ALGORITHMIC ARBITRATION: THE USE OF MANDATORY ARBITRATION CLAUSES IN AIAAS AGREEMENTS

Abstract: This research examines mandatory arbitration clauses in AI service agreements. Through empirical analysis of terms of service from diverse AI-as-a-Service (AIaaS) platforms, we identify how arbitration clauses, combined with class action waivers and liability caps, shield tech companies from accountability while concentrating norm-setting power away from transparent judicial processes. The study reveals how these contractual provisions disproportionately benefit established AI services over startups and individuals, prevent potentially useful discovery, and externalize risks of AI development from AI producers onto users. Our findings challenge the efficiency narrative surrounding arbitration, demonstrating how it also functions to produce a favorable legal landscape for AI producers through private ordering.

Keywords: Arbitration, AI, SAAS