsets out only limited grounds for vacating arbitration awards. This section describes some current issues arising under the FAA as it applies to international
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