Originally from American Review of International Arbitration - ARIA

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DOES A "SILENT" ARBITRATION CLAUSE PRECLUDE A
CLASS ACTION? THE SUPREME COURT'S VIEW
Hans Smit∗
 

I. INTRODUCTION

In the Bazzle case, the Supreme Court ruled that it was for the arbitrator to
decide whether a class action could be brought in arbitration. However, this did
not mean that the arbitrator had unlimited freedom in this respect. On the
contrary, I had argued that arbitrators should not rule on issues of mandatory law
in any form of arbitration. And I had serious misgivings about arbitrators
deciding issues of class certification and settlement in opt-out class actions,
because, in effect, the party-appointed arbitrators who would make these decisions
would be more likely to rule in accord with the positions of the named parties than
those of the unnamed parties. In other words: The checks by an independent
court would be lacking. And that would be a significant lack of independent
judicial control even when the class actions involved non-mandatory law. I had
therefore argued that only an opt-in type of class action was permitted and then
only in non-mandatory class action arbitrations.

That was also the view I espoused when the Supreme Court granted certiorari
in the Stolt-Nielsen case. In that case, purchasers of global parcel tanker services
had brought a class action in a U.S. court against owners of tanker vessels alleging
that they had violated U.S. antitrust laws in charging for such services in
international trade. The tanker owners invoked the arbitration clause in their
contracts, and the U.S. Judicial Panel on Multidistrict Litigation, to which the
action had been referred, ruled that the parties had to arbitrate their dispute. The
arbitral panel then had to decide whether the case could be pursued as a class
action. Although the arbitration clause was silent on the issue, the panel ruled that
the case could be pursued as a class action, but it did not specify what type of
class action would be appropriate. The parties did not seek a further arbitral