Arbitration in the United States of America
Encyclopedia
Arbitration
, in the context of United States law
, is a form of alternative dispute resolution
— specifically, a legal alternative to litigation whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing) to a neutral third party (the arbitrator(s) or arbiter(s)) for resolution. In practice arbitration is generally used as a substitute for judicial systems, particularly when the judicial processes are viewed as too slow, expensive or biased. Arbitration is also used by communities which lack formal law, as a substitute for formal law.
Arbitration may also serve a distinct purpose: as an alternative to strikes and lockouts as a means of resolving labor disputes. Labor arbitration comes in two varieties: interest arbitration, which provides a method for resolving disputes about the terms to be included in a new contract when the parties are unable to agree, and grievance arbitration, which provides a method for resolving disputes over the interpretation and application of a collective bargaining agreement.
During the Industrial Revolution
, large corporations became increasingly opposed to this policy. They argued that too many valuable business
relationships were being destroyed through years of expensive adversarial litigation, in courts whose rules differed significantly from the informal norms and convention
s of businesspeople (the private law of commerce
, or jus merchant). Arbitration was promoted as being faster, less adversarial, and cheaper.
The result was the New York Arbitration Act of 1920, followed by the United States Arbitration Act of 1925. Both made agreements to arbitrate valid and enforceable (unless one party could show fraud or unconscionability or some other ground for rescission which undermined the validity of the entire contract). The USAA is now known as the Federal Arbitration Act
. Due to the subsequent judicial expansion of the meaning of interstate commerce, the U.S. Supreme Court reinterpreted the FAA in a series of cases in the 1980s and 1990s to cover almost the full scope of interstate commerce. In the process, the Court held that the FAA preempted many state laws covering arbitration, some of which had been passed by state legislature
s to protect their consumer
s against powerful corporations.
Since commercial arbitration is based upon either contract law or the law of treaties, the agreement between the parties to submit their dispute to arbitration is a legally binding contract
. All arbitral decisions are considered to be "final and binding." This does not, however, void the requirements of law. Any dispute not excluded from arbitration by virtue of law (for example, criminal proceedings) may be submitted to arbitration.
Furthermore, arbitration agreements can only bind parties who have agreed, expressly or impliedly to arbitrate. Arbitration cannot bind nonsignatories to an arbitration contract, even if those nonsignatories later become involved with a signatory to a contract by accident (usually through the commission of a tort
).
, such as the National Labor Union
, called for arbitration as early as 1866 as an alternative to strikes to resolve disputes over the wages, benefits and other rights that workers would enjoy. Governments have also relied on arbitration to resolve particularly large labor disputes, such as the Coal Strike of 1902
. This type of arbitration, wherein a neutral arbitrator decides the terms of the collective bargaining agreement, is commonly known as interest arbitration. The United Steelworkers of America adopted an elaborate form of interest arbitration, known as the Experimental Negotiating Agreement, in the 1970s as a means of avoiding the long and costly strikes that had made the industry vulnerable to foreign competition. Major League Baseball
uses a variant of interest arbitration, in which an arbitrator chooses between the two sides' final offers, to set the terms for contracts for players who are not eligible for free agency. Interest arbitration is now most frequently used by public employees who have no right to strike (for example,, law enforcement and firefighters).
Unions and employers have also employed arbitration to resolve employee and union grievances arising under a collective bargaining agreement. The Amalgamated Clothing Workers of America
made arbitration a central element of the Protocol of Peace it negotiated with garment manufacturers in the second decade of the twentieth century. Grievance arbitration became even more popular during World War II
, when most unions had adopted a no-strike pledge. The War Labor Board, which attempted to mediate disputes over contract terms, pressed for inclusion of grievance arbitration in collective bargaining agreements. The Supreme Court subsequently made labor arbitration a key aspect of federal labor policy in three cases which came to be known as the Steelworkers' Trilogy. The Court held that grievance arbitration was a preferred dispute resolution technique and that courts could not overturn arbitrators' awards unless the award does not draw its essence from the collective bargaining agreement. State and federal statutes may allow vacating an award on narrow grounds (e.g., fraud). These protections for arbitrator awards are premised on the union-management system, which provides both parties with due process. Due process in this context means that both parties have experienced representation throughout the process, and that the arbitrators practice only as neutrals. See National Academy of Arbitrators
.
