Originially from: World Arbitration and Mediation Review (WAMR)

Federal Jurisdiction in Arbitration
by
Hon. Lawrence C. Waddington (Ret.)∗
I. Federal and State Jurisdiction
Federalism in the United States is generally understood to describe
the allocation of power between federal and state governments. The
doctrine unfolds in various formats, including federal pre-emption of state
and local legislation, but manifested also in jurisdictional conflicts
between the dual American judicial systems of state and federal courts.
Federalism is inherently associated with state sovereignty in its
relationship to the national government, and to link a governmental
doctrine with arbitration resonates as intuitively incoherent. Arbitration is
explicitly a private and nonjudicial procedural resolution of disputes
combining an extra-legal format with minimal judicial intrusion during the
process. Yet Congressional enactment of the Federal Arbitration Act
(FAA) in 1925 and its subsequent interpretation by the United States
Supreme Court pre-empting state anti-arbitration law, and in some cases
enjoining state courts from refusing to enforce arbitration agreements,
reflects the continuing tension of sovereignty, a concept present at the
creation of the Constitution.
Of all the disputes swirling among the delegates at the
Constitutional Convention in 1787, the thread of sovereignty weaves
pervasively throughout the debates. Thirteen individual states, zealously
guarding their prerogatives and suspicious of creating an overwhelming
national judicial power, forced the ultimate draft of the Constitution into
language of compromise by cabining federal original jurisdiction into a
three-fold category of “federal questions,” constitutional issues, and
treaties. Congress subsequently acknowledged the potential for judicial
bias incurred in litigation between citizens of one state appearing in courts
of another state and adopted the doctrine of diversity jurisdiction in the
Judiciary Act. By providing federal courts to serve as a neutral forum
staffed by life-tenured judges immune from public retribution, Congress
offered litigants a safe harbor from state court parochial decisions yet
simultaneously assuring state dominance in civil litigation among its own
citizenry.