This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in the United States.
This Q&A is part of the global guide to Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/
What legislation applies to arbitration in your country? Are there any mandatory laws?
The Federal Arbitration Act (“FAA”) is the controlling legislation governing arbitration at both the state and federal level in the United States. Chapter 1 of the FAA contains general arbitration. It primarily governs domestic arbitrations, but is also relevant to international arbitration to the extent that it does not conflict with Chapters 2 and 3. Chapters 2 and 3 of the FAA incorporate the New York and Panama Conventions, respectively, and thus govern international arbitrations. In addition to the FAA, other laws also regulate arbitration at the federal level, including the Patent Act and the Foreign Sovereign Immunities Act.
Our analysis here focuses mainly on the FAA. However, in the U.S., each state has the power to legislate regarding arbitration and other matters at the state level. Each state has enacted laws that govern arbitration that apply to arbitrations seated in that state. See, e.g., New York Civil Procedure Practice and Rules (“CPLR”), Art. 75. The FAA preempts state laws that are inconsistent with the Act, but state laws that are not contrary to provisions of the FAA are enforceable.
Arbitration law in the U.S. is also developed through case law. Accordingly, practitioners should always look to the case law of the governing jurisdiction in addition to any statutory laws.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
The United States is a signatory to the New York Convention. The U.S. has issued two reservations to the Convention which limit its applicability to (i) awards made in a country that is also a party to the Convention and (ii) disputes arising out of commercial relationships. U.S. courts have construed the term “commercial” broadly and have held that any doubts as to whether the relationship at issue is commercial should be resolved in favor of arbitration.
What other arbitration-related treaties and conventions is your country a party to?
In addition to the New York Convention, the U.S. is a party to the Inter-American Convention on International Commercial Arbitration (“Panama Convention”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”). The U.S. is also a party to numerous bilateral investment treaties (“BITs”) and free trade agreements (“FTAs”) containing investment chapters providing for international arbitration as a procedural remedy for a treaty breach, including the North American Free Trade Agreement (“NAFTA”), and the Dominican Republic-Central America Free Trade Agreement (“CAFTA-DR”). The U.S. recently negotiated a replacement for NAFTA, which has yet to be signed and ratified by the parties and enter into force, called the United States-Mexico-Canada Agreement (“USMCA”).
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
The FAA is not based on the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), as the FAA predates the Model Law. However, similar to the Model Law, its provisions contain a strong presumption in favor of enforcing arbitral agreements and awards, and U.S. courts have largely interpreted the FAA in a manner that is consistent with the Model Law. Several states have adopted legislation based on the UNCITRAL Model Law, including California, Florida, Illinois, and Texas, among others. See, e.g., California Arbitration Act, Code of Civil Procedure Sec.1280 et seq.
The Model Law generally provides more detailed procedures for arbitration, while the FAA is less detailed and leaves many procedural points to be addressed by the parties’ agreement and the applicable institutional rules. There are some significant differences between the FAA and the Model Law. For example, each provides different grounds and procedures for the vacatur or setting aside of an award. See 9 U.S.C. § 10 and Model Law, Art. 34. In addition, the FAA does not address the issue of a tribunal’s competence to determine its own jurisdiction, while the Model Law provides that a tribunal may rule on its own jurisdiction, including any objections related to the validity of the arbitration agreement. See Model Law, Art. 16. We note, however, that the U.S. courts have recognized the principle of competence-competence to some extent, as explained below.
Are there any impending plans to reform the arbitration laws in your country?
There are no plans currently in action to reform or amend the FAA. However, several bills have been introduced by the U.S. Congress in recent years that have proposed amendments to the arbitration framework in the U.S. For instance, several iterations of an “Arbitration Fairness Act” have been introduced which would prohibit pre-dispute arbitration agreements from being valid or enforceable where they require the arbitration of an employment, consumer, antitrust, or civil rights dispute. See, e.g., S.537 - Arbitration Fairness Act of 2017. The proposed Act would require that a court determine the validity and enforceability of an arbitration agreement, rather than an arbitrator, effectively eliminating the principle of competence-competence.
