Democracy and Dispute Resolution: The Problem of Arbitration

I INTRODUCTION Scholars have approached arbitration, especially under the Federal Arbitration Act, (1) from a variety of perspectives, including doctrinal, (2) historical, (3) empirical, (4) and practical. (5) One aspect that has not yet been fully considered, however, is the relationship between arbitration and constitutional democracy. (6) Yet, as a dispute-resolution process that is often sanctioned by the government, (7) that sometimes inextricably intertwines governmental and private conduct, (8) and that derives its legitimacy from the government, (9) it is appropriate--indeed, our responsibility--to ask whether arbitration furthers the goals of democratic governance. (10) It is only sensible that state-supported dispute resolution in a democracy should strengthen, rather than diminish, democratic governance and the civil society that supports it. (11) The debate over "mandatory arbitration" (12)--that is, the imposition of binding arbitration through contracts of adhesion, employee handbooks, consumer terms and conditions, and other unilaterally drafted documents, under the authority of the Federal Arbitration Act and related state laws--seems to call the question. Since the late 1980s, plaintiffs' and defense lawyers have been engaged in an intense battle over mandatory arbitration in the courts, the legislatures, and the media. (13) This is not merely a fight over a pocketbook issue. Rather, the deeply felt arguments of both sides resonate with the most fundamental of democratic virtues: individual liberty, the rule of law, and fundamental fairness This is not surprising considering the profound importance of the rule of law and dispute resolution in the daily functioning of any democracy. What is surprising, however, is how little scholarly or judicial attention has been given to the topic. With rare exception, (14) the question of the relationship between arbitration and democracy, or for that matter, democracy and dispute resolution generally, (15) has simply fallen through the cracks of scholarly attention. A full exploration of the relationship between democracy and dispute resolution is beyond the scope of this inquiry. This Article seeks only to bring the submerged issue of arbitration's relationship to democracy to the surface of the mandatory arbitration debate. Its goal is relatively modest: to recognize and articulate the relationship between democracy and arbitration as an issue worth considering, to analyze the democratic character of arbitration, and to suggest some implications of this assessment. The discussion draws primarily upon U.S. constitutional democracy, (16) but hopefully is broad enough to begin to inform the experiences of other democracies. (17) Part II establishes an operative understanding of what democracy is, explores the role of dispute resolution in a democracy, and identifies certain core substantive values of democratic governance that may be used to assess the democratic character of a dispute-resolution method, process, or system, namely: personal autonomy, participation, accountability, transparency, rationality, equality, due process, and the promotion of a strong civil society. Part II suggests that public adjudication represents a high embodiment these values and that, under U.S. democracy, it constitutes democracy's endowment for dispute resolution. Part III applies this lens of democratic theory to arbitration and concludes that arbitration has a contingent democratic character: As a dispute-resolution process, arbitration is generally undemocratic, but it acquires democratic legitimacy when parties actually agree to arbitrate their disputes because it furthers the unifying democratic value of personal autonomy. When involuntary, however, arbitration only frustrates the larger goals of democratic governance. Part IV discusses the potentially significant systemic costs of institutionalized, mandatory, and binding arbitration: the possible diminishment of public trust in the rule of law as an institution, and a concomitant erosion of the social capital that is necessary for effective democracy. …