Bills target mandatory arbitration

Business Insurance
Monday, November 3, 2008

Federal legislation that would ban or greatly limit the use of mandatory arbitration to resolve certain contract disputes gained traction in the latest session of Congress and, some say, may win passage in the next Congress.

Mandatory arbitration contract clauses, which require both parties to submit to binding arbitration before taking any dispute to court, have become a widely used way for businesses to avoid the costs and risks of litigation.

While business groups and tort reform advocates have lauded predispute arbitration clauses for keeping disputes out of court, consumer advocates and trial lawyer groups argue they deny consumers due process. Longstanding relationships between arbitrators and the businesses that select them, opponents allege, may cause pro-business bias.

"If you and I have a dispute, and I get to pick the judge and the rules, you're not going to like that very much," said David Arkush, director of Public Citizen's Congress Watch, a Washington-based consumer advocacy group. "There is a range of things I can do, large and small, blatant and subtle, to bias the proceedings.

"Each arbitration provider has its own rules, and I haven't seen a set of arbitration rules that are good for consumers," Mr. Arkush said. "There is no guarantee—in fact, there is virtually no opportunity—of review in court if you lose in arbitration."


"We don't oppose arbitration as long as it's voluntary," said Joanne Doroshow, New York-based executive director of the Center for Justice & Democracy. "But banks and credit card companies, and sometimes health insurers, are slipping mandatory arbitration agreements into contracts that consumers are not aware of."

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