ABA House of Delegates Passes Resolution in Support of Commercial Arbitration

On February 22, the ABA House of Delegates passed Resolution 100 in support of arbitration of business-to-business (“b-to-b”) disputes.  This is an important recognition by the American Bar Association of the benefits and importance of arbitration to resolve these disputes.  It reads:

RESOLVED, that the American Bar Association supports the use of arbitration of business-to-business disputes, both domestically and internationally, as an efficient and economical method of dispute resolution.

Arbitration has long been used to provide a prompt, fair, relatively inexpensive, and final way to resolve b-to-b disputes.  Nearly 100 years ago, Congress passed the Federal Arbitration Act, 9 U.S.C. § 1, et seq., to overcome the hostility some courts had to this private method of dispute resolution.

Expansion of arbitration beyond b-to-b disputes to employment, consumer, and other such disputes, has become controversial.  It has, for example, become common for arbitration provisions in consumer contracts to forbid class actions. This has been perceived by some as denying the ability of consumers to effectively vindicate their legal rights against large corporations.  The proposals for such legislation are typically based on the relative lack of bargaining power consumers and employees have against corporations that insist on arbitration and the perceived limitation of the rights consumers and employees might otherwise enjoy in court. 

There are, of course, two sides to this controversy.  But the criticism directed at consumer and employment arbitration has cast some shade on arbitration in general.  This is unfortunate for b-to-b arbitration, given its long history of service in resolving business disputes between parties with significant ability to negotiate their preferred method of dispute resolution.

The report accompanying the resolution is careful to avoid taking any position on the controversies surrounding non-b-to-b arbitration.  Instead, it explains the benefits of b-to-b arbitration including speed, economy, knowledgeable decision-makers, privacy, finality, party control, and a neutral forum for international disputes. And it notes that that b-to-b arbitration has been particularly useful during the recent pandemic.  While courts have been closed or access limited, businesses have had another avenue to resolve their disputes quickly, relieving courts of further congestion. 

The recent ABA resolution reminds us that b-to-b arbitration has been of service for a long time, and issues surrounding arbitration in other contexts should not detract from that record of service.