Originially from: World Arbitration and Mediation Review (WAMR)

Constitutional Limitations on Federal Government  Participation in Binding Arbitration
By Walter Dellinger, Assistant Attorney General. This
Memorandum was prepared by the U.S. Department of Justice, Office of
Legal Counsel, for John Schmidt, Associate Attorney General and issued
on September 7, 1995.

You have asked for our opinion as to whether the Constitution in
any way limits the authority of the federal government to submit to
binding arbitration. Specifically, you have asked us to explain and expand
on advice we issued on September 19, 1994, in which we confirmed our
earlier oral advice that "the Office of Legal Counsel no longer takes the
view that the Appointments Clause, U.S. Const. art. II, § 2, cl. 2, bars the
United States from entering into binding arbitration." Memorandum from
Dawn Johnsen, Deputy Assistant Attorney General, to David Cohen,
Director, Commercial Litigation Branch, Civil Division, re: Binding
Arbitration (Sept. 19,1994). Below, we reiterate this conclusion and,
pursuant to your request, set forth the reasoning by which we reached it. In
addition, we consider, again pursuant to your request, the various other
constitutional provisions that may be implicated when the federal
government enters into binding arbitration. We conclude that none
absolutely bars the federal government from taking such action. We
should point out, however, that Executive Order No. 12778 remains in
effect. See 56 Fed. Reg. 55195 (1991). That order forbids litigation
counsel for federal agencies from seeking or agreeing to enter into binding
arbitration. Id. § 1(c)(3). Therefore, while a constitutionally valid statute
may compel litigation counsel to enter into binding arbitration, litigation
counsel may not voluntarily agree to binding arbitration.
I. Background
Neither term in the phrase "binding arbitration" bears a settled
meaning. First, "arbitration" may be a very different exercise in different
contexts and cases because there are no universally applicable rules of
practice, procedure, or evidence governing the conducting of arbitration.
In addition, there is no standard as to whether arbitration is to be
conducted by a single arbitrator or by a panel of arbitrators or as to the
method for selecting the individuals who serve in that capacity. Moreover,
arbitration may be voluntarily—in that both parties have agreed to resolve
their dispute by this method—or compulsory—in that some other
requirement such as a statute compels the parties to resolve their dispute
by this method. Second, it is not at all clear what exactly is meant by
referring to an arbitration as "binding." We take this to mean that judicial