The process operates under its own rules, and is described in an article Introduction to Securities Arbitration. Securities arbitrations are held primarily by the Financial Industry Regulatory Authority ("FINRA").
decided that if the arbitration clause includes a provision which stated that the arbitrator "shall have exclusive authority to resolve any dispute
relating to the interpretation, applicability, enforceability" of the clause. The Federal Arbitration Act typically allows federal courts to decide these types of "gateway" or validity questions, but the Supreme Court ruled that since Jackson targeted the entire contract rather than a specific clause, the arbitrator decided the validity.
Arbitration clauses of companies such as Blockbuster, AT&T, and Talk America have been ruled unconscionable and, therefore, unenforceable. However arbitration clauses have been upheld repeatedly as well.
In insurance
law, arbitration is complicated by the fact that insurance is regulated at the state level under the McCarran–Ferguson Act. From a federal perspective, however, a circuit court ruling has determined that McCarran-Ferguson requires a state statute rather than administrative interpretations. The Missouri Department of Insurance attempted to block a binding arbitration agreement under its state authority, but since this action was based only on a policy of the department and not on a state statute, the United States district court
found that the Department of Insurance did not have the authority to invalidate the arbitration agreement.
Some states, such as Texas
, Washington, and Tennessee
have held that the time limit does apply, even when you dispute the existence of an arbitration agreement in the first place. Texas is particularly consumer-unfriendly in this respect. In that state, not only does the time limit apply, no matter on what grounds you dispute the award, but even if you are within the three month time limit, "[t]he nonexistence of an arbitration agreement is not one of the grounds upon which an arbitration award may be vacated under the FAA," effectively allowing anyone in Texas to unilaterally file arbitrations against anyone else, contract or no contract, and the other party who did not want to arbitrate is left without recourse.
Missouri
takes a slightly more consumer-friendly approach, but still largely favors proponents of arbitration. Missouri recognizes lack of an arbitration agreement as a grounds to vacate, but still requires the person seeking vacature to prove that there was no agreement to arbitrate, effectively requiring the opponent of arbitration to prove a negative
.
The United States Court of Appeals for the First Circuit
, however, has taken the opposite approach, and argued that the three month time limit is not triggered until there is an agreement to arbitrate. Arkansas
has adopted the First Circuit's approach to the issue. However, neither of these cases specify whether or not the opponent to the arbitration has the burden of proof, like in Missouri.
rules and the ICSID rules. The rules to be followed by the arbitrator are specified by the agreement establishing the arbitration.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(Done at New York, 10 June 1958; Entered into force, 7 June 1959; 330 U.N.T.S. 38, 1959) provides for the enforcement of foreign arbitral awards on the territory of the contracting parties. Similar provisions are contained in the earlier Convention on the Execution of Foreign Arbitral Awards (Done at Geneva, 26 September 1927; Entered into force, 25 July 1929; L.N.T.S. ???).
Some jurisdictions have instituted a limited grace period during which an arbitral decision may be appealed against, but after which there can be no appeal. In the case of arbitration under international law, a right of appeal does not in general exist, although one may be provided for by the arbitration agreement, provided a court exists capable of hearing the appeal.
When arbitration occurs under U.S. law, either party to an arbitration may appeal from the arbitrator's decision to a court, however the court will generally not change the arbitrator's findings of fact but will decide only whether the arbitrator was guilty of malfeasance, or whether the arbitrator exceeded the limits of his or her authority in the arbitral award or whether the award conflicts with positive law. The Supreme Court has described the standard of review as one of the narrowest known to Western jurisprudence. Wherever so seen, arbitration may be the best approach to the legal manners and parties involved.
It is open to the parties to restrict the possible awards that the abitrator can make. If this restriction requires a straight choice between the position of one party or the position of the other, then it is known as pendulum arbitration
or final offer arbitration. It is designed to encourage the parties to moderate their initial positions so as to make it more likely they receive a favourable decision.
