Originally from: The Law and Practice of Arbitration - 4th Edition - Hardcover
The Law and Practice of Arbitration - 4th Edition - Electronic
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Chapter Five: Arbitration and Federalism
1. Initial Steps toward "Federalization"
The FAA was enacted during the era of Swift v. Tyson.1 The
decision in Swift v. Tyson provided that federal courts hearing state
law cases on a diversity basis were bound by state court opinions
only when the cases before them involved the construction of state
constitutions or statutes. When such provisions were not involved,
the federal courts were free to devise their own rules of decision
independently of state court rulings. Erie Railroad Co. v. Tompkins2
overruled Swift v. Tyson, providing that "there is no general federal
common law,"3 and that "Congress has no power to declare
substantive rules of common law applicable in a state, whether they
be local in their nature or general, whether they be commercial law
or a part of the law of torts."4 In effect, Erie reversed the prior
doctrine by requiring federal courts, in cases of diversity jurisdiction,
to apply state law except when the controversy was governed by the
U.S. Constitution or a significant Act of Congress.
Viewing the enactment of the FAA from the perspective of
Erie, the question became whether the federal law on arbitration--
providing for the enforceability of arbitration agreements and
awards--was merely a set of procedural regulations or legislation that
created substantive rights and was, therefore, binding upon the federal
courts in all cases. More specifically, in a diversity of citizenship case
involving predominantly state interests, could the provisions of the
FAA dislodge the application of a less favorable or perhaps contrary
(but otherwise controlling) state statute or decisional law?
Under Erie, the courts could have envisaged the
displacement of applicable state law on arbitration as an
impermissible preemptive application of general federal common
law. The application of state arbitration laws by federal courts sitting
in diversity could have fragmented any national consensus on
arbitration and undermined the FAA’s clear mandate to make
arbitration an autonomous and viable alternative adjudicatory
process. Another view of the federalism dimension of the FAA in
diversity cases, however, could be advanced. Because Erie mandated
the application of state law in all diversity cases but those in which...
Chapter Five: Arbitration and Federalism
1. Initial Steps toward "Federalization"
2. The Federalism Trilogy
3. The Faux Pas in Volt
4. Affirming the Federalization Policy
Thomas E. Carbonneau is the Samuel P. Orlando Distinguished Professor of Law at Penn State's Dickinson School of Law. Professor Carbonneau is commonly regarded as one of the world’s leading experts on domestic and international arbitration. He serves on the editorial board of La Revue de L'Arbitrage and is the author of ten highly acclaimed books and 75 scholarly and professional articles on arbitration. Professor Carbonneau and was formerly the Moise S. Steeg Jr. Professor of International Law at Tulane University School of Law.
