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Waiving the Right to Arbitrate in the United States: Should the Prejudice Requirement be Discarded?

2023; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4359281

1556-5068

Jack Wright Nelson,

Corporate Law and Human Rights

The decision in Art Shy v Navistar International Corporation, 781 F.3d 820, 2015) confirmed the uncertain state of U.S. law regarding waiving the right to arbitrate. The Federal Arbitration Act (‘FAA’) provides that a court shall stay a court action commenced in the face of a valid arbitration agreement provided that “the applicant for the stay is not in default in proceeding with such arbitration” (9 U.S.C. § 3).The majority of U.S. circuit courts interpret the FAA as requiring that the party seeking to compel arbitration must not have caused its opponent “prejudice.” This most commonly arises in the form of undue cost or delay. Yet the amount of prejudice required differs greatly from circuit to circuit. The Sixth Circuit’s decision in Art Shy illustrates the difficulties in applying the prejudice standard, and raises the question of whether arbitration waiver should require prejudice at all.