U.S. Supreme Court Subordinates Enforcement of Regulatory Statutes to Enforcement of Arbitration Agreements: From the Bremen's License to the Sky Reefer's Edict

By Davitz, Christine L. | Vanderbilt Journal of Transnational Law, January 1997 | Go to article overview

U.S. Supreme Court Subordinates Enforcement of Regulatory Statutes to Enforcement of Arbitration Agreements: From the Bremen's License to the Sky Reefer's Edict


Davitz, Christine L., Vanderbilt Journal of Transnational Law


TABLE OF CONTENTS

I. INTRODUCTION II. ALTERNATIVE DISPUTE RESOLUTION. III. HISTORY OF ARBITRATION

A. Common Law

B. Federal Arbitration Act

C. New York Convention

D. Conclusion IV. U.S. SUPREME COURT INTERPRETATION OF THE FAA

AND THE NEW YORK CONVENTION

A. Wilko v. Swan

B. The Bremen v. Zapata Off-Shore Co

C. Scherk v. Alberto-Culver Co.

D. Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc.

E. Vimar Seguros; Y Reaseguros v. MI V Sky Reefer

F. Conclusion V. DANGERS TO U.S. REGULATORY SCHEMES POSED

BY THE SUPREME COURT'S PRO-ARBITRATION

STANCE

A. The Current Structure of Arbitration

Prevents Courts from Reviewing

Arbitral Awards

B. Arbitral Awards are Rarely Vacated

1. FAA Section 10(a)(4): Arbitrators

Exceeded Their Powers; Manifest

Disregard

2. Article V(2)(a): Subject Matter

Inarbitrable

3. Article V(2)(b): Public Policy of the

Forum

C. Parties May Opt Out of Regulatory Statutes

1. Congress Did not Intend the Goal

of International Business Harmony

to Override All Other U.S. Policies

2. Comity is not Applied by Other Nations

D. Arbitral Tribunals are Not Appropriate

Fora for Interpretation of U.S. Public Policy 92 VI. CONCLUSION

I. INTRODUCTION

Through a series of cases,(1) the U.S. Supreme Court has developed a preference for arbitration of disputes arising out of international commercial contracts containing an arbitration clause. The Court's preference began with the assumption that the United States cannot presume to tell the world that all disputes arising between a U.S. citizen or corporation and another country's citizen or corporation must be decided by U.S. courts.(2) The Court recognized the special role forum selection and choice of law clauses have in obtaining certainty and stability in international commercial transactions.(3) The Court's focus on international commercial parties' freedom of contract, however, has hidden, or at least minimized, the danger that pre-dispute resolution agreements pose to U.S. public policies as expressed in U.S. statutory regulations.

The Court articulated reasons for its preference, such as comity between nations, certainty and stability in the choice of law between parties to international commercial contracts, quickness in dispute resolution, and freedom of contract. It emphasized the passage of the Federal Arbitration Act (FAA)(4) and the U.S. ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter "New York Convention")(5) when it allowed parties to avoid U.S. regulatory statutes by arbitrating securities.(6) antitrust,(7) and COGSA(8) disputes. Indeed, the reasons given by the Court in this line of cases ignore both the history of arbitration and its real consequences to U.S. regulatory schemes. It is important, therefore, to review the reasoning behind the FAA, as well as the New York Convention, to reveal whether the U.S. Congress intended to alter the status quo and allow arbitration of regulatory statutes in addition to contractual and common law disputes.

This Note analyzes the Court's reasoning behind its pro-arbitration stance and compares it with the history and purposes of the FAA and the New York Convention. The Note points out the false security of recognizing public policy defenses to enforcement of arbitral awards since the defense, though available, is virtually never successful. The Note then articulates the dangers posed to U.S. public policies that arbitration of statutory claims would create. This Note argues that the Court has expanded the scope of arbitrable issues beyond that which was intended by the FAA and the New York Convention and to a point dangerously close to unraveling U. …

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