Legislation introduced to US Senate banning pre-dispute arbitration clauses

This is news that may sound strange to Irish arbitration practitioners and the wider ADR community.

The Arbitration Fairness Act (S. 878/H.R. 1844) was introduced by Sen. Al Franken and Rep. Hank Johnson and would only permit arbitration that is agreed to after the dispute arises, unless the arbitration provision is in a collective bargaining agreement.

The Bill’s preamble, rather surprisingly states:

“Mandatory arbitration can be a huge disadvantage to consumers, workers, and small businesses, often limiting their ability to have any meaningful legal recourse when they are wronged.”

In a statement, Franken said, “I’ve reintroduced the Arbitration Fairness Act to ensure that people and small businesses maintain their right to their day in court when they are cheated.”

As usual things look different to European eyes. The European union has recently introduced a number of measures to facilitate alternative and on-line dispute resolution processes for consumers which have beed widely welcomed as providing an alternative to court action. Many consumers will see the opportunity to go to courts as a less than enticing prospect. (The Small Claims Court, wuth a claims limit of €2,000 being an exception)

But in the US the premise is that “mandatory arbitration undermines the development of public law because there is inadequate transparency and inadequate judicial review,”  and so the legislation has been reintroduced to impose a broad ban on pre-dispute arbitration agreements involving employment and consumer disputes.

There is no congressional action currently scheduled on the bill, and it is considered highly unlikely the measure will see action by the Republican House of Representatives, according to international HR agency BEERG.

The campaigning website ‘Fair Arbitration Now’ describes forced arbitration clauses as ‘an abusive corporate tactic to stamp out consumers’ and employees’ rights’.

According to the website over the last year, the US Supreme Court has issued three decisions that expanded companies’ use of ‘forced’ arbitration clauses in consumer and non-union employment contracts.

It says the Court has allowed companies to restrict the right to access the court by expanding arbitrators’ power and limiting consumers’ and employees’ ability to band together in class actions. But is this a bad thing?

‘Just last month in AT&T Mobility v. Concepcion, the Court gave the green light to corporations to ban class actions in their contracts. So now we are left virtually without recourse and corporations are free to act without any fear that they may be held accountable for their actions.’

Can’t go along with this, I’m afraid. We need more, not less alternative dispute resolution vehicles as alternatives to court and less resort to the formal law system. Looks like just more work for lawyers!!