Another recent proposed bill would amend the FAA to invalidate arbitration agreements between parties in certain commercial contracts or transactions if they require arbitration of a claim for damages or injunctive relief brought by an individual or small business arising from the alleged violation of a federal or state statute, the U.S. Constitution, or a state constitution, unless the written agreement to arbitrate is entered into by both parties after the claim has arisen and pertains solely to an existing claim. See S.550 – Restoring Statutory Rights and Interests of the States Act of 2017. This bill proposes that a court, rather than an arbitrator, would determine whether an arbitration agreement is enforceable. Both of the aforementioned bills are still pending in the Senate.
What arbitral institutions (if any) exist in your country? Have there been any amendments to their rules or are there any being considered?
Arbitration institutions that are headquartered in the United States include the American Arbitration Association (“AAA”), the AAA’s International Centre for Dispute Resolution (“ICDR”), JAMS, the International Institute for Conflict Prevention and Resolution (“CPR”), and the Inter-American Commercial Arbitration Commission (“IACAC”). The CPR amended its Arbitration Rules in 2018, effective 1 March 2018. The other institutions have not amended their rules in the past couple of years.
The International Centre for Settlement of Investment Disputes (“ICSID”) is also headquartered in the U.S. and is an arbitral institution that deals with international investment treaty arbitration. Currently, amendments to the ICSID Rules are under discussion.
In addition to the arbitration institutions that are headquartered in the U.S., the International Chamber of Commerce (“ICC”), which administers arbitrations through its International Court of Arbitration, has offices in the U.S.
What are the validity requirements for an arbitration agreement under the laws of your country?
The FAA provides that arbitration agreements must be in writing, must be part of a valid contract, may be incorporated by reference and need not be signed by the parties. 9 U.S.C. § 2. The presumption of validity of written arbitration agreements contained in the FAA is subject to the ordinary principles that govern the formation of contracts, including defenses such as fraud and duress. See Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68 (2010).
Are arbitration clauses considered separable from the main contract?
Yes. Although the FAA does not explicitly address separability of arbitration clauses, case law has established that arbitration clauses are considered separable from the main contract and can be enforced even if the underlying agreement is found to be void or otherwise unenforceable. See Prima Paint Corp v Flood & Conklin Mfg Co, 388 US 395, 403 (1967).
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
The FAA is silent with regard to multi-party and multi-contract arbitration. However, federal courts will generally enforce multi-party and multi-contract arbitration agreements as written. Courts will allow parties to “specify with whom they choose to arbitrate their disputes.” Stolt-Nielsen S. v. AnimalFeeds International Corp., 559 U.S. 662, 664 (2010).
Most arbitral institutions, including the ICDR, the CPR and JAMS, provide for the joinder of additional parties to an arbitration and/or the consolidation of multiple claims in an arbitration. The AAA and IACAC Rules do not provide explicit rules for joinder and consolidation but do not prohibit them.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
The FAA and state law do not provide guidelines regarding the choice of substantive law. Tribunals will apply the law designated by the parties in an agreement. If the parties’ agreement is silent, U.S. courts have held that tribunals have authority to determine the applicable choice of law rules.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
Most civil disputes are arbitrable, including consumer, antitrust and employment disputes. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (Antitrust); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (U.S. 1991) (Employment). However, the FAA explicitly states that it does not apply to employment contracts for transportation workers engaged in interstate commerce, including “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 28 U.S.C. § 1. Criminal disputes are not considered arbitrable.
In your country, are there any restrictions in the appointment of arbitrators?
No. The FAA does not restrict parties’ appointment of arbitrators. Most state laws do not restrict appointment in any meaningful way; however, some states do have restrictions, such as New Jersey, where an individual who has “a known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party” cannot serve as an arbitrator where the agreement requires that the arbitrator be neutral. N.J. Stat. Ann. § 2A:23B-11.
Are there any default requirements as to the selection of a tribunal?
Under the FAA, if the parties fail to agree on a method of selecting the arbitrators (either expressly or by agreeing on institutional rules that provide for a default method), the court may, upon application of either party, designate an arbitrator. 9 U.S.C. § 5. In such a case, a single arbitrator will be selected unless the agreement provides otherwise.