No definitive statement can be made concerning the credentials or experience levels of arbitrators, although some jurisdictions have elected to establish standards for arbitrators in certain fields. Several independent organizations, such as the American Arbitration Association
and the National Arbitration Forum
, offer arbitrator training programs and thus in effect, credentials. Generally speaking, however, the credibility of an arbitrator rests upon reputation, experience level in arbitrating particular issues, or expertise/experience in a particular field. Arbitrators are generally not required to be members of the legal profession.
To ensure effective arbitration and to increase the general credibility of the arbitral process, arbitrators will sometimes sit as a panel, usually consisting of three arbitrators. Often the three consist of an expert in the legal area within which the dispute falls (such as contract law in the case of a dispute over the terms and conditions of a contract), an expert in the industry within which the dispute falls (such as the construction industry, in the case of a dispute between a homeowner and his general contractor), and an experienced arbitrator.
, are actually binding arbitration. The most famous example is The People's Court
. Judge Judy
is another one.
of Wisconsin
and Congressman Hank Johnson
of Georgia
, together with numerous co-sponsors in both Houses, introduced the Arbitration Fairness Act (S. 1782, H.R. 3010) in the U.S. Congress. The bill
would prohibit mandatory pre-dispute binding arbitration in consumer, employment, and franchise disputes. Parties to a dispute would still be able to choose arbitration over court if they wanted to, but individuals would be given a choice in the matter and would not be denied their constitutional right to access the courts and have a jury trial. The bill would overturn the strong presumption in favor of arbitrability that has been erected by decisions of the United States Supreme Court under the rubric of the Federal Arbitration Act, at least as applied to consumer and employment disputes. The bill is supported by the groups such as Public Citizen, Center for Responsible Lending, Consumer Federation of America, Homeowners of Texas, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center
, National Consumer Coalition for Nursing Home Reform, National Employment Lawyers Association, and American Association for Justice. Opposition to the bill is led by the U.S. Chamber of Commerce's Institute for Legal Reform
.
Among other things, the proposed Act states that: "No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of— (1) an employment, consumer, or franchise dispute; or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power."
For the relevant conflict of laws
elements, see contract
, forum selection clause
, choice of law clause
, proper law
, and lex loci arbitri
Arbitration
Arbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
, in the context of United States law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, is a form of alternative dispute resolution
Alternative dispute resolution
Alternative Dispute Resolution includes dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation. ADR basically is an alternative to a formal court hearing or litigation...
— specifically, a legal alternative to litigation whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing) to a neutral third party (the arbitrator(s) or arbiter(s)) for resolution. In practice arbitration is generally used as a substitute for judicial systems, particularly when the judicial processes are viewed as too slow, expensive or biased. Arbitration is also used by communities which lack formal law, as a substitute for formal law.
Arbitration may also serve a distinct purpose: as an alternative to strikes and lockouts as a means of resolving labor disputes. Labor arbitration comes in two varieties: interest arbitration, which provides a method for resolving disputes about the terms to be included in a new contract when the parties are unable to agree, and grievance arbitration, which provides a method for resolving disputes over the interpretation and application of a collective bargaining agreement.
Commercial and other forms of contract arbitration
Agreements to arbitrate were not enforceable at common law, though once the parties had actually submitted a pending dispute to an arbitrator, the arbitrator's judgment was usually enforceable. The reasoning for this was that the power of the arbitrator arose solely from the mutual consent of the parties to his jurisdiction; but by the time a dispute reached the point that one party wished to take it to an arbitrator, the other often preferred to take their chances in court instead. Thus, without the consent of both parties to his jurisdiction, the arbitrator lacked the power to decide the case.During the Industrial Revolution
Industrial Revolution
The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...
, large corporations became increasingly opposed to this policy. They argued that too many valuable business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
relationships were being destroyed through years of expensive adversarial litigation, in courts whose rules differed significantly from the informal norms and convention
Convention (norm)
A convention is a set of agreed, stipulated or generally accepted standards, norms, social norms or criteria, often taking the form of a custom....
s of businesspeople (the private law of commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
, or jus merchant). Arbitration was promoted as being faster, less adversarial, and cheaper.
