Originally from Dispute Resolution Journal

The authors surveyed the approaches of four European countries, Canada and Australia to determine the accuracy of the U.S. perception that foreign countries ban all predispute arbitration clauses in the consumer and employment contexts. They find no such bans in the countries surveyed. This finding casts doubt on the argument that Congress should adopt the Arbitration Fairness Act in order to bring the United States into alignment with foreign countries. Accordingly, the authors recommend that Congress consider the surveyed foreign models before voting on this bill. 

Congress presently is considering the most significant overhaul of arbitration law in the United States since the Federal Arbitration Act’s (FAA) enactment in 1925. This follows many previous efforts in recent years to introduce bills that would invalidate pre-dispute arbitration clauses in contracts of various kinds, including those pertaining to consumer purchases, terms of employment, livestock/poultry, franchises, motor vehicle sales, military reservists, nursing home admissions, and home mortgages.1 A central premise underlying these bills is the idea that the parties to these agreements (typically there is an individual on one side and a company on the other) tend to occupy unequal bargaining positions. The drafters of these bills conclude from this that the individual’s choice to opt into arbitration before a dispute has arisen cannot be considered free and voluntary, and thus, the arbitration agreement should be considered void and unenforceable. Defenders of these bills claim that the United States, when compared to other nations, stands alone in allowing pre-dispute agreements between companies and individuals to be enforced.2 But is that true? We set out to test this claim in order to determine whether U.S. policy makers can learn anything from their foreign counterparts. 3 Our research indicates that the treatment of pre-dispute arbitration agreements in other nations is not as portrayed by proponents of these bills, suggesting that Congress should take these other approaches into consideration before rushing to adopt purported reforms.