Can the local courts intervene in the selection of arbitrators? If so, how?
Local courts cannot intervene in the selection of arbitrators except to make a default appointment where necessary, as explained above.
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?
The FAA does not address arbitrator challenges. Institutional rules provide the conditions for challenging an arbitrator’s appointment. The typical grounds for challenge are the lack of impartiality and independence of the arbitrator. The procedure for challenging varies by institutional rules. Given that most challenges to an arbitrator’s appointment happen prior to the final award and out of court, there is little publicly available information allowing us to determine whether the number of challenges have recently increased in the U.S.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
The FAA does not speak to the authority of truncated tribunals. Case law has indicated that truncated tribunals lack authority to decide disputes unless the parties’ agreement states otherwise, including by adopting institutional rules that allow truncated tribunals to proceed to a decision. If parties do not either (i) expressly address this in their agreement or (ii) otherwise adopt institutional rules that allow truncated tribunals to reach a decision, the arbitral process must be repeated. See, e.g., Marine Prods. Exp. Corp. v M.T. Globe Galaxy, 977 F.2d 66, 68 (2d Cir. 1992).
Are arbitrators immune from liability?
The FAA does not speak to immunity for arbitrators. Courts have held that an arbitrator is immune from civil liability for those acts taken by the arbitrator “within the scope of their duties and within their jurisdiction.” Wasyl, Inc. v. First Boston Corp., 813 F.2d 1579, 1582 (9th Cir. 1987).
Is the principle of competence-competence recognised in your country?
The FAA does not address the issue of a tribunal’s competence to determine its own jurisdiction. U.S. courts, however, have recognized the principle of competence-competence when there is clear and unmistakable evidence that the parties intended for the arbitral tribunal to determine its own jurisdiction. See AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 649 (1986). Some courts have held that the incorporation of institutional rules that provide for the arbitrator to determine its own jurisdiction is akin to the parties directly addressing the issue in their agreement. See e.g. Terminex Intern. Co. v. Palmer Ranch Ltd., 432 F.3d 1327 (11th Cir. 2005).
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
U.S. federal courts diverge on the applicable approach towards a party commencing litigation in apparent breach of an arbitration agreement. The First, Fifth and Ninth Circuits have held or implied that courts may dismiss an action where all of the claims are arbitrable. In contrast, the Second, Third, Seventh, Tenth, and Eleventh Circuits have all held or implied that the case must be stayed pending resolution of the arbitration, rather than dismissed, in light of the language of the FAA, which indicates that a court “shall on application of one of the parties stay the trial of the action” where a court refers all claims to arbitration. 9 U.S.C. § 3. The Supreme Court declined to address the issue in Green Tree Financial Corp. Alabama v. Randolph (531 U.S. 79, 87 n.2 (2000)), and the circuit split remains unresolved. Therefore, whether a case will be stayed or dismissed will depend on the federal circuit that has jurisdiction over the arbitration.
There is a similar split among state courts, with some states allowing for dismissal (such as California; see, e.g., Charles J. Rounds Co. v. Joint Council of Teamsters No. 42, 4 Cal. 3d 888 (1971)) and some states requiring a stay (such as Pennsylvania; see, e.g., Sew Clean Drycleaners & Launders, Inc. v. Dress for Success Cleaners, Inc., 2006 PA Super 182, ¶ 12, 903 A.2d 1254, 1258 (2006)).
How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
The FAA does not speak to the commencement of arbitral proceedings. There are no limitation periods or time bars for commencing arbitration. However, parties’ claims may be barred by state law governing the statute of limitations related to certain claims.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate?
If a respondent fails to participate in an arbitration, the FAA empowers federal courts to compel the respondent’s participation. 9 U.S.C. § 4. Most state laws empower state courts to do the same. See, e.g., NY CPLR § 7503 (2012).
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
Under the Foreign Sovereign Immunities Act, a sovereign state is immune from judicial proceedings, including proceedings under the FAA, unless certain exceptions apply. One such exception is where the state has waived its immunity by contract and entered into an agreement to arbitrate. However, the waiver of immunity from suit will not extend immunity to attachment of assets, as explained below.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award? Can local courts order third parties to participate in arbitration proceedings in your country?
