Private Courts

September 25th, 2014   Submitted by Anthony Caprio

MeanJudgeTwo of the main questions asked by statists about Anarcho-Capitalism is, “Who will defend us?” and “Who will handle the court system?” For the answer to the first question please see my articles “Defense and the State,” “Costa Rica and Defense,” “Liechtenstein,” and “Maritime Defense.” In these articles I show real world examples of defense that’s not being provided by the state, and that the people living in these territories are thriving and prosperous despite being located in some violent and dangerous points in world history. For the answer to the second question let’s look at the issue of private courts.

This is one aspect of Anarcho-Capitalism that seems to have become extremely popular. The American Arbitration Association (AAA) hears over 2 million cases each year, and hundreds of thousands of cases are heard every year by other agencies and individuals. The exciting thing about this statistic is that every year millions of people are opting out of what is allegedly one of the most important roles of government (for those who believe in government). I doubt many of the people involved in these cases are Anarcho-Capitalists. So, why would they chose a private alternative over the state system? For those of us in the liberty movement the answer is obvious. The government tends to be incompetent at best, and evil at worst. People instinctively recognize this, and shy away from the option with a monopoly on violence at all costs.

The majority of arbitration cases are business related disputes. This makes perfect sense because commerce is based on voluntary exchange. So, when a dispute arises the preferred method of resolution is voluntary, rather than a state backed court, which can impose harsh penalties backed up by armed men with the power to place people in cages or confiscate property.

A common question that arises is, “How are private systems of arbitration enforced?” The simple answer is they usually are not. That’s the beauty of voluntary association. No one holds a gun to your head to force you to do anything. So, why would the losing party abide by the ruling? As anyone who has worked in the private sector knows, a company lives and dies by its reputation. A firm with a bad reputation does not stay in business for long in a free market. If you are seen as unreasonable, or unfair, why would a customer want to do business with you? Especially when they have the option of using a competitor with a better a reputation?

The same goes for individuals. The most important thing you have in life is your reputation, and no one wants to be seen as unreasonable, irrational, or incompetent. Even the people I have known who are unreasonable, irrational, or incompetent do not tend to see themselves this way. Their delusion is often times protected by some faulty feed back mechanism. In other words some person or organization protects them from the consequences of their actions. This can be done by a person’s position in an organization (a bureaucrat who cannot be fired), a protected legal status (diplomatic immunity), or some other benefactor who is immune to their behavior (a spoiled child who is protected by their parents). This concern for reputation is ultimately what binds decisions in arbitration. I would also argue that it is what makes civilization possible.

Often companies and individuals involved in arbitration will continue to do business with each other. The last company I worked for was a firm that specialized in custom engineering. Private arbitration was called for in our contracts as the method of dispute resolution with our customers. We were involved in numerous arbitration disputes with customers that we did repeat business with. Both sides had things they were unhappy with, but ultimately each side found the business relationship profitable, and decided to carry on.

Other key reasons private arbitration is used is disputes are resolved faster, and both parties can chose an arbitrator with specialized knowledge in their area of expertise. What does the average judge and jury know about mechanical engineering, computer programming, consulting or music? If you have a dispute with someone, chances are you want them making an informed decision based on the facts. If the person deciding your case has no knowledge of your industry they may make their decision based solely on emotional appeal. To fill the niche in this market arbitrators have arisen who specialize in nearly every field imaginable.

The market is already rising to meet the demand for arbitration.

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14 Responses to “Private Courts”

  1. Audrey BarberNo Gravatar says:

    This idealogy may work in the long run but it wouldn’t help the person who was wronged at the time. Take “wrongful termination” for instance. This doesn’t get the person’s job back like it would through the courts…..this would have to happen over and over again until the company’s “bad reputation” would become apparent to the general public. Think of a big city like LA or NY….how long would that take to get around? What if you have a very unique business without competitors to speak of…….I just think that we need laws…..maybe there are too many of them but laws anyway. Since my background was in real estate and I’d hate to think of not having zoning laws. You build your dream house and next thing you know there is a sewage plant next door.

  2. SSemansNo Gravatar says:

    Very abstract. Don’t these private arbitration services, such as the ones set up by the banking industry, have the reputation of favoring the businesses that pay them rather than consumers? Do any of these private courts use juries? Sounds like a good concept for litigants of equal power, such as banks, or tech companies, suing each other over abstract issues, but inevitably a bad deal for individuals. Then, too, there’s the issue of competing courts – there HAS to be a “supreme” court, with access to socially sanctioned enforcement mechanisms.

