In my view, legislatures, rather than courts or parties, should decide whether (and to what extent) courts should review arbitral awards for errors of law. The optimal legislative mechanism should not be compulsory but should offer parties the choice whether to "opt-in" to this regime of expanded review by inserting language to that effect in their arbitration agreement. A legislative solution with an "opt-in" feature has a sounder doctrinal foundation, better respects the distribution of power between various branches of government, involves a lower risk of error and minimizes transaction costs. From this position, two additional conclusions follow: first, courts should not review arbitral awards for manifest disregard of the law; secondly, courts should not enforce party-based expansions of the grounds for judicial review of arbitral awards. The article develops this thesis in three sections. The first section introduces the law in the United States on judicial review of arbitral awards for legal errors. It focuses on the interpretation of the FAA by the federal courts, which have given the most complete treatment to this issue, and also draws on examples from other countries' arbitration laws and those of individual states. The second section analyses the relative advantages and disadvantages of vesting courts, parties or legislatures with the power to regulate judicial review of arbitral awards for legal errors. The final section explores the conclusions of this analysis and sketches a future research agenda.
Peter B. Rutledge,
On the Importance of Institutions: Review of Arbitral Awards for Legal Errors
Available at: http://digitalcommons.law.uga.edu/fac_artchop/619