In principle, an arbitration agreement is only binding on the parties. However, different common law principles may apply to bind a non-signatory party, such as agency law, equitable estoppel, or the piercing of the corporate veil. Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009).
Arbitrators have the power to summon any third party in writing to testify before the tribunal at a hearing. 9 U.S.C. § 7. If a person summoned as a witness does not comply, the statute gives the district court in the district in which the arbitrator sits the power to compel the person’s attendance before the arbitrator. However, the FAA does not give arbitrators the power to subpoena documents from third parties outside of a hearing. See CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 708 (9th Cir. 2017).
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
Arbitral tribunals may grant interim relief if requested by one of the parties. The AAA, ICDR, JAMS, CPR, and IACAC rules provide arbitrators with wide latitude to issue interim relief. Arbitral orders granting a wide spectrum of interim relief have been enforced by U.S. courts.
An arbitration agreement does not preclude a court from granting interim relief before or after the commencement of arbitration proceedings. See, e.g., Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 376 (4th Cir. 2012); Borden, Inc. v. Meiji Milk Prods. Co., 919 F.2d 822, 826 (2d Cir. 1990).
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?
The FAA does not contain evidentiary rules. In general, arbitrators have great latitude when it comes to managing, obtaining, and evaluating evidence. Institutional rules often provide evidentiary guidelines.
Under the FAA, arbitrators have the power to summon witnesses to appear, testify, and produce documents at an arbitration hearing. 9 U.S.C. § 7. The US district court for the district in which the arbitration is seated is required to enforce such summons. Some state statutes also provide for judicial enforcement of summons issued by arbitrators.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
Counsel in the United States will be bound by the ethics rules of the states in which they practice. Arbitrators in the United States are generally required to observe standards of impartiality and neutrality. Particular states may impose further requirements, such as those provided by California’s Ethics Standards for Neutral Arbitrators in Contractual Arbitrations.
How are the costs of arbitration proceedings estimated and allocated?
The FAA does not address costs, and state laws vary. Costs are governed according to the parties’ agreement and the arbitration rules that apply to a dispute.
Can pre- and post-award interest be included on the principal claim and costs incurred?
The FAA does not address interest. Absent an agreement between the parties, the courts will assess statutory interest pursuant to 28 U.S.C. § 1961. Arbitrators do not have the power to award post-judgment interest absent an agreement between the parties. Tricon Energy Ltd v Vinmar Int’l, Ltd, 718 F 3d 448, 457 (5th Cir 2013).
What legal requirements are there in your country for the recognition of an award?
Under the FAA, a petition to recognize a domestic arbitral award must be filed within one year of issuance of the award. For foreign awards, the time limit for seeking recognition is three years from the issuance of the award.
A party moving for recognition of an award must file a duly certified copy of the arbitration agreement and a duly certified copy of the arbitration award. If these documents are not in English, a certified translation must be submitted.
Courts may refuse to recognize and enforce an international award where: (1) the parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; (2) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present his case; (3) the award deals with a difference beyond the scope of the arbitration agreement; (4) the arbitral tribunal was improperly constituted; (5) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made; (6) the subject matter of the difference is not capable of settlement by arbitration under the law of the U.S.; or (7) the recognition or enforcement of the award would be contrary to the public policy of the U.S. 9 U.S.C. § 207; New York Convention, Art. V.
Courts may vacate a domestic arbitral award where: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators, or either of them; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10.
What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?
An unopposed petition to enforce an award will likely take less than six months from the time the petition is filed. An opposed petition will take approximately 12-18 months from the time the petition is filed, depending on the court in which the petition is filed and the judge to which the case is assigned.
The FAA requires that notice of a party’s application to affirm must be served upon the adverse party. 9 U.S.C. Sec. 9. Case law has confirmed that this requirement prohibits ex parte confirmation proceedings. See Micula v. Government of Romania, 104 F. Supp. 3d 42 (D.D.C. 2015); Mobil Cerro Negro, Ltd. v. Bolivian Republic of Venezuela, 863 F.3d 96 (2nd Cir. 2017).
Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?