The result was the New York Arbitration Act of 1920, followed by the United States Arbitration Act of 1925. Both made agreements to arbitrate valid and enforceable (unless one party could show fraud or unconscionability or some other ground for rescission which undermined the validity of the entire contract). The USAA is now known as the Federal Arbitration Act
Federal Arbitration Act
In United States law, the Federal Arbitration Act is a statute that provides for judicial facilitation of private dispute resolution through arbitration. It applies in both state courts and federal courts, as was held in Southland Corp. v. Keating...
. Due to the subsequent judicial expansion of the meaning of interstate commerce, the U.S. Supreme Court reinterpreted the FAA in a series of cases in the 1980s and 1990s to cover almost the full scope of interstate commerce. In the process, the Court held that the FAA preempted many state laws covering arbitration, some of which had been passed by state legislature
Legislature
A legislature is a kind of deliberative assembly with the power to pass, amend, and repeal laws. The law created by a legislature is called legislation or statutory law. In addition to enacting laws, legislatures usually have exclusive authority to raise or lower taxes and adopt the budget and...
s to protect their consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s against powerful corporations.
Since commercial arbitration is based upon either contract law or the law of treaties, the agreement between the parties to submit their dispute to arbitration is a legally binding contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
. All arbitral decisions are considered to be "final and binding." This does not, however, void the requirements of law. Any dispute not excluded from arbitration by virtue of law (for example, criminal proceedings) may be submitted to arbitration.
Furthermore, arbitration agreements can only bind parties who have agreed, expressly or impliedly to arbitrate. Arbitration cannot bind nonsignatories to an arbitration contract, even if those nonsignatories later become involved with a signatory to a contract by accident (usually through the commission of a tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
).
Labor arbitration
Arbitration has also been used as a means of resolving labor disputes for more than a century. Labor organizations in the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, such as the National Labor Union
National Labor Union
The National Labor Union was the first national labor federation in the United States. Founded in 1866 and dissolved in 1873, it paved the way for other organizations, such as the Knights of Labor and the AF of L . It was led by William H...
, called for arbitration as early as 1866 as an alternative to strikes to resolve disputes over the wages, benefits and other rights that workers would enjoy. Governments have also relied on arbitration to resolve particularly large labor disputes, such as the Coal Strike of 1902
Coal Strike of 1902
The Coal Strike of 1902 was a strike by the United Mine Workers of America in the anthracite coal fields of eastern Pennsylvania. Miners were on strike asking for higher wages, shorter workdays, and the recognition of their union...
. This type of arbitration, wherein a neutral arbitrator decides the terms of the collective bargaining agreement, is commonly known as interest arbitration. The United Steelworkers of America adopted an elaborate form of interest arbitration, known as the Experimental Negotiating Agreement, in the 1970s as a means of avoiding the long and costly strikes that had made the industry vulnerable to foreign competition. Major League Baseball
Major League Baseball
Major League Baseball is the highest level of professional baseball in the United States and Canada, consisting of teams that play in the National League and the American League...
uses a variant of interest arbitration, in which an arbitrator chooses between the two sides' final offers, to set the terms for contracts for players who are not eligible for free agency. Interest arbitration is now most frequently used by public employees who have no right to strike (for example,, law enforcement and firefighters).
Unions and employers have also employed arbitration to resolve employee and union grievances arising under a collective bargaining agreement. The Amalgamated Clothing Workers of America
Amalgamated Clothing Workers of America
The Amalgamated Clothing Workers of America was a United States labor union known for its support for "social unionism" and progressive political causes. Led by Sidney Hillman for its first thirty years, it helped found the Congress of Industrial Organizations...
made arbitration a central element of the Protocol of Peace it negotiated with garment manufacturers in the second decade of the twentieth century. Grievance arbitration became even more popular during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, when most unions had adopted a no-strike pledge. The War Labor Board, which attempted to mediate disputes over contract terms, pressed for inclusion of grievance arbitration in collective bargaining agreements. The Supreme Court subsequently made labor arbitration a key aspect of federal labor policy in three cases which came to be known as the Steelworkers' Trilogy. The Court held that grievance arbitration was a preferred dispute resolution technique and that courts could not overturn arbitrators' awards unless the award does not draw its essence from the collective bargaining agreement. State and federal statutes may allow vacating an award on narrow grounds (e.g., fraud). These protections for arbitrator awards are premised on the union-management system, which provides both parties with due process. Due process in this context means that both parties have experienced representation throughout the process, and that the arbitrators practice only as neutrals. See National Academy of Arbitrators
National Academy of Arbitrators
The National Academy of Arbitrators is a not-for-profit 501 honorary and professional organization of labor arbitrators in the United States and Canada founded in 1947....
