Control over Dispute-System Design and Mandatory Commercial Arbitration

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INTRODUCTION

The phrase "mandatory arbitration" has come to refer to binding arbitration imposed by the stronger party on the weaker in an economic relationship through an adhesive contract clause. (1) Scholars have identified emerging patterns in how arbitration is viewed and regulated based on whether the parties are repeat or one-shot players in the arbitration system. (2) As amply documented in this Symposium, critics have identified a series of concerns regarding the fairness of mandatory arbitration systems, including lack of consent, lack of due process, privatization of public law, shifting costs, and others. This Article argues that mandatory arbitration is not itself the problem. The problem is instead that in some instances, one party to the dispute has exclusive control of the design of the dispute-resolution system. Consequently, research on mandatory arbitration should concentrate on who is structuring it, how they structure it, why this is so, and how these choices affect dispute outcomes.

Dispute systems vary across two separate dimensions of disputant self-determination or control: (3) control over the overall system design, and control within a given case using a specific process provided by the overall system design. Professors Ury, Brett, and Goldberg coined the phrase "dispute system design" to describe an organization's conscious effort to channel disputes into a series of steps or options to manage conflict. (4) Organizational dispute-system designs can take myriad forms, including a single, multi-step procedure culminating in mediation or arbitration, ombudspersons (5) programs giving disputants many different process choices, or simply a single-step, binding arbitration design. (6)

Control over dispute-system design includes making choices regarding which cases are subject to the process, which process or sequential processes are available (mediation, early neutral evaluation, or binding arbitration, for example), which due process rules apply, and other structural aspects of a private justice system. Control at the case level includes the process and outcome, such as whether within a discrete dispute the process results in a voluntary, negotiated settlement agreement or an imposed, binding, third-party decision.

Discussions of self-determination in appropriate or alternative dispute resolution (ADR) typically focus on the disputants' control over the process and outcome in the particular dispute, mostly in the context of mediation. (7) Mediator ethics codes, for example, focus on mediators' obligation not to coerce parties to agree to a particular settlement.(8) Self-determination is not a salient component of arbitrator codes of ethics. Rather, the codes focus on conflicts of interest and due process during the hearing. (9) The process that brings parties to the mediation table or arbitration hearing is often left implicit.

More recently, there has been discussion of the ethical obligations of provider organizations--those public, private, and nonprofit agencies and organizations that provide neutral dispute-resolution services for multiple parties and cases. (10) Proposed codes of ethics impose upon these organizations various duties to ensure the fairness and impartiality of dispute-resolution processes and the quality and competence of neutrals, with a sliding scale of responsibility based on the measure of control exercised by the provider organization. (11) These discussions, however, do not distinguish between self-determination at the case level and its relationship to control over dispute-system design.

ADR processes vary depending on who is designing them, their purpose, and the resulting design. Table 1 is an effort to illustrate variations in control over the outcome at the case level and control over overall dispute-system design.

Cell A, B, and C each addresses a different distribution of control over dispute-system design in mediation and other nonbinding processes in which the parties retain control over the outcome at the case level. …