The Legal System in the U.S.

and the Americas

The impact on international commercial arbitration
(A very short overview)

Richard Williamson, Professor Emeritus

University of Miami School of Law
 FAMILIAR IMAGES OF
THE U.S. GOVERNMENT

Architect of the Capital

 Key Features of U.S. Constitution
Quick History: Fear of governmental power, but a
weak central confederation had failed. The
solution: A Constitution providing a much
stronger central government, but protected from
governmental abuse by:
• Strong preservation of individual rights
• Separation of Powers
• Federalism
 Individual Rights in the Constitution
and Bill of Rights
• The Constitution, as initially proposed, had only a few guarantees of
individual rights. As a result, a political compromise became necessary to
get the document ratified by the states. The result was the famous “Bill of
Rights”, ten amendments to the original Constitution, including freedoms
of religion, press, speech, and assembly, rights to a fair trial, and states’
rights, which could not be violated by the new federal government.
• Most of these were applied to the states in the years after the Civil War.
• The original Constitution did have a few protective provisions. The most
important for arbitration is that that no state may pass a “Law impairing
the Obligation of Contracts.” This provision has been interpreted to also
apply to the federal government, and a “law” was interpreted very broadly.
Baron de La Brède et de Montesquieu
• Winemaker (first to
create Cabernet
Sauvignon)
• Lawyer, Judge &
Legislator
• Famous Political
Philosopher
 Separation of Powers
• The leaders of the revolution against England, and the drafters of the
Constitution were great admirers of the influential book “The Spirit of
the Laws” by the French political philosopher Montesquieu.
• Montesquieu admired the British version of the Monarchy over the
more absolutist French version (in this, he somewhat misunderstood
the structure of the British government.)
• What he favored was a complete separation of the Legislative,
Executive and Judicial functions of government.
 Montesquieu’s Separation of Powers

Legislative Executive Judicial

Constitution’s Separation of Powers

Legislative Executive Judicial

 Legislative Function
Impact on Arbitration
• Most of the listed powers in the Constitution are granted to the Congress.
• When it comes to arbitration, the Congress has the power to enact laws
(subject to a possible veto by the President, which is subject to a possible
override by the Congress).
• Following the passage of the Federal Arbitration Act in 1925, there has
been relatively little new legislation concerning arbitration.
• There has been recent pressure from Democrats in Congress to reduce the
role of arbitration in consumer finance, and employment disputes, but not
concerning international commercial arbitration.
• The Congress, especially the Senate, also has a vital role concerning
treaties involving arbitration, and implementing legislation.
 Executive Branch
Impact on Arbitration
• The executive powers under the Constitution are vested in a
President, who is tasked (among other things) with seeing to the
faithful enforcement of laws.
• Congress often delegates its authority over a particular matter to the
Executive (i.e. the President or one of the Executive Branch Agencies).
This has led to a vast increase in the relative power of the Presidency.
• That is not much the case concerning arbitration.
• Federal agencies do have some roles, particularly in some domestic
arbitration (labor/management disputes, some consumer matters, or
when the government itself is a party to a legal dispute.)
 The Judicial Branch
Impact on Arbitration
• The head of the Judicial Branch is the Supreme Court. In almost all
cases, it takes cases only that it feels merits its attention.
• It has ruled on many arbitration issues, virtually always in support of
arbitration and significantly narrowing the exceptions and limitations
that are in the Federal Arbitration Act.
• That is true for international commercial arbitration as well.
• There is a system of lower courts, beginning with the 94 Federal
District Courts, and then 11 regional Circuit Courts of Appeals.
Unsuccessful litigants may bring a case to the relevant appeals court
as a matter of right. Such cases are nearly always decided on legal
grounds, and not on a re-litigation of the facts of the case.
 The Judicial Branch (continued)
• The U.S. legal system grew out of the Common Law system of England, and
even though there has been a vast explosion of statutory laws, important
aspects of the Common Law remain.
• A critical one is the role of precedent. District Courts are bound to
interpretations of law from their Appeals Court. Sometimes two Appeals
Courts will have differing interpretations of a legal provision, meaning that
unless the Supreme Court decides the matter, the law can differ depending
on what Appeals Court jurisdiction one is in. That has happened quite
often concerning arbitration.
• Courts also have supervisory functions in arbitration, e.g. appointing
arbitrators when the parties cannot agree, working through international
treaties or Letters Rogatory to obtain discovery in foreign countries,
confirming arbitral awards, and several others.
States of the United States

Not Shown: Alaska, Hawaii, or

the 8 territories
 Federalism
Impact on Arbitration
• The United States is a federation, with legal authority split between
the national government and the 50 states.
• Each state has its own constitution, its own body of laws, its own
legislature which makes laws, a Governor who is the chief executive,
its own administrative agencies, and its own multi-level court system.
• The Constitution provides that the powers of the Federal Government
are limited to the grants of authority in the Constitution itself, but
many of the provisions have been very broadly interpreted.
• Nevertheless, in many areas of law, the states have a much bigger role
than the federal government, including substantive contract law.
 Federalism continued
• The Constitution contains a Supremacy Clause, which specifies that a valid
law of the United States (whether a constitutional provision, treaty,
statute, regulation, or court decision) always takes precedent over a state
law dealing with the same matter.
• The consequence for arbitration is that the law governing arbitrations per
se are entirely federal; the states have no role unless federal law does not
address the matter. [Example, the FAA says nothing about who may
represent parties in an arbitration, and states are free, if they wish, to
require attorneys in a matter being decided in their state to be licensed to
practice law in their jurisdiction.]
• On the other hand, in most cases, the substantive law governing a contract
will be state law.
 Latin American Map
Showing Spanish and Portuguese Speaking Countries

No significance to the Color Red

Map colors Haiti & French Guiana incorrectly
 Government in the Americas
• All the Latin American democracies utilize the Presidential system of
government, or some modification of it.
• A number of the governments grant the President extensive powers
to rule by decree, but others do not have that as a common practice.
• Countries also vary considerably in the extent to which their courts
rule on the constitutionality of statutes and decrees.
• Though there are many similarities, each government has its own
body of legislation.
• The non-Latin American countries other than the U.S. mostly have a
Parliamentary system of government and utilize Common Law.
 Arbitration in Latin America
• Like the U.S., Latin American courts were initially quite hostile to
arbitration. That was especially true for international cases.
• That remained generally true long after the U.S. had shifted to a pro-
arbitration policy. However, after WW II, that began to change. The last
holdout was Brazil. In 2001, it ratified the New York Convention and its
Supreme Court ruled arbitration constitutional.
• Now, all the largest Latin American countries and most of the smaller ones
have favorable arbitration legislation, many based at least in part on the
UNCITRAL Model Law. All are parties to the New York and/or Panama
Conventions, and some have adopted the ICSID Convention. Most
international cases take place in the U.S. (NY or Miami)
 WARNING
Just because most Latin American countries:
•are Presidential and utilize Civil Law;
•have become parties to the same arbitration-
related treaties; and
•have somewhat similar arbitration laws
•Does not mean you can assume they are the
same. Each must be investigated separately!