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Vanderbilt Law Review

First Page

1189

Abstract

Arbitration implicates serious constitutional concerns that have not received adequate attention in case law or commentary. Recent litigation in the D.C. Circuit over the constitutionality of the North American Free Trade Agreement ("NAFTA") represents the most recent, high-profile example. A centerpiece of NAFTA and its implementing legislation is an arbitration mechanism that divests Article III courts of virtually all jurisdiction over countervailing duty and anti-dumping claims and invests that authority in panels of Associate Professor of Law, Columbus School of Law, Catholic University of America. Arbitration implicates serious constitutional concerns that have not received adequate attention in case law or commentary. Recent litigation in the D.C. Circuit over the constitutionality of the North American Free Trade Agreement ("NAFTA") represents the most recent, high-profile example. A centerpiece of NAFTA and its implementing legislation is an arbitration mechanism that divests Article III courts of virtually all jurisdiction over countervailing duty and anti-dumping claims and invests that authority in panels of arbitrators whose decisions are subject to virtually no federal court review. A group of American softwood lumber producers, dissatisfied with the arbitrators' decision, challenged NAFTA's dispute resolution mechanism on a variety of grounds, including its incompatibility with Article II. The parties ultimately settled the case, perhaps motivated in part by fear of the consequences if a court invalidated the scheme. As representatives of both Canada and the U.S. government made clear during oral argument in the D.C. Circuit, a successful challenge had the potential to unravel the entire NAFTA regime.

Had the settlement not been struck, any judicial decision would have had enormous repercussions for arbitration. If the D.C. Circuit had held that NAFTA's Dispute Resolution Boards violated Article III, it would have destroyed a keystone of the legal architecture supporting America's trade and investment policy over the past several decades. It also would have jeopardized various other markets, such as foreign direct investment, that likewise depend on robust arbitration systems. Alternatively, had the D.C. Circuit sustained NAFTA's scheme, it would have marked the first time that a federal appellate court had upheld an arbitral system that provided for virtually no judicial review by Article III courts. Moreover, it is unlikely that this holding could have been confined to the international trade context. Unlike other nations, the United States does not accord different legal treatment to different types of arbitration. Given this "one size fits all" quality of American arbitration jurisprudence, a decision upholding NAFTA's scheme would have provided an opportunity for similarly constricted judicial review in other areas, such as securities law and employment discrimination.

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