.
Securities arbitration
In the United States securities industry, arbitration has long been the preferred method of resolving disputes between brokerage firms, and between firms and their customers. The securities industry uses a pre-dispute arbitration agreement, where the parties agree to arbitrate their disputes before any such dispute arises. Those agreements were upheld by the United States Supreme Court in Shearson v. MacMahon, 482 U.S. 220 (1987) and today nearly all disputes involving brokerage firms are resolved in arbitration.The process operates under its own rules, and is described in an article Introduction to Securities Arbitration. Securities arbitrations are held primarily by the Financial Industry Regulatory Authority ("FINRA").
Judicial arbitration
Some state court systems have promulgated court-ordered arbitration; family law (particularly child custody) is the most prominent example. Judicial arbitration is often merely advisory dispute resolution technique, serving as the first step toward resolution, but not binding either side and allowing for trial de novo. Litigation attorneys present their side of the case to an independent teritary lawyer, who issues an opinion on settlement. Should the parties in question decide to continue to dispute resolution process, there can be some sanctions imposed from the initial arbitration per terms of the contract.Validity of Arbitration Clauses
The validity of arbitration clauses in the US is not a settled legal matter. Typically, the validity of an arbitration clause is decided by a court rather than an arbitrator. However, in a split decision (5-4) on Rent-A-Center, West, Inc. v. Jackson the Supreme Court of the United StatesSupreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
decided that if the arbitration clause includes a provision which stated that the arbitrator "shall have exclusive authority to resolve any dispute
relating to the interpretation, applicability, enforceability" of the clause. The Federal Arbitration Act typically allows federal courts to decide these types of "gateway" or validity questions, but the Supreme Court ruled that since Jackson targeted the entire contract rather than a specific clause, the arbitrator decided the validity.
Arbitration clauses of companies such as Blockbuster, AT&T, and Talk America have been ruled unconscionable and, therefore, unenforceable. However arbitration clauses have been upheld repeatedly as well.
In insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
law, arbitration is complicated by the fact that insurance is regulated at the state level under the McCarran–Ferguson Act. From a federal perspective, however, a circuit court ruling has determined that McCarran-Ferguson requires a state statute rather than administrative interpretations. The Missouri Department of Insurance attempted to block a binding arbitration agreement under its state authority, but since this action was based only on a policy of the department and not on a state statute, the United States district court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
found that the Department of Insurance did not have the authority to invalidate the arbitration agreement.
Timeliness and the Non-Existence of Arbitration Agreements
Generally, a person who opposes an arbitration award must file a motion to vacate the award within three months of the date in which the award was either entered or delivered. However, it is by no means a settled legal matter whether or not this time limit applies when the person moving to vacate is challenging, not the award itself, but the very contractual obligation to arbitrate in the first place.Some states, such as Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
, Washington, and Tennessee
Tennessee
Tennessee is a U.S. state located in the Southeastern United States. It has a population of 6,346,105, making it the nation's 17th-largest state by population, and covers , making it the 36th-largest by total land area...
have held that the time limit does apply, even when you dispute the existence of an arbitration agreement in the first place. Texas is particularly consumer-unfriendly in this respect. In that state, not only does the time limit apply, no matter on what grounds you dispute the award, but even if you are within the three month time limit, "[t]he nonexistence of an arbitration agreement is not one of the grounds upon which an arbitration award may be vacated under the FAA," effectively allowing anyone in Texas to unilaterally file arbitrations against anyone else, contract or no contract, and the other party who did not want to arbitrate is left without recourse.
