Arbitration, the Law Market, and the Law of Lawyering

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This paper builds on Larry Ribstein's path-breaking work concerning the role of lawyers and bar associations in jurisdictional competition and law production. According to Ribstein, unauthorized practice of law (UPL) rules, which create barriers to entry preventing out-of-state attorney and other professionals from providing services, can actually encourage the development of higher quality legal rules in a state. Ribstein's work also focused on the role of contractual choice clauses in promoting jurisdictional competition for substantive and procedural legal rules. This paper builds on his insights by incorporating the increasingly important role of arbitration into Ribstein's framework and testing empirically for possible effects of jurisdictional competition for arbitration business. We also consider and empirically test for the potential effects of jurisdictional competition on the production of law, including special rules exempting arbitration from ordinary UPL rules and state laws concerning arbitration. Our findings suggest that the adoption of a liberal UPL rule may have a significant effect on attracting legal business, but most other legal changes do not. Moreover, our findings also suggest that some (although not all) of these legal reforms are enacted as coordinated packages, validating Ribstein's insights about the political economy of law production. Finally, our findings suggest that lawyers in many states are finding ways to cleverly respond to international competitive pressures while simultaneously insulating domestic dispute resolution from similar forces, a dynamic not explored in Ribstein's work, and the Supreme Court's strong preemptive stance toward the Federal Arbitration Act may be fueling this segregation.