    • macsnafuNo Gravatar says:

      The best protection for unequal litigants is still private arbitration, because of competition: both parties have to agree to which court or arbitrator they will go before.

      Also, if both parties *do* voluntarily agree to the court or arbitrator, then there’s no real need or point for an appeal or a “final arbiter”. If one party has no trust in a particular court or arbiter, then they simply don’t agree to go before them, and select a different court or arbiter.

  3. Jonathan ThompsonNo Gravatar says:

    @ Audrey – Neither does the current system. It can take years for wrongful termination suits to get through the court system. Also, things like zoning laws can be implemented in a better way. For example, by having insurance systems wherein anyone polluting or otherwise endangering you and your neighborhood would cover your needs, while going into arbitration with the offending business/neighbor, potentially resulting in a catastrophic financial loss unless they negotiate.

    @SSemans – Would i think you are saying is we need a “final verdict” for various issues and appeals. Having a supreme court do it is the worst way possible. They are beholden to absolutely no one for the results of their decisions and their verdict is back by violence. Instead, we can have the competing courts involved appeal to a 3rd party court which will have it’s reputation and finances on the line as a result of bad decisions. We simply make that court the final decision. Failure to comply will initiate the punitive clauses of contracts of the parties in violation, rendering them financially destroyed.

  4. Anthony CaprioNo Gravatar says:

    Thanks Jonathan Thompson! You answered these objections perfectly. The only thing I would add is under AnCap/ Voluntaryist philiosphy there is no such thing as wrongful termination. Your employer has the right to be a jerk if they want to be a jerk. In a free market employees can leave and go to firms that treat them better. I have left multiple jobs where my value was under appreciated and moved to employers that paid me better and showed me greater respect.

    • HReardenNo Gravatar says:

      Uh, why would there not be employment contracts under AnCap? If an employee has a contract that states the grounds for termination and believes they were wrongfully terminated they could bring suit against the employer for breech of contract. Explain why that would not be possible under AnCap.

  5. HReardenNo Gravatar says:

    There is an episode of Bonanza that has an example of a dispute settled by free market arbitration instead of the state court system.

    See: http://youtu.be/MN35OY3u3_Y#t=32m40s

    • HReardenNo Gravatar says:

      Well it is a free market court. These types of courts existed in the past in the 19th century in particular . It is an ad hock court established to settle a dispute. This court in the episode was a court to settle a land dispute that was called a miner’s court.

  6. Anthony CaprioNo Gravatar says:

    @HRearden you are correct in saying that under an AnCap system you could have a private contract that stipulates the terms of employment and the consequences for wrongful termination. When I heard the term wrongful termination used in the previous comments. I thought of how that term is used today in the USA which usually means some who got fired tries to sue their company for some violation of state and federal law. This of course would not exist under an AnCap system employers would be free to hire and fire at will provided they did not violate any VOLUNTARY agreement. And yes miners courts and various other methods of arbitration have existed for over one hundred years.

  7. Audrey BarberNo Gravatar says:

    The reason that brought up “wrongful Termination” is because a friend of mine, age 37, just got hired by a contractor that was to do weatherization of homes for the county or state (don’t remember which). He was sent to a class to be trained and tested in which he got a 96% on his tests. They were very impressed with him. After the classes were over he mentioned to a fellow worker that he has a defibulator and has had it in for many years. it got back to his supervisor and he was FIRED for not mentioning it. It was never asked of him in the application nor was there a physical given. They said that he was being deceitful, so he was fired not even laid off. Couldn’t that come under the “rule” of wrongful termination?

    • DaveNo Gravatar says:

      Wasn’t he being deceitful, though? Working on homes is physically-demanding work, and the defibulator could indicate that he may not be able to do the work. The contractor needs people who can do the job.

      And, the fact that this was work done for the county or state probably led to him being fired faster. Once your friend started working for a government-funded project, he probably had more “rights” than before he started working. Thus, why not fire him before work begins and not take the chance?

  8. Michael HendricksNo Gravatar says:

    I don’t think reputation is enough, these firms can engage in counter intelligence.