Missouri
Missouri
Missouri is a US state located in the Midwestern United States, bordered by Iowa, Illinois, Kentucky, Tennessee, Arkansas, Oklahoma, Kansas and Nebraska. With a 2010 population of 5,988,927, Missouri is the 18th most populous state in the nation and the fifth most populous in the Midwest. It...
takes a slightly more consumer-friendly approach, but still largely favors proponents of arbitration. Missouri recognizes lack of an arbitration agreement as a grounds to vacate, but still requires the person seeking vacature to prove that there was no agreement to arbitrate, effectively requiring the opponent of arbitration to prove a negative
Proving a negative
Proving a negative or negative proof may refer to:*Evidence of absence in general, such as evidence that there is no milk in a certain bowl*Modus tollens, a logical proof*Proof of impossibility, mathematics...
.
The United States Court of Appeals for the First Circuit
United States Court of Appeals for the First Circuit
The United States Court of Appeals for the First Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* District of Maine* District of Massachusetts...
, however, has taken the opposite approach, and argued that the three month time limit is not triggered until there is an agreement to arbitrate. Arkansas
Arkansas
Arkansas is a state located in the southern region of the United States. Its name is an Algonquian name of the Quapaw Indians. Arkansas shares borders with six states , and its eastern border is largely defined by the Mississippi River...
has adopted the First Circuit's approach to the issue. However, neither of these cases specify whether or not the opponent to the arbitration has the burden of proof, like in Missouri.
Proceedings
Various bodies of rules have been developed that can be used for arbitration proceedings. The two most important are the UNCITRALUNCITRAL
The United Nations Commission on International Trade Law was established by the United Nations General Assembly by its Resolution 2205 of 17 December 1966 "to promote the progressive harmonization and unification of international trade law"....
rules and the ICSID rules. The rules to be followed by the arbitrator are specified by the agreement establishing the arbitration.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959...
(Done at New York, 10 June 1958; Entered into force, 7 June 1959; 330 U.N.T.S. 38, 1959) provides for the enforcement of foreign arbitral awards on the territory of the contracting parties. Similar provisions are contained in the earlier Convention on the Execution of Foreign Arbitral Awards (Done at Geneva, 26 September 1927; Entered into force, 25 July 1929; L.N.T.S. ???).
Some jurisdictions have instituted a limited grace period during which an arbitral decision may be appealed against, but after which there can be no appeal. In the case of arbitration under international law, a right of appeal does not in general exist, although one may be provided for by the arbitration agreement, provided a court exists capable of hearing the appeal.
When arbitration occurs under U.S. law, either party to an arbitration may appeal from the arbitrator's decision to a court, however the court will generally not change the arbitrator's findings of fact but will decide only whether the arbitrator was guilty of malfeasance, or whether the arbitrator exceeded the limits of his or her authority in the arbitral award or whether the award conflicts with positive law. The Supreme Court has described the standard of review as one of the narrowest known to Western jurisprudence. Wherever so seen, arbitration may be the best approach to the legal manners and parties involved.
Arbitrators
Arbitrators have wide latitude in crafting remedies in the arbitral decision, with the only real limitation being that they may not exceed the limits of their authority in their award. An example of exceeding arbitral authority might be awarding one party to a dispute the personal automobile of the other party when the dispute concerns the specific performance of a business-related contract.It is open to the parties to restrict the possible awards that the abitrator can make. If this restriction requires a straight choice between the position of one party or the position of the other, then it is known as pendulum arbitration
Pendulum arbitration
Pendulum arbitration, otherwise known as final offer arbitration , is a type of interest arbitration in which the arbitrator chooses one of the parties' proposals on each disputed issues. For example, in the case of labor collective bargaining, a trade union may demand a wage increase of 7% and...
or final offer arbitration. It is designed to encourage the parties to moderate their initial positions so as to make it more likely they receive a favourable decision.
No definitive statement can be made concerning the credentials or experience levels of arbitrators, although some jurisdictions have elected to establish standards for arbitrators in certain fields. Several independent organizations, such as the American Arbitration Association
American Arbitration Association
The American Arbitration Association is a private enterprise in the business of arbitration, and one of several arbitration organizations that administers arbitration proceedings. The AAA also administers mediation and other forms of alternative dispute resolution. It is headquartered in New York...
and the National Arbitration Forum
National Arbitration Forum
The National Arbitration Forum , founded in 1986, provides arbitration and mediation services to businesses, based at its Minneapolis, Minnesota headquarters and offices in New Jersey. The company is one of the United States's largest and most controversial dispute resolution companies...
