In a way, there’s a parallel between corporations mandating arbitration cases and the investor-state dispute settlement (ISDS) process placed into international trade agreements. Under this process, corporations can sue sovereign governments if they believe regulations violate the terms of the trade agreement. Like arbitration, ISDS stays outside national courts, and corporations can win cash awards based on expectations of future profits lost through the regulatory changes. Private lawyers, not judges, hear the cases.
So the lesson here is that corporations don’t respect the judicial system as much as they want to bend it to their advantage. As 100 law professors wrote in a letter to Congress and the U.S. Trade Representative this week, ISDS “grants foreign corporations a special legal privilege,” weakening the rule of law. You can say the same things about mandatory arbitration clauses. In both cases, corporations can step outside the legal system and into a process they feel they can control, whether to chill regulations or to stop individuals from suing for relief.
Both ISDS and consumer arbitration have no appeals process. They feature no public oversight of the arbitrators. They create no precedent on corporations that they must follow. So there’s no accountability, no review and no fairness. The only difference is that ISDS exists as an option for corporations; consumers have no alternative but arbitration.
The good news is we have a consumer agency now that has managed to study arbitration, with a focus on how it affects ordinary people, not the financial industry. I hope they finish the job.