Enforcement of domestic awards entails more robust proceedings, while international awards are subject to more summary proceedings that merely convert what is already a final decision into a judgment of a court. For international awards, the FAA provides that a court must confirm an arbitral award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award. See Jiangsu Changlong Chemicals, Co. v. Burlington Bio-Med. & Sci. Corp., 399 F. Supp. 2d 165, 168 (E.D.N.Y. 2005) For domestic awards, the procedure may be lengthier because courts have the ability to confirm, vacate, modify, correct, or remand the award for re-hearing. 9 U.S.C. §§ 9-11.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
The FAA does not put any limits on remedies. Certain states impose limits on arbitral remedies, but such rules do not apply to arbitrations governed by the FAA. For example, New York law prohibits arbitrators from awarding punitive damages, but this restriction does not apply to arbitrations seated in New York that are governed by the FAA because the FAA preempts state law. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 59 (1995).
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
The FAA provides the grounds and procedures for vacating or setting aside an arbitration award. Under the FAA, an award may be set aside if (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption by the arbitrators; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing for sufficient cause, in refusing to hear pertinent and material evidence, or any other misbehavior which prejudiced any party’s rights; or (4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award was not made. 9 U.S.C. § 10(a).
Although many state arbitration statutes mirror the FAA grounds, some state courts have held that such statutory grounds are not exclusive. For instance, certain states, such as Connecticut, allow awards to be set aside for public policy reasons. See Garrity v. McCaskey, 223 Conn. 1, 6, 612 A.2d 742, 745 (1992).
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
The FAA has been interpreted to provide that parties cannot waive any rights of appeal or challenge before a dispute arises. See In re Wal-Mart Wage & Hour Employment Practices Litig., 737 F.3d 1262, 1267 (9th Cir. 2013). Most states have adopted the same position. However, some states allow for pre-dispute waiver, such as California, where a waiver will be upheld if it is “clear and explicit.” See Emerald Aero, LLC v. Kaplan, 1144, 215 Cal. Rptr. 3d 5, 21 (Ct. App. 2017), as modified on denial of rehearing (Mar. 21, 2017), review denied (June 14, 2017).
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
Although under the Foreign Sovereign Immunities Act (“FSIA”), a foreign state waives its sovereign immunity from the jurisdiction of U.S. courts when it agrees to arbitrate disputes with a private party, this waiver of immunity does not extend to later enforcement proceedings. 28 USC § 1605(a)(6). Therefore, in order to execute an award against a sovereign state’s assets, the property at issue must fall within one of the exemptions to the general protection of sovereign states provided for in the FSIA. The first exemption authorizes execution against a foreign State’s property located in the U.S. if the property is used for “commercial activity” in the United States. 28 U.S.C. 1610(a). The second exemption designates certain types of property as “immune from execution,” including property of a foreign central bank or monetary authority held for its own account and property that is connected to the military. 28 U.S.C. 1611(b).
To what extent might a third party challenge the recognition of an award?
Only parties to an arbitration can challenge or intervene in a challenge to the recognition of an award, even in instances where a third party’s rights might be affected by the outcome of the proceedings. See Acuff v. United Papermakers & Paperworkers, 404 F.2d 169, 171, n. 2 (5th Cir. 1968).
Have there been any significant developments with regard to third party funding in your jurisdiction recently?
There has been a rise in the prevalence of third-party funding in the U.S. in recent years. Such development has given rise to concerns between arbitration practitioners, mostly related to potential conflicts of interests between funders and arbitrators. For this reason, the working group who is drafting the amendments to the ICSID rules included an obligation for the parties to disclose whether they are being supported by third-party funding. According to the draft, the parties will have to provide the name of the funder prior to the appointment of the arbitrators, while the arbitrators will be required to disclose whether they have any relationship to the funder. This obligation is to be applied throughout the proceeding. Thus, if the parties obtain third-party funding after the commencement of the arbitration, they are required to disclose such information to the Tribunal then.
Other institutional arbitration rules, such as those of the AAA, the ICDR, the CPR, and JAMS, have not yet incorporated third-party funding provisions into their rules.
