Originally from American Review of International Arbitration - ARIA

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Arbitration practitioners and users appeared to be divided on the question of how the Supreme Court’s recent decision in Hall Street Associates, L.L.C. v. Mattel, Inc., should have been decided. On one side were those who argued that the judicial recognition of arbitration is based on freedom of contract and that the same principle governs the enforceability of an agreement to arbitrate subject to heightened judicial review. This group also contended that party-agreed expanded judicial review is consistent with the procedural flexibility and party autonomy that are hallmarks of arbitration. The opposing camp warned that allowing party-defined standards of review would open the floodgates to vastly expanded postaward litigation. Once expanded review was recognized parties could agree on any number of different judicial standards that would invite post-award challenges, which in turn would inevitably increase the pressures on the parties and the arbitrators to treat the arbitral proceedings more litigiously and merely as a warm-up for post-award litigation. This would inevitably dilute arbitration’s benefits of efficiency and finality.

I. JUDICIAL AGNOSTICISM AND THE PRINCIPLES OF ARBITRATION

Thus, Hall Street seemed to raise basic question about the essence of arbitration, or, more specifically, the judicial role in arbitration. Was arbitration a protean form of dispute resolution that allowed the parties to define even the role of the courts in the arbitration process? Or is arbitration a specific type of dispute resolution, at least with respect to the judicial-arbitral interface? The language of the Federal Arbitration Act (“FAA”) itself did not address this issue and made different interpretations plausible. And the fact that each of the parties and amici on both sides described themselves as advocates of arbitration seemed to demonstrate that the policy lines were not clearly drawn. As Judge Kozinski noted in a 1999 Ninth Circuit concurring opinion considering this issue, the question of expanded judicial review of arbitral decisions is “closer than most.” And the fact that the Ninth Circuit, to use a now-common political trope, “voted for expanded review before it voted against it" only tended to reinforce Judge Kozinski's observation.