Arbitration is a common way to solve disputes especially in a commercial setting. Arbitration allows the parties to customize their dispute resolution. Parties can decide, for example, which evidentiary rules the arbitrator must follow, whether punitive damages are on the table, as well as the extent and limits of the arbitrator’s powers. Instead of settling on a generic clause, “all disputes shall be resolved by an arbitrator,” the parties are urged and inclined to customize their arbitration clause beforehand to meet their individual needs. Customization is important because unless the parties have expressly agreed about a particular matter, courts will have to rely on default rules, which at their best are commonly understood, but at their worst, can be unpredictable.
Agreed exceptions to the parties’ obligation to arbitrate are called carve-outs. A typical carve out is the right to seek injunctive relief from a court even when arbitration is pending. If the right to seek injunctive relief has not been expressly carved-out from the arbitration clause, the circuits disagree on the legal consequences.
This article analyzes the arbitrator and the court’s jurisdiction as to injunctive relief when the parties have agreed to arbitrate all their disputes but have not expressly agreed anything about injunctive relief. What is the default rule in these cases? The key question is, do the parties have the right to seek injunctive relief from the court if the arbitration clause is silent on whether the right exists.