Control Over Dispute-System Design and Mandatory Commercial Arbitration

This article argues that mandatory arbitration is not itself the problem. The problem is instead that in some instances, one party to the dispute has exclusive control of the design of the dispute-resolution system. Consequently, research on mandatory arbitration should concentrate on who is structuring it, how they structure it, why this is so and how these choices affect dispute outcomes

Article Entries Alphabetized by Author Last Name

Published in cooperation with the American Bar Association Section of Dispute Resolutio

Soft and Hard Strategies: The Role of Business in the Crafting of International Commercial Law

Part I returns to the classic definition of hard international law initially put forward by Kenneth Abbott and Duncan Snidal and related IR scholars and analyzes existing commercial law treaties in light of this definition. It concludes that virtually none of these commercial law treaties constitute “hard” international law because nearly all commercial law treaties rely on national courts for enforcement. But Abbott and Snidal’s focus on the extent to which international law is legalized—and especially the extent to which it is enforced by international actors—may matter less with commercial than other more public international lawmaking. This is because the mostly private law governing commercial transactions conceives of obligation and enforcement in ways distinct from its public law counterparts. Part II explains the distinction between private and public laws that govern purely domestic commerce. Many commercial transactions are not governed by regulatory legislation imposing “top down” obligations enforced by the state but rather contractual obligations that are self-regulating and mostly self-enforcing. In the absence of mandatory commercial regulation, businesses assert their interests domestically through privately organized contracts and litigation brought to enforce these contracts as well as through political pressure for reform of judicial administration. Where regulation does exist or has been proposed, businesses may also look to influence this regulation by lobbying legislators and executives. Part III considers the implications of commercial lawmaking for international settings and, in particular, state and non-state (that is, business) interests in the production of international versions of such laws. State sovereignty interests vary depending on the type of international commercial law reform proposed, whether regulatory or otherwise; business’ autonomy interests also vary along this axis. These interests may diverge, although the interests of states and businesses are also interconnected and subject to change based on assertions of influence. Soft law may aid in bridging these differences in various ways—through its gap-filling, advocacy, and socializing functions. Businesses are uniquely capable of fulfilling these functions through soft international law, capabilities that Part III explores both with reference to the detail of various international commercial laws and with regard to broader theoretical concerns

E Pluribus Unum – Out of Many, One Common European Sales Law?

In light of the fragmentation due to the nationalization of civil and commercial law and the growing intensity of cross-border trade in manufactured goods, arguments for the unification of private law surfaced already from the early 20th century. Such attempts resulted in, among others, the CISG, the UPICC or the PECL. In line with this pattern, as an attempt to make Out of Many, One Common European Sales Law, a Proposal for a Regulation on a Common European Sales Law (CESL) was published in 2011. The aim of the present contribution is to explore the background of the Proposal and to assess its significance for the future, with specific attention to the challenges of the digital age. Section I of the paper provides an overview of the process in the first decade of the 21st century leading to the publication of the Proposal, identifying the various stages of making an instrument. This is followed by the description of the Proposal and its evaluation in Section II. Although the immediate implementation and application of the instrument are not feasible, the text contains some promising elements to build on. According to the main findings of the paper, in the new millennium no longer merely international trade in manufactured goods is a chief factor triggering the implementation of international instruments of contract law. The innovations which pose new challenges and regulatory needs, also addressed in the CESL, are trade in digital content and e-commerce. Considering a digital key to the success of regulatory aspirations, the paper thus outlines ways European and international legislation might go in terms of regulating cross-border trade in the age of information technology. Accordingly, the areas to focus on for a start are transactions for the supply of digital content and e-commerce transactions

PKI Interoperability: Still an Issue? A Solution in the X. 509 Realm

There exist many obstacles that slow the global adoption of public key infrastructure (PKI) technology. The PKI interoperability problem, being poorly understood, is one of the most confusing. In this paper, we clarify the PKI interoperability issue by exploring both the juridical and technical domains. We demonstrate the origin of the PKI interoperability problem by determining its root causes, the latter being legal, organizational and technical differences between countries, which mean that relying parties have no one to rely on. We explain how difficult it is to harmonize them. Finally, we propose to handle the interoperability problem from the trust management point of view, by introducing the role of a trust broker which is in charge of helping relying parties make informed decisions about X.509 certificates

The relationship between copyright and contract law

Contracts lie at the heart of the regulatory system governing the creation and dissemination of cultural products in two respects: (1) The exclusive rights provided by copyright law only turn into financial reward, and thus incentives to creators, through a contract with a third party to exploit protected material. (2) From a user perspective purchases of protected material may take the form of a licensing contract, governing behaviour after the initial transaction. Thus, a review of the relationship between copyright and contract law has to address both supply- and demand-side issues. On the supply side, policy concerns include whether copyright law delivers the often stated aim of securing the financial independence of creators. Particularly acute are the complaints by both creators and producers that they fail to benefit from the exponential increase in the availability of copyright materials on the Internet. On the demand side, the issue of copyright exceptions and their policy justification has become central to a number of reviews and consultations dealing with digital content. Are exceptions based on user needs or market failure? Do exceptions require financial compensation? Can exceptions be contracted out by licence agreements? This report (i) reviews economic theory of contracts, value chains and transaction costs, (ii) identifies a comprehensive range of regulatory options relating to creator and user contracts, using an international comparative approach, (iii) surveys the empirical evidence on the effects of regulatory intervention, and (iv) where no evidence is available, extrapolates predicted effects from theory

