Binding arbitration is even better for defendants, though, since all they have to do is pay their friend the arbitrator to rule on their side. There are no checks and balances, no jury of your peers, no appeals process, and no reason for the arbitrator to ever side with you. If you sign a contract that includes a mandatory binding arbitration clause, it means one thing: the other side intends to violate the contract.
I'm familiar with your history on HN and your work with open source and appreciate both, so please do not take offense to this.
You are completely and totally wrong about everything you just said. I run a business and every client signs a contract agreeing to mandatory binding arbitration. Why? Court cases are expensive, and most of my clients are attorneys themselves or have significantly more resources than I do.
Both sides agree on an arbitrator and each side pays 50% of the fee. Arbitration is not some back room circle jerk where the defendant gives the arbitrator a couple hundred bucks for a favorable ruling, and the notion that it is is offensive to people like me who rely on that option. And guess what? If the arbitration was like that, you're within your right to sue.
The problem is not back room deals but how the system converges on local maxima. Say you're consumer C and you have a problem with megacorp A. Megacorp A chooses arbitrator B. B sides with you. Consumer D has a problem with A, and B again sides with the consumer. Arbitrator B is fired by megacorp B. Megacorp A brings in arbitrator D, who sides with Megacorp A. This continues, generating happiness for Megacorp A and plenty of income for Megacorp D, making everyone happy but consumer C.
It's simply how the incentives are aligned. If judges were paid salaries by major corporations and could be fired at the corporation's whim, the court system would, at the very least, seem unfair.
For two small entities wanting to disagree over something, arbitration might work out OK. But it absolutely does not work out between consumers and large corporations. Fair or not, they don't seem fair, and seeming fair is the legal system's number one task.
The comparison to judges would be a fair comparison if both parties paid 50% of the judge's salary, and both parties had to agree on which judge to use. Arbitrators are simply not chosen and paid for by the corporations. The way it is typically done is that one arbitrator is agreed upon by both parties (negating any implications of foul play), or each party chooses one and those two arbitrators choose a third.
I think it was mentioned elsewhere that contracts that are both (A) between parties of vastly disparate power, e.g. Microsoft's EULA and the average Xbox gamer; and (B) "take it or leave it" style contracts have been ruled on at least one occasion to be untenable.
Understanding this is not usually the case in the US, I'd rather have a legal system that seemed unfair unless you researched the details than one tried to seem fair from the outside at the risk of being unfair to specific groups.