, offer arbitrator training programs and thus in effect, credentials. Generally speaking, however, the credibility of an arbitrator rests upon reputation, experience level in arbitrating particular issues, or expertise/experience in a particular field. Arbitrators are generally not required to be members of the legal profession.
To ensure effective arbitration and to increase the general credibility of the arbitral process, arbitrators will sometimes sit as a panel, usually consisting of three arbitrators. Often the three consist of an expert in the legal area within which the dispute falls (such as contract law in the case of a dispute over the terms and conditions of a contract), an expert in the industry within which the dispute falls (such as the construction industry, in the case of a dispute between a homeowner and his general contractor), and an experienced arbitrator.
Umpire
The umpire is a third party chosen either by the method of the arbitral parties or by a court to render an independent decision usually in labour disputes when the arbitrators disagree on something. Umpire is another word for "arbitrator" or an arbitrator appointed to resolve an arbitration when the arbitrators can't agree.Arbitration on TV
The "judge shows" that have become popular in many countries, especially the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, are actually binding arbitration. The most famous example is The People's Court
The People's Court
The People's Court is a US television court show in which small claims court cases are heard, though what is shown is actually a binding arbitration....
. Judge Judy
Judge Judy
Judge Judy is an American court show featuring former family court judge Judith Sheindlin arbitrating over small claims cases in small claims court...
is another one.
Arbitration Fairness Act
Most recently Senators Russ FeingoldRuss Feingold
Russell Dana "Russ" Feingold is an American politician from the U.S. state of Wisconsin. He served as a Democratic party member of the U.S. Senate from 1993 to 2011. From 1983 to 1993, Feingold was a Wisconsin State Senator representing the 27th District.He is a recipient of the John F...
of Wisconsin
Wisconsin
Wisconsin is a U.S. state located in the north-central United States and is part of the Midwest. It is bordered by Minnesota to the west, Iowa to the southwest, Illinois to the south, Lake Michigan to the east, Michigan to the northeast, and Lake Superior to the north. Wisconsin's capital is...
and Congressman Hank Johnson
Hank Johnson
Henry C. "Hank" Johnson Jr. is the U.S. Representative for , serving since 2007. He is a member of the Democratic Party. The district is based in DeKalb County, a largely suburban county east of Atlanta. It also includes portions of Gwinnett and Rockdale counties.-Life, education and...
of Georgia
Georgia (U.S. state)
Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...
, together with numerous co-sponsors in both Houses, introduced the Arbitration Fairness Act (S. 1782, H.R. 3010) in the U.S. Congress. The bill
Bill (proposed law)
A bill is a proposed law under consideration by a legislature. A bill does not become law until it is passed by the legislature and, in most cases, approved by the executive. Once a bill has been enacted into law, it is called an act or a statute....
would prohibit mandatory pre-dispute binding arbitration in consumer, employment, and franchise disputes. Parties to a dispute would still be able to choose arbitration over court if they wanted to, but individuals would be given a choice in the matter and would not be denied their constitutional right to access the courts and have a jury trial. The bill would overturn the strong presumption in favor of arbitrability that has been erected by decisions of the United States Supreme Court under the rubric of the Federal Arbitration Act, at least as applied to consumer and employment disputes. The bill is supported by the groups such as Public Citizen, Center for Responsible Lending, Consumer Federation of America, Homeowners of Texas, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center
National Consumer Law Center
The National Consumer Law Center is an American nonprofit organization specializing in consumer issues on behalf of low-income people. Legal services, government and private attorneys, as well as community organizations, work with the center to advocate for consumer reform.The National Consumer Law...
, National Consumer Coalition for Nursing Home Reform, National Employment Lawyers Association, and American Association for Justice. Opposition to the bill is led by the U.S. Chamber of Commerce's Institute for Legal Reform
Institute for Legal Reform
The US Chamber Institute for Legal Reform is an advocacy group founded in 1998 by the United States Chamber of Commerce, with a focus on what it calls "tort reform."- Stances on Issues :...
.
