Copyright c 2006 The American Society of Comparative Law Inc The American Journal of Comparative Law Supplement Fall 2006 54 Am J Comp L 233 LENGTH 11813 words SECTION II CIVIL LAW PROCEDURE AND PRIVATE INTERNATIONAL LAW New Experiences of International Arbitration in the United States NAME 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 international rather 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 substantially over 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 n5 A 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 force for 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 as do 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 United States is party to over 40 Bilateral Investment Treaties BITs which likewise provide for arbitration to resolve investor state disputes n11 National 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 n17 State 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 n20 B 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 and sets out only limited grounds for vacating arbitration awards This section describes some current issues arising under the FAA as it applies to international arbitration 1 Enforcing Arbitration Agreements Section 2 of the FAA makes both pre dispute and post dispute arbitration agreements valid irrevocable and enforceable save upon such grounds as exist
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