Archive for the ‘ADR’ Category

Alan Scott Rau on “Arbitrating ‘Arbitrability’”

April 16, 2013

Alan Scott Rau (University of Texas at Austin School of Law, The Center for Global Energy, International Arbitration, and Environmental Law) has posted “Arbitrating ‘Arbitrability‘”, World Arbitration and Mediation Review, 2013/U of Texas Law, Public Law Research Paper No. 403.  The abstract reads:

This paper was prepared for a presentation at the Institute for Transnational Arbitration/American Society of International Law program on “Gateway Issues in International Arbitration.”

It is quite common, in the case law and the secondary literature, to focus discussions in terms of “gateway” or “threshold” challenges to the arbitration of a commercial dispute. Like most metaphors, this is rife with ambiguity: The notion of a “gateway” may, purely as a semantic matter, direct us to distinguish between issues that must be resolved before a party can be permitted to proceed and fully adjudicate the “merits” of the dispute — issues that may after all include such things as the non-payment of fees, or the untimely making of an application — and those that need not be. Or alternatively, it may ask us to distinguish between issues that must be resolved before a party may even invoke arbitral jurisdiction — and those that may instead be left to the arbitrators themselves. And even within this second category, it is still frequently unclear whether: (1) the metaphor of a “gateway” is being used to evoke what is a logically prior prerequisite to arbitral jurisdiction — asking us, that is, to distinguish between those issues that (whenever raised) will condition the ultimate validity of an award — and those that do not; or whether (2) the term is being used, instead, to evoke what is merely chronologically prior to arbitral proceedings — asking us, that is, to distinguish between those issues that (whoever will have the final word on the subject) must be resolved before a party is permitted even to have access to the arbitral tribunal — and those that need not be.

These last two questions are often conflated, but ought best be kept distinct. I discuss the question of timing and chronology, which is largely a matter of efficiency, but only the former question, I think, is truly challenging. The inquiry is thus into the allocation of decisionmaking authority between courts and arbitrators. This question — the respective roles of courts and arbitral tribunals — is, in one form or another, the foundational, primal question around which our whole law of arbitration revolves.

It is obligatory these days to begin and end every discussion with the Supreme Court’s decision in First Options, and in particular Justice Breyer’s suggestion there that parties may entrust arbitrators with the power to decide jurisdictional questions — and if they have done so “clearly and unmistakably,” the tribunal’s decision on the subject will be entitled to the same deference as is any arbitral award. It seems fair to say that Justice Breyer’s discussion has often been overread. And in practice, and in positive law, the supposed lessons have now become marginalized — have dwindled into insignificance — to the point that to invoke them begins increasingly to sound hollow and perfunctory. This is why any requirement of “clear statement” — even if in theory made necessary by Justice Breyer’s taxonomy — is here so routinely and trivially satisfied.

This impression is reinforced by the common practice of fleshing out agreement through the use of institutional rules. Contractual incorporation of the Rules of the AAA — adopted precisely to take advantage of the hint dropped by Justice Breyer — is now routinely deemed to constitute party agreement to the arbitrability of “jurisdictional disputes.” This common reading has now become a default rule that treats a reference to the Rules as a simple “term of art” denoting the choice of a particular scheme for the allocation of power. And while the backstory, and the preconceptions, underlying other commonly-used bodies of institutional rules are entirely different, it was inevitable that U.S. courts have been led to treat all these facially-similar rules as identical.

If this is troubling in theory, one cannot avoid the impression that it doesn’t seem to make much of a difference in result. The point is illustrated nicely by two very recent decisions of our Second Circuit, the Thai-Lao and Schneider/Kingdom of Thailand cases. Reading them, it is hard to avoid the conclusion that in where U.S. arbitration law appropriately governs the agreement, the rules of arbitral institutions — however they are construed — are as likely as not to amount to a makeweight; it does no great harm to assume that they may be properly treated in the end as tangential to any actual decision. What seems “overdetermined” is that even if the challenges in such cases — such as the right of a non-signatory to compel arbitration, or the existence of an approved investment under a BIT — is somehow to be construed as “jurisdictional” (which I very much doubt) — U.S. law will properly, and through a default rule methodology, allocate the decision to arbitrators. The implication is that even transnational cases will be expected to remain within the framework of the present complex structure of our common law — notwithstanding the siren calls of “international consensus.”

 A pdf copy of the article is available for download via SSRN here.

S.I. Strong, “Navigating the Borders Between International Commercial Arbitration and U.S. Federal Courts: A Jurisprudential GPS”

June 6, 2012

S.I. Strong (University of Missouri School of Law) has posted “Navigating the Borders Between International Commercial Arbitration and U.S. Federal Courts: A Jurisprudential GPS”, Journal of Dispute Resolution (forthcoming)/University of Missouri School of Law Legal Studies Research Paper No. 2012-12. Here is the abstract:

To the uninitiated, international commercial arbitration may seem as if it “isn’t all that different” from domestic arbitration or litigation. However, the truth of the matter is that international commercial arbitration is an extremely challenging area of law, full of traps for inexperienced parties.

This is particularly true with respect to the parties’ ability to seek relief from U.S. federal courts. While some advocates may believe that a visit to the judge is the best and fastest way to get results in certain types of procedural disputes, that tactic is often inappropriate in international arbitral proceedings, where the tribunal’s jurisdiction and powers are frequently in tension with the jurisdiction and power of various national courts (since there may be multiple courts that could potentially become involved with a particular matter).

Quite simply, this area of practice is unlike any other, and the only way to avoid making expensive and time-consuming errors is to gain an overview of the process from a specialist’s perspective. This Article provides just that sort of guide, outlining the various ways in which U.S. federal courts can become involved in international commercial arbitration and introducing both basic and advanced concepts in a straightforward, practical manner. However, this Article provides more than just an overview. Instead, it discusses relevant issues on a motion-by-motion basis, helping readers find immediate answers to their questions while also getting a picture of the field as a whole.

Written especially for busy lawyers, this Article gives practitioners, arbitrators and new and infrequent participants in international commercial arbitration a concise but comprehensive understanding of the unique challenges that arise in this complex area of law. Experienced counsel will also find the discussion helpful, not only as a means of explaining the process to clients and junior colleagues but also as a tactical tool to help consider various options in situations where a U.S. federal court may become (or has become) involved in an international arbitral proceeding.

Download a pdf copy of the article at SSRN here.

Drahozal and Rutledge on “Contracts and Procedure”

February 23, 2011

Christopher R. Drahozal (University of Kansas School of Law)

and Peter B. Rutledge (University of Georgia Law School)

have published “Contract and Procedure”, Marquette Law Review, forthcoming/University of Kansas School of Law Working Paper No. 2011-1/UGA Legal Studies Research Paper No. 11-02. Here is the abstract:

This paper examines both the theoretical underpinnings and empirical picture of procedural contracts. Procedural contracts may be understood as contracts in which parties regulate not merely their commercial relations but also the procedures by which disputes over those relations will be resolved. Those procedural contracts regulate not simply the forum in which disputes will be resolved (arbitration vs litigation) but also the applicable procedural framework (discovery, class action waivers, remedies limitations, etc.). At a theoretical level, this paper explores both the limits on parties’ ability to regulate procedure by contract (at issue in the Supreme Court’s recent Rent-A-Center decision) and the scope of an arbitrator’s ability to fill gaps in parties’ procedural contracts (at issue in the Supreme Court’s recent Stolt-Nielsen decision). At an empirical level, this paper taps a largely unexplored database of credit card contracts available at the Federal Reserve in order to examine actual practices in the use of procedural contracts.

The paper is available for download on SSRN here.


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