Among other things, the proposed Act states that: "No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of— (1) an employment, consumer, or franchise dispute; or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power."
See also
- Arbitration awardArbitration awardAn arbitration award is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law...
- ConciliationConciliationConciliation is an alternative dispute resolution process whereby the parties to a dispute agree to utilize the services of a conciliator, who then meets with the parties separately in an attempt to resolve their differences...
- Dispute resolutionDispute resolutionDispute resolution is the process of resolving disputes between parties.-Methods:Methods of dispute resolution include:* lawsuits * arbitration* collaborative law* mediation* conciliation* many types of negotiation* facilitation...
- Expert determinationExpert determinationExpert determination is a historically accepted form of dispute resolution invoked when there isn't a formulated dispute in which the parties have defined positions that need to be subjected to arbitration, but rather both parties are in agreement that there is a need for an evaluation.The practise...
- London Court of International ArbitrationLondon Court of International ArbitrationThe London Court of International Arbitration is an institution based in London, United Kingdom providing the service of international arbitration....
- MediationMediationMediation, as used in law, is a form of alternative dispute resolution , a way of resolving disputes between two or more parties. A third party, the mediator, assists the parties to negotiate their own settlement...
- NegotiationNegotiationNegotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy...
- Special refereeSpecial refereeIn law, a special referee acts as a judge on matters of fact only.-Explanation:In many instances, the interpretation of the specific statutes or case law relevant to a dispute is absolutely clear. The uncertainty between the parties lies in the facts. Hence, a special referee is an expert in the...
- SubrogationSubrogationSubrogation in its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim....
- Tort reformTort reformTort reform refers to proposed changes in common law civil justice systems that would reduce tort litigation or damages. Tort actions are civil common law claims first created in the English commonwealth system as a non-legislative means for compensating wrongs and harm done by one party to...
- UNCITRAL Model Law on International Commercial ArbitrationUNCITRAL Model Law on International Commercial ArbitrationThe UNCITRAL Model Law on International Commercial Arbitration was prepared by UNCITRAL, and adopted by the United Nations Commission on International Trade Law on 21 June 1985...
- National Arbitration ForumNational Arbitration ForumThe National Arbitration Forum , founded in 1986, provides arbitration and mediation services to businesses, based at its Minneapolis, Minnesota headquarters and offices in New Jersey. The company is one of the United States's largest and most controversial dispute resolution companies...
- National Academy of ArbitratorsNational Academy of ArbitratorsThe National Academy of Arbitrators is a not-for-profit 501 honorary and professional organization of labor arbitrators in the United States and Canada founded in 1947....
For the relevant conflict of laws
Conflict of laws
Conflict of laws is a set of procedural rules that determines which legal system and which jurisdiction's applies to a given dispute...
elements, see contract
Contract (conflict)
In the conflict of laws, the validity of a contract with one or more foreign law elements will be decided by reference to the so-called "proper law" of the contract.-History:...
, forum selection clause
Forum selection clause
A forum selection clause in a contract with a conflict of laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum...
, choice of law clause
Choice of law clause
A choice of law clause or proper law clause is a term of a contract in which the parties specify that any dispute arising under the contract shall be determined in accordance with the law of a particular jurisdiction.-Explanation:...
, proper law
Proper law
The Doctrine of the Proper Law is applied in the choice of law stage of a lawsuit involving the conflict of laws.-Explanation:In a conflicts lawsuit, one or more state laws will be relevant to the decision-making process. If the laws are the same, this will cause no problems, but if there are...
, and lex loci arbitri
Lex loci arbitri
The lex loci arbitri is the Latin term for "law of the place where arbitration is to take place" in the conflict of Laws. Conflict is the branch of public law regulating all lawsuits involving a "foreign" law element where a difference in result will occur depending on which laws are...
External links
- Read actual arbitration awards and find arbitrator's resumes at GVSU
- American Arbitration Association's Home Page
- Chartered Institute of Arbitrators (UK, elsewhere) Web Site
- Chartered Institute of Arbitrators (Irish Branch)
- the Global Arbitration Mediation Association.
- The Arbitration Database.
- An Example of Labor Arbitration in the United States (Vulcan Iron Works and the Machinists' Union, 1981).