Is emergency arbitrator relief available in your country? Is this frequently used?
Emergency arbitrator relief is not addressed in the FAA, but most institutions, including the AAA, ICDR, CPR, and JAMS rules, have emergency relief procedures available. Emergency procedures appear to be implemented fairly regularly – for instance, the ICDR reported in 2016 that over 70 cases had utilized the two iterations of its emergency procedures since the first procedures were added in 2006, although not all of these cases are or were seated in the U.S.
Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?
The FAA does not address expedited procedures. However, most institutional arbitration rules, including the AAA, ICDR, CPR, and JAMS rules, provide for expedited procedures for claims under certain values. These procedures are used often—for example, since the 2017 ICC Rules of Arbitration entered into force on 1 March 2017, and as of 31 July 2018, 84 requests to opt into the Expedited Procedure Provisions (“EPP”) have been submitted and 25 cases have been or are being administered under the EPP. The ICC statistics are not US-specific, but also include arbitrations in the U.S.
Have there been any mass (arbitration) claims in your jurisdiction?
Yes. Mass arbitration claims in the U.S. typically manifest as “class action” style disputes, in which one or more plaintiff is named to represent a larger class of plaintiffs. In 2003, the U.S. Supreme Court implicitly approved the use of class arbitration to settle disputes by holding that it was for the arbitrator to decide whether a class arbitration could proceed. See Green Tree Financial Cop. v. Bazzle, 539 U.S. 444 (2003). As a result of the Bazzle case, the AAA and JAMS implemented rules for class arbitration. See AAA Supplementary Rules for Class Arbitration; JAMS Class Action Procedures.
In a subsequent case in 2010, the Supreme Court refined its position, holding that an arbitral tribunal that compels a class arbitration without finding that the parties contractually agreed to class arbitration exceeds its powers under the FAA. See Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010). Following the Stolt-Nielsen decision, it appears that class arbitrations are permissible so long as they are provided for in the parties’ arbitration clause.
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
Yes. Several arbitral institutions in the U.S. have moved toward more open and transparent processes. For instance, the AAA and the ICDR have taken steps in recent years to enhance transparency surrounding the selection of arbitrators. In 2013 and 2017 respectively, the AAA and the ICDR introduced arbitrator and mediator search platforms that allow users to search the institutions’ entire rosters of arbitrators and mediators. Both institutions also make information about the costs and duration of proceedings publicly available.
The CPR has recently increased efforts to promote transparency as well. The CPR launched its Due Diligence Evaluation Tool in 2010, which allows counsel to conduct due diligence on potential arbitrators by connecting them with other counsel who recently appeared before the arbitrator.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?
Yes. Several arbitral institutions have diversity committees that seek to promote diversity amongst arbitrators and counsel alike. For instance, the AAA has a mission statement that memorializes its commitment to diversity, and has a diversity committee that builds coalitions and participates in events with national, minority, and local bar associations and law schools to provide training and create opportunities for diverse practitioners. The AAA and the ICDR jointly sponsor the AAA Higginbotham Fellows Program, which provides training, networking, and mentorship for young diverse ADR practitioners.
Another example of an increased interest in the promotion of diversity is JAMS, which promotes diversity by recruiting and retaining diverse ADR professionals. JAMS also encourages businesses to include diversity and inclusion arbitration clauses in their contracts, which requires the inclusion of diversity as a consideration when selecting an arbitrator or arbitration panel.
There are also several professional organizations based in the U.S. that promote diversity in the legal field generally, such as the American Bar Association’s Office of Diversity & Inclusion (https://www.americanbar.org/groups/diversity/). The ArbitralWomen (https://www.arbitralwomen.org/), an international organization that focuses particularly on gender diversity in arbitration, has become very active in the U.S. in the recent years.
Have there been any developments regarding mediation in your jurisdiction?
Yes. Most state and local courts have rules governing mediation. At the federal level, the Alternative Dispute Resolution Act (“ADRA”) requires all federal trial courts to implement ADR and allows judges the discretion to order that cases go to mandatory ADR, including mediation. Additionally, many administrative agencies have established mediation practices, such as the Equal Employment Opportunity Commission (“EEOC”), the Environmental Protection Agency (“EPA”), and the Department of Labor. In addition, most arbitral institutions also provide for mediation. For instance, JAMS, the AAA, the ICDR, the CPR, and the ICC all provide procedures for mediation. ICSID proposed new mediation rules in August 2018, which are currently under consideration.
