Judicial Monopoly November 8, 2007Posted by federalist in Government Regulation, Judiciary.
I see no reason why a government should impose a judicial monopoly on civil affairs. If two parties are competent to enter into a contract, then they should also be competent to agree on how that contract should be adjudicated.
Indeed, when given a choice it seems that many American entities would rather have their first appeal through manifestly more cheap and efficient private arbitration. However, the WSJ yesterday noted that the Trial Bar Lobby is tired of losing its monopoly on civil litigation. Which brings us the Arbitration Fairness Act, which “would outlaw pre-dispute arbitration agreements in the future for all private contracts involving consumers, employment and franchising.”
An earlier post here noted the beauty of competition in regulation in principle. The WSJ points out that competition in civil litigation (through arbitration agreements) has proven itself an effective alternative to government monopoly in practice:
Even lawyers concede its virtues. In 2003, an American Bar Association survey found that 78% of lawyers “believe that arbitration is generally timelier than litigation, and 56% feel it is more cost effective.”
One could imagine that without any government oversight a particular industry could form an arbitration cartel at the expense of its customers, but the government already guards against that:
Under existing law, judges can throw out arbitration agreements tilted too far in favor of one party, so most arbitration clauses tend to give the consumer a reasonably fair shake. University of Kansas law professor Stephen J. Ware says that even in cases where arbitration contract terms are more favorable to sellers, the result is generally lower prices for consumers, because the cost of lawyering has been stripped out. “Recognition of this has been standard in the law-and-economics literature for at least a quarter of a century,” he notes.