The Interplay Between U.S. Statutory Rights and Public Policy Under the FAA and New York Convention in International Disputes

Daniel M. Schwarz, University of Miami School of Law/University of Miami Law Review

Abstract

The “prospective waiver” doctrine allows U.S. courts to invalidate or sever arbitration clauses in otherwise valid agreements to arbitrate where arbitrating under foreign law would prevent a U.S. party from seeking relief under a U.S. statute. The loss of this opportunity is said to affront U.S. public policy. This paper acknowledges that courts’ application of this idea has resulted in the need for a more fundamental revisiting of the question of whose law should be “mandatory” in international arbitration. But more specifically, this paper proposes appropriate sets of factors for pre-arbitration courts, arbitrators, and post-arbitration enforcement courts to consider in balancing the competing forces of desiring to protect vulnerable parties, to hold parties to their bargain, to give regard to the general preference for international arbitration as a beneficial means for resolving international commercial disputes, and otherwise to ensure that the interest in effective implementation of public policy is not stifled.