Moreover, from an international standpoint, the United States government was active in the negotiations of the UNCITRAL Working Group II’s draft Convention on International Settlement Agreements Resulting from Mediation, to be known as the “Singapore Convention.” The draft treaty would function akin to the New York Convention in that it would create an international regime for mediated settlements and would allow for streamlined enforcement of mediated agreements in any signatory party’s courts. The Singapore Convention would not apply to mediation that resolves consumer, personal or family transactions, and courts would be able to refuse enforcement under the Singapore Convention if an agreement has already been performed or where the agreement was not meant to be binding. UNCITRAL considered the final draft at its 26 June 2018 session and resolved to recommend it for adoption by the United Nations. If the draft Singapore Convention is adopted, the United States ratifies the treaty, and it enters into force, parties would be able to seek the enforcement of mediated agreements in U.S. courts. This would make enforcing mediated agreements significantly easier for parties.
Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
Two recent Second Circuit cases have dealt with situations in which parties tried to enforce awards that had been annulled at the seat of arbitration. In the Pemex and Thai-Lao Lignite cases, from 2016 and 2017 respectively, the Second Circuit held that U.S. courts have discretion to enforce an award that has been annulled at the seat of arbitration. See Corporacion Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploracion y Produccion, 832 F.3d 92, 107 (2d Cir. 2016), cert. dismissed, 137 S. Ct. 1622 (2017); Thai-Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic, 864 F.3d 172 (2d Cir. 2017).
In the Pemex case, the Second Circuit affirmed the lower court’s judgment confirming an arbitration award in the U.S., even though a Mexican court had nullified the award. The Court acknowledged that the Panama Convention, which is codified in the FAA, affords discretion to U.S. courts to enforce an arbitral award that has been annulled at the seat of arbitration. The Court held that the exercise of a court’s discretion is appropriate under a limited public policy exception in order to protect fundamental notions of what is decent and just in the jurisdiction where enforcement is sought.
In the Thai-Lao Lignite case, the Second Circuit again acknowledged the discretion of the court and the public policy exception to recognizing an annulment at the seat of arbitration, but found that the annulling court’s decision did not offend basic notions of what is decent and just.
In both cases, the Court warned that courts should generally be very reluctant to enforce annulled arbitral awards. As evidenced by Pemex and Thai-Lao Lignite, the threshold parties must reach to convince a court to enforce an award annulled at the seat of arbitration is quite high.
Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?
Comparative to other countries, corruption is not an issue that is regularly raised in the U.S. The U.S. ranks 16 out of 180 countries on Transparency International’s 2017 Corruption Perceptions Index (https://www.transparency.org/news/feature/corruption_perceptions_index_2017).
Corruption allegations that arise in the U.S. related to bribes of foreign officials can be prosecuted under the Foreign Corrupt Practices Act (“FCPA”), while allegations that arise in relation to domestic officials can be criminally prosecuted under domestic anti-bribery statutes.
An individual may face criminal charges for bribery of public officials and witnesses under U.S. domestic law. 18 U.S.C.A. § 201. The standard of proof applicable to criminal charges in the U.S. is “beyond a reasonable doubt,” which is a very high standard that requires there to be no reasonable doubt in the mind of a reasonable person that the criminal defendant is guilty. See In re Winship, 397 U.S. 358, 362 (1970).
Under the FCPA, criminal charges brought by the Department of Justice against an individual or corporation will also be subject to the beyond a reasonable doubt standard, while civil claims brought by the Securities Exchange Commission will be subject to the preponderance of the evidence standard, a lower standard that requires that a fact or event was more likely than not to have occurred. See, e.g., United States v. Kay, 513 F.3d 432 (5th Cir. 2007); Gordon K. Eng, The Burden of Proof in SEC Disciplinary Proceedings: Preponderance and Beyond, 49 Fordham L. Rev. 642, 645 (1981).