“Whimsy Little Contracts” with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements

Arbitration clauses have become ubiquitous in consumer contracts. These arbitration clauses require consumers to waive the constitutional right to a civil jury, access to court, and, increasingly, the procedural remedy of class representation. Because those rights cannot be divested without consent, the validity of arbitration agreements rests on the premise of consent. Consumers who do not want to arbitrate or waive their class rights can simply decline to purchase the products or services covered by an arbitration agreement. But the premise of consent is undermined if consumers do not understand the effect on their procedural rights of clicking a box or accepting a product. This Article reports on an empirical study exploring the extent to which consumers are aware of and understand the effect of arbitration clauses in consumer contracts. We conducted an online survey of 668 consumers, approximately reflecting the population of adult Americans with respect to race/ethnicity, level of education, amount of family income, and age. Respondents were shown a typical credit card contract with an arbitration clause containing a class action waiver printed in bold and with portions in italics and ALLCAPS. Respondents were then asked questions about the sample contract as well as about a hypothetical contract containing what was described as a “properly-worded” arbitration clause. Finally, respondents were asked about their own experiences with actual consumer contracts. The survey results suggest a profound lack of understanding about the existence and effect of arbitration agreements among consumers. While 43% of the respondents recognized that the sample contract included an arbitration clause, 61% of those believed that consumers would, nevertheless, have a right to have a court decide a dispute too large for a small claims court. Less than 9% realized that the contract had both an arbitration clause and that it would prevent consumers from proceeding in court. With respect to the class waiver, four times as many respondents thought the contract did not block them from participating in a class action as realized that it did, even though the class action waiver was printed twice, in bold, in the sample contract, including one time in italics and ALLCAPS. Overall, of the more than 5000 answers we recorded to questions offering right and wrong answers, only a quarter were correct. Turning to respondents’ own lives, the survey asked if they had ever entered into contracts with arbitration clauses. Three hundred and three respondents claimed never to have done so. In fact, 264, or 87%, had at least one account subject to an arbitration clause. These and other findings reported in this Article should cause concern among judges and policymakers considering mandatory pre-dispute consumer arbitration agreements. Our results suggest that many citizens assume that they have a right to judicial process that they cannot lose as a result of their acquiescence in a form consumer contract. They believe that this right to judicial process will outweigh what one respondent referred to as a “whimsy little contract.” Our results suggest further that citizens are giving up these rights unknowingly, either because they do not realize they have entered into an arbitration agreement or because they do not understand the legal consequences of doing so. Given the degree of misunderstanding the results demonstrate, we question whether meaningful consent is possible in the consumer arbitration context

Online Review Censorship

Ample anecdotal evidence in the media notes that many businesses seek to ‘silence’ negative reviews, e.g., via legal threat. Despite attention toward this issue, we are aware of no systematic analyses addressing it. We address that gap here, leveraging review data from TripAdvisor.com. First, we estimate that ~1% of truthful reviews are deleted within six months of posting and that negative reviews are significantly more likely to be deleted, consistent with a mechanism of censorship. The effect is substantial; we estimate that a 1-star decrease in rating valence is associated with an approximate 25% (0.25pp) increase in the probability of deletion. Second, we examine how freedom of expression (FoE) in a country associates with characteristics of (uncensored) online reviews. We find that FoE associates with larger review volumes, lower review valence, and faster review posting. We discuss implications for online ratings platforms, consumers, and research opportunities

Class Action-Barring Mandatory Pre-Dispute Consumer Arbitration Clauses: An Example of (and Opportunity for) Dispute System Design?

Ultimately, this essay will conclude that a private, ad hoc dispute system design process did lead to the insertion of class action waivers in mandatory pre-dispute consumer arbitration clauses. In-house and outside counsel certainly played key roles in initiating this process, but it is unclear that any individual lawyers could claim credit or responsibility as designers. The representatives of dispute resolution organizations, meanwhile, played supporting roles-as providers of information and as amici in Supreme Court litigation. The essay will consider whether dispute resolution professionals could have managed their role in the process differently-and if so, why they would have managed it differently. This essay also concludes that the momentum generated by the CFPB\u27s regulatory proposals has created another opportunity for dispute resolution organizations and professionals to play a role in designing a system for the resolution of disputes between consumers and businesses. However, the appropriate role played by these dispute resolution organizations and professionals depends upon the role played by the CFPB, particularly in light of the recent election. If the CFPB survives and acts as a third party, committed to hearing and considering the concerns of all stakeholders and acting in the public interest, and if the agency retains its independence and final decision-making authority over the dispute system\u27s design, then experienced dispute resolution organizations and professionals should be able to play a very valuable dual role as both designers and stakeholders. If the CFPB does not survive or does not retain its independence and decision- making authority, then playing a dual role becomes more problematic. It will then be important to identify those dispute resolution organizations that either do not rely on referrals from corporate repeat players for their survival or those that do rely on such referrals but have nonetheless persisted in working to protect the integrity of the dispute resolution field. These are the organizations that will need to step up and play a design role for the benefit of the dispute resolution field and, even more importantly, for the benefit of our public justice system and our larger polity