For a long time, courts in the United States were viewed as experts in everything. Almost any dispute could be settled in a courtroom. In fact, courts were viewed as the only arena where legal disputes between parties could be settled. Over time, however, the ability of courts to settle disputes efficiently and effectively came into question. Courts got backed up, and volumes of codified law piled up. Litigation progressively became more expensive and draconian. Parties sought viable alternatives. Out of this frustration, alternative dispute resolution (ADR)—and arbitration in particular—was born.

Arbitration is “[a] method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding.”[1] Although arbitration is now widely accepted by the U.S. legal system, this was not always the case. In its infancy, arbitration was shunned as an inferior method of settling disputes. Initially, in fact, the practice was entirely banned.

Judges shunned arbitration for a number of reasons. The most often cited factors were that arbitrators lack as robust an understanding of the law as judges, the lack of adequate judicial oversight of the arbitration process, and the lack of a binding effect. As time went on, however, and the body of American contract law developed, courts became satisfied that individuals could contract with one another to make their future disputes subject to arbitration. However, this freedom-of-contract theory only went so far.

Those who decided on arbitration were forced to remain subject to American law, thus moving the dispute out of the courtroom while maintaining the somewhat fixed variable of the U.S. rule of law. This method of regulating individual agreements came into question as individuals were progressively given more freedom to craft their agreements to meet their individual needs and expectations. Eventually, the rule requiring arbitrations to apply American law gave way to one giving individual contracting parties the ability to choose the applicable law. Although there have certainly been bumps in the road for arbitration, it has weathered the storms and gained a significant amount of respect from almost the entire legal community, including judges whose dockets have become quite a bit more manageable because of the practice.

In short, arbitration allows parties to agree to settle disputes that arise from their dealing outside of the traditional court system and beyond the realm of the traditional rule of law, opting instead for a venue and law they find mutually agreeable. Therefore, the rule of law, at least in the customizable realm of arbitration, has become less of a fixed structure and more adaptive to individual needs and desires. This development has shifted the law from being viewed as a science from which a singular correct answer can be found, to a search for more contextual answers dictated by the parties’ agreement to arbitrate. Stemming almost entirely from the contract setting, this newly discovered malleability of the law at most highlighted the fact that courts are not experts in all things and often do a poor job of settling disputes to the satisfaction of either— if any—of the parties, and at least justified allowing another avenue for parties to take in settling their disputes.

By analogy, it is helpful to think of arbitration and litigation as separate houses, with each arbitral specialization as a room within the arbitration house. At first, religious groups stood by and watched the construction of what would become the house of arbitration. Labor unions were one of the first groups to move in, quickly embracing it and testing its structural soundness. They soon found that arbitration was an excellent outlet for resolving disputes governed by collective bargaining agreements. Other groups then started occupying other parts of the house, each decorating its own room. As the number of individuals embracing arbitration increased, so did the number of arbitrators who focused solely on one type of dispute or one type of arbitrating party.

This specialization added new strength and beauty to the house of arbitration, and resolved an initial discrepancy between it and the litigation house—the latter of which initially had a vast knowledge and understanding of the law and, in turn, how disputes should be decided. By contrast, arbitrators were at first asked to balance the law on one hand and the wishes of the disputing parties on the other. Early critics of arbitration cited this as one of the reasons litigation was superior. But as arbitrators specialized, groups of prospective arbitral parties were able to build de facto court systems within which to settle their disputes, wherein they could have their legal issues decided, but with a slant toward their own internal policy preferences. As the class of arbitrable disputes grew, so did the groups who embraced the practice. Merchants, employers, and banks all began implementing it in some form or another.

Meanwhile, religious groups saw the litigation house tossing out the furniture of the values and beliefs that had, for a long time, gone hand in hand with religion. Too skeptical to move into arbitration at first, religious groups bided their time. In addition to the general concerns about arbitration’s durability—especially its ability to stand up to the wrecking balls of judicial review and expectations for arbitration awards to be consistent with state and federal law—religion was faced with the very real concern that church and state should remain separate. In the eyes of many, cohabitation of legal and religious principles in arbitration set up religious arbitration to be judicially walled off. Courts were always wary of quasijudicial bodies, and were prone to be especially so when religious groups were involved.

  • [1] Id. at 119.
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