Domestic Commercial Arbitration Outline

 
 
 
Domestic Arbitration Outline
I.              An Introduction to Arbitration
A.    The Law of Arbitration: Basic Concepts and Principles
1.    Arbitration—form of dispute resolution, non-judicial, it is usually final and binding, it is adjudication, the 3rd party decides with finality
2.    Party Autonomy
a.    Freedom of contract governs
b.    Volt Information Sciences (14)—requires courts to enforce privately negotiated agreements to arbitrate
i           Arbitral contractualism allows the parties to the arbitration agreement to write their own rules of arbitration
ii          Parties can customize the arbitral process to the needs of their transaction
3.    Arbitration Agreements
a.    This is the law of the arbitration
b.    Submission to arbitration—an arbitration agreement in which the parties agree that an existing dispute shall be submitted to arbitration
i           Used once a dispute arises in a transaction
ii          These are less common b/c the parties are already in the dispute when they are trying to negotiate the terms of arbitration
c.    Arbitral clause (compromissory clause)—a contract under which the parties agree to submit future disputes to arbitration
i           Primary form of arbitration agreement
ii          Has an autonomous legal existence
4.    Terms of Reference
a.    define the parties’ disagreement and invest the arbitrators with the authority to rule upon the specifically defined disputes
b.    establish the arbitral tribunal’s jurisdiction to adjudicate
c.    to resolve the issue of the parties being unable to agree to the scope of their dispute, it may be wise to define the jurisdiction of the arbitrator in the arbitration agreement
5.    Arbitrability
a.    The question of arbitrability establishes which disputes can be lawfully submitted to arbitration
b.    It represents a limit upon the parties’ right to engage in arbitration and upon the arbitrators’ authority to rule
c.    It is a defense
d.    Inarbitratility defense:
i           Subject-matter inarbitrability—those things as a matter of law that cannot be submitted to arbitration
(a) Cannot realistically thwart submission to arbitration w/ subject matter inarbitrability
ii          Contractual inarbitrability
(a) If the party alleges that the dispute in question is not covered by the arbitration agreement; 3 arguments:
(i)            The scope of the agreement doesn’t cover this dispute
(ii)           Contract is defective
(iii)          There is no agreement to arbitrate at all
(b) Need only establish one of these to thwart the submission
(c) But court will err on the side of submission to arbitration
6.    The Separability Doctrine and Kompetenz-Kompetenz
a.    Provides that the agreement to arbitrate is separate from and independent of the main contract
b.    Allegations of contractual invalidity made against the main contract do not necessarily affect the validity of the arbitral clause
c.    Kompetenz-kompetenz—arbitrators have a right to rule on competence and jurisdictional challenges and not the courts
i           Under FAA §3 a federal court determines whether there is jurisdiction to go to arbitration
ii          Kaplan—if parties have decided in the contract to submit the question of jurisdiction of the arbitrators to the arbitrator then that contractual provision will stand
d.    Purpose of these:
i           Gets the courts out of the process
ii          By giving the power to say that they have jurisdiction to arbitrators, arbitration acquires legitimacy
7.    Adjudicatory Powers of the Arbitrator
a.    The basic rule of US arbitration law is that the arbitrators possess the remedial authority necessary for them to do justice in a given case
b.    The general view is that restrictions on the arbitrators’ remedial authority should come from (if anywhere) the arbitration agreement entered into by the parties
8.    Enforcement of Awards
a.    FAA § 10 gives limited statutory grounds to pursue vacatuer of arbitral awards
b.    There are 3 common law grounds:
i           If arbitral tribunal manifestly disregarded the law
ii          Arbitrary and capricious (irrational) award
iii         Award as decided violates public policy
(a) Misco
c.    Arbitration values functionality
d.    Adding more appeal grounds cuts at the heart of arbitrations functionality
e.    The court has given itself an escape hatch by introducing merits review
f.     Kabia v. Koch – Arbitrators have absolute immunity from suit
i           Arbitrator was accused of libel and slander
9.    Consolidation and Class Action in Arbitration
a.    Consolidation implications
i           Can amount to wholesale rewriting of a material element of the parties’ agreement to arbitrate
ii          Parties agreed to arbitrate disputes between themselves, not between themselves and several other parties
iii         Court of Appeals for the Second Circuit reconsidered its position on consolidation, holding that it was an exceptional remedy and that its availability was severely constrained by the parties’ freedom of contract (Boeing)
(a) No consolidation unless party agreement to consolidate à Contract sets the rule of law
b.    Class action implications
i           The central question is whether courts can certify classes in arbitration or order classwide arbitrations when the arbitration agreement is silent on the matter
(a) Bazzle (US) – Arbitrator decides whether there should be a class action suit
ii          The general rule is that, when the arbitration agreement does not specifically authorize class action procedures, the courts are powerless to compel such proceedings
(a) Arbitration is singular in nature (between the parties in contract) and is therefore incompatible with class actions
iii         Allowing parties to agree to classwide arbitration in contract is objectionable for a number of reasons:
(a) It allows parties to establish judicial jurisdiction at their whim through contract
(b) If the agreement arises from circumstances of adhesion, the weaker party is forced to agree not only to submit disputes to arbitration, but also to arbitrate in a particular manner
(c) Express party agreement to aggregation devices constitutes an invitation to have the courts interfere with the arbitration
10. Duty to Arbitrate in Good Faith
a.    Intended to instill basic discipline in the arbitral process and to provide arbitrators with a means of thwarting highly uncooperative party conduct
b.    Parties have a duty to act in good faith, unless they explicitly waive the duty
11. Selecting Arbitrators
a.    Most important part of arbitration process
12. Arbitral Institutions
a.    Transactional parties can choose to arbitrate their own (ad hoc arbitration) or with institutional administration
b.    American Arbitration Association (AAA)
c.    International Chamber of Commerce (ICC)
13. Fast Track Arbitration
a.    In order to guarantee the efficiency of arbitral proceedings, arbitration agreements sometimes provide for “time-limited” or “fast-track” arbitration
i           Time-limited arbitration results from ad hoc provisions in the contract of arbitration
ii          Fast-track is an established part of institutional arbitral process or can be contracted for
14. The Modern Arbitration Statute
a.    Modern legislative enactments on arbitration generally contain the following substantive provisions and policy statements:
i           Express language recognizing arbitration agreements as valid contracts, either in the form of a submission to arbitrate or an arbitral clause
(a) Arbitration represents the lawful exercise of the parties’ contractual rights and as a result arbitration agreements can only be challenged on traditional contractual grounds
ii          Express language recognizing the juridical consequences of a valid contract of arbitration: an arbitration agreement divests the courts of jurisdiction to rule upon disputes validly submitted to arbitration – unless the parties agree mutually (expressly or impliedly) to rescind the duty to arbitrate.
iii         Provisions of law establishing a duty upon the courts to cooperate with the arbitral process and to assist its operation by naming an arbitrator for a recalcitrant party or compelling a reluctant party to arbitrate.
iv        Provision of limited and narrow grounds for the judicial supervision of awards, establishing a strong presumption that awards are valid for purposes of enforcement.
(a) Other than flagrant abuses by the arbitrators that amount to a denial of justice, courts can refuse to enforce awards only for violations of minimum due process guarantees (notice of the proceeding and the right to be heard) or for reasons of fundamental public policy.
v         Finally, most contemporary statutory regulations of arbitration acknowledge and legitimate the emergence of “a-national” arbitration in the sphere of international commercial dispute resolution.
(a) Under this concept, ar