Arbitrators and Arbitral Institutions: Legal Risks for Product Liability?

By Veeder, , V, V | American University Business Law Review, January 3, 2016 | Go to article overview

Arbitrators and Arbitral Institutions: Legal Risks for Product Liability?


Veeder, , V, V, American University Business Law Review


Introduction

Let us imagine a brown ginger beer bottle produced by a well-known global institution for your personal use. The bottle's label proudly proclaims that in addition to reaching regions of the world that other natural beverages cannot reach, its ginger beer is the best beverage that is better than any municipal water: not even "probably" so, like mere Danish beers, but indisputably so. This ginger beer is said to be more costeffective, more efficient, and quicker at quenching your thirst than any other kind of beverage. The bottle's label contains no advisory, health information, or other warning whatsoever. So, this green, eco-friendly ginger beer is proclaimed as effectively "the only drink in town."

Now, let us also imagine that this global institution knows for certain that at least fifty percent of those of us who drink its ginger beer are likely to be greatly dissatisfied with this experience. In the ginger beer trade, the fifty percent of dissatisfied consumers are known as "losers" while the satisfied consumers are called "winners." Let us imagine further that those of us who would like to be winners find, once the bottle is opened, that our particular bottle contains not only a decomposed snail, which can make the drinking experience less than satisfactory, but worse, that the bottle contains no ginger beer at all. In the ginger beer trade, technically that is called "annulled ginger beer."

There are two additional details. First, there is a legally binding contract between the institution and the imbibers. This case is not an elderly case from an old casebook on torts or delicts. It is not exactly clear what the contract's applicable law might be or what court might have jurisdiction over any dispute between the imbibers and the institution. However, it is manifestly clear that the institution has assumed significant contractual obligations toward the imbibers of its ginger beer bottles. Furthermore, there may be certain non-contractual legal obligations on the institution as a promoter, manufacturer, and supplier of ginger beer, depending on the applicable law and the judicial forum. Second, the cost of a ginger beer bottle is not a modest five U.S. dollars or so. Taking into account all costs, the total can amount to millions, even tens of millions of U.S. dollars. However, that price will remain unfixed at the time a user purchases the bottle because it will usually be determined later by the institution itself. While this ginger beer bottle may be cost-effective, its price will not be cheap or fixed at the point of sale.

Now, on these facts, if we found the bottle empty or polluted, caused by the negligent act or omission of the institution, would we be surprised to learn that we had no legal claim against the institution? Would we also be surprised to learn that both the institution and its workers had legal immunity for any negligent act or omission on the ground of public policy? That, because ginger beer is so important to the national and global economy, ginger beer institutions and workers should not be held accountable because it might adversely affect their work? A lay person would likely be surprised because he or she would expect the contrary and so too would most regulators and legislatures. As a general principle, it is usually accepted that every institution should be legally accountable for its legal wrongs, including negligence, especially when the product sold is professionally produced, heavily promoted, and significantly expensive.1 If we are not surprised, then we are almost certainly an arbitration user or an arbitration specialist because, traditionally, arbitration users have often been told that there was no possible legal claim against arbitrators and arbitral institutions apart from fraud, corruption, criminal activity and intentional wrongs. Other than these exceptions, there is no reported case in England of any arbitrator or arbitral institution being held liable to any arbitration user in the long-recorded history of English arbitration. …

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Arbitrators and Arbitral Institutions: Legal Risks for Product Liability?
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