Academic journal article Houston Journal of International Law

A Comparison of Commercial Arbitration: The United States and Latin America

Academic journal article Houston Journal of International Law

A Comparison of Commercial Arbitration: The United States and Latin America

Article excerpt

I. INTRODUCTION

It has been said that the United States and Latin America have historically taken different attitudes toward arbitration.(1) Although there is some truth to this statement, it would be an oversimplification to say that arbitration has always been accepted in the United States and rejected in Latin America. In fact, arbitration has not always received favorable treatment in the United States; for most of its history, arbitration was viewed with skepticism and hostility. Nevertheless, there is a significant difference in the way arbitration is currently viewed in the two regions. The reasons for those differences will be the subject of this comment. A variety of factors contribute to the divergent treatment of arbitration, not the least of which are different legal cultures, histories, concerns about national sovereignty, and the role of the state in the administration of justice. Part II of this comment will discuss the history of arbitration in the United States and analyze its current state of development. Part III will proceed with a general description of arbitration in Latin America and conclude with a focus on Brazil, Venezuela, and Mexico.

II. THE DEVELOPMENT OF ARBITRATION IN THE UNITED STATES

A. Common Law

Although arbitration had existed as a form of dispute resolution since colonial times, it was not popular.(2) The origins of arbitration can be found in English common law and unfortunately, some of the same shortcomings that existed in England were transplanted to the United States.(3) The belief that arbitral agreements out courts of jurisdiction was the most crippling problem.(4) As explained by William Howard in The Evolution of Contractually Mandated Arbitration, the consequences of this attitude can be seen in an early sixteenth century statute that prohibited agreements barring lawsuits.(5) Additionally, the sixteenth century court decision known as Vynior's Case established a trend that "arbitration agreements were revocable by either party at any time prior to the award based on the concept that the arbitrator was the agent of both whose authority could be revoked at any time."(6) This conception of the arbitrator's proved to be the most serious limitation to widespread use of arbitration because it became strong precedent in both England and the United States.(7) Other explanations for the historical distrust of arbitration are the fear that it is more likely to result in a miscarriage of justice and the public policy argument that the state should maintain a monopoly over the resolution of disputes.(8)

Even with these limitations, arbitration in the United States was an established form of dispute resolution before the American Revolution.(9) In 1768, the New York Chamber of Commerce created the first permanent board of arbitration in the colonies.(10) Initially, the New York Chamber of Commerce Arbitration Committee dealt solely with claims between merchants, but in 1817 the securities industry adopted a constitution that provided the nation's first comprehensive arbitration clause.(11) After the revolution, many states passed statutes permitting the enforcement of arbitral awards, but pre-dispute agreements were not recognized--a manifestation of the anti-arbitration hostility exemplified by the rule in Vynior's case.(12) In 1854, the Supreme Court showed signs of recognizing the importance of arbitration when it held that arbitrators should be given broad discretion subject to limited judicial review.(13) However, this holding was never strong precedent, and in 1874, the Supreme Court echoed the common law sentiment by holding that pre-dispute agreements oust courts of jurisdiction and are illegal and void.(14)

B. Federal Arbitration Act

In an effort to "overcome centuries of hostility," a pro-arbitration reform movement formed in New York.(15) The New York Chamber of Commerce and the New York Bar Association joined forces and lobbied the state legislature to pass a law that would make arbitration a viable form of dispute resolution both before and after a dispute arose. …

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