U.S.

• Courts’ willingness to intervene in the arbitration process
• Appeals and setting aside awards
• Consolidation
• Injunctions
• Mandatory provisions

Courts’ willingness to intervene in the arbitration process

U.S. courts will intervene in the arbitration procedure in limited circumstances spelled out in the Federal Arbitration Act (“FAA”) and state arbitration law. The FAA, while creating a body of federal substantive law, does not provide an independent basis for federal court jurisdiction. As a result, both state and federal courts are called upon to interpret the FAA.

• Assisting the process – under sections 4 and 206 of the FAA, courts can assist the process by compelling arbitration if they find that the parties entered into an agreement to arbitrate a particular dispute. Section 5 of the FAA allows courts to appoint arbitrators on the application of one of the parties if the parties did not specify a procedure, or if a party fails to make use of an agreed procedure. Under section 7 of the FAA, courts can compel the appearance of witnesses in aid of arbitration. Procedures similar to these exist in the laws of most states. Note, however, that the U.S. Supreme Court has ruled that 28 U.S.C. § 1782, which allows parties to seek the much broader rules of discovery used in the U.S., is inapplicable  to private commercial arbitrations outside of the United States, or arbitration panels formed pursuant to international treaties (unless they are conferred with governmental authority).
• Removal of arbitrators – U.S. courts generally refuse to consider interlocutory challenges to the appointment of arbitrators. After an award is rendered, however, a court can vacate an award under FAA section 10(a)(2) on the grounds of “evident partiality or corruption in the arbitrators.” Again, most states’ arbitration laws have similar provisions.
• Jurisdiction – although this question is not addressed directly in the FAA, the U.S. Supreme Court has established guidelines for the allocation of competence to determine jurisdiction of an arbitral tribunal. An arbitral tribunal can make an initial determination of jurisdiction. However, that determination is only binding on a court if there is “clear and unmistakable” evidence that the parties intended to submit that question to the tribunal. (First Options of Chicago Inc. v. Kaplan, 514 U.S. 938,944 (1995)). Where the parties have submitted to arbitration under institutional rules that provide for the arbitrators to decide their own jurisdiction, courts have found this standard satisfied. Parties should also keep in mind that the FAA provides for an expeditious judicial resolution of the issue by allowing injunctive relief against pending arbitrations and the commencement of litigation on an allegedly arbitrable dispute. Once a court determines that a dispute is arbitrable, it must stay any related litigation pending before it.

Appeals and setting aside awards

Generally, a party can move to vacate an arbitration award in a court with jurisdiction where the award was rendered within a certain period after delivery of the award (3 months in federal and New York courts). A federal court will vacate the award only where: (i) the award is procured by fraud or corruption; (ii) there is partiality or corruption on the part of the arbitrators; (iii) the arbitrators are guilty of misconduct in refusing to postpone a hearing, to hear material evidence, or of any other misbehaviour by which the rights of any party have been prejudiced; or (iv) the arbitrators exceeded their powers, or failed to make a mutual, final and definite award on the subject matter submitted. There is no effective appeal for ordinary errors of fact or law (see FAA section 10(a)). A federal court will not vacate an award absent “manifest disregard of the law.” This does not mean an ordinary error of law, but rather the award must demonstrate that the arbitrators were aware of applicable law and declined to follow it. Although using different formulations, most states have equally deferential standards limiting the scope of judicial review of arbitration awards. Whether the set aside action is to be brought in the state court where the award was made, or can be brought in a federal court will depend: federal jurisdiction requires an independent basis for the set aside action itself (such as diversity jurisdiction i.e. the parties being resident in different states). If that doesn’t exist, the action belongs in a state court.

Consolidation

Court ordered consolidation is not directly addressed in the FAA and there is a split of authority on the subject in the U.S. Some federal courts have found that they have a general power to compel consolidation of related arbitrations even in the absence of an agreement among all parties to do so. Some states have enacted statutes that allow court ordered consolidation without the parties’ agreement. Most federal courts have found that they can order consolidation only where the parties have so agreed. The rules regarding consolidation of a chosen arbitration institution would generally be construed as part of the parties’ agreement on the subject.

Injunctions

Although the FAA is silent on the ability of arbitrators to order provisional measures, most U.S. courts have found that such power is not prohibited by U.S. law. Thus, provisional measures ordered by an arbitral tribunal are enforceable in U.S. courts as long as the parties so provided in their agreement or such power is provided in the rules of a designated arbitral institution. There is a split of authority on whether courts have the power to order provisional measures in aid of arbitrations. Some courts have held that the New York Convention prevents court involvement outside of referring the parties to arbitration while some courts have rejected this notion and issued injunctions to preserve the status quo pending arbitration. Some states have solved the problem through legislation. For example, New York allows courts to issue provisional remedies in aid of arbitrations taking place in New York but only where the eventual award would be rendered ineffectual absent such relief.

Mandatory provisions

U.S. law does not enumerate mandatory provisions that must apply to arbitrations conducted in the United States. Courts have generally interpreted the FAA to grant very broad freedom to the parties to choose the arbitral procedures applicable in their proceedings. Some courts have held that arbitration procedures must conform to the minimum standards of due process contained in the U.S. Constitution while others have not applied constitutional standards to arbitrations on the grounds that arbitrations do not constitute state action.

Arbitrators’ attitude towards procedure

American arbitrators come from a common law background in which the extensive discovery of documents, cross-examination of witnesses, party selected expert witnesses and oral argument are usually permitted. As a result, document discovery allowed by American arbitrators is more extensive than in other jurisdictions but generally not as extensive as that allowed in American court litigation. Absent specific agreement of the parties, American arbitrators generally will not allow oral depositions. American arbitrators, who are usually lawyers, for the most part find statutes and previous decisions by courts or tribunals to be of greater persuasive weight than academic legal commentary.

Arbitrators’ role in settlement

American arbitrators generally view the promotion of settlement as being inconsistent with their role as adjudicators and so will not involve themselves in settlement negotiations. Some state laws expressly prohibit arbitrators from becoming involved in settlement discussions, serving as a mediator or creating a settlement agreement for the parties.

Costs of arbitrations

There are numerous organizations offering institutional assistance for arbitration in the U.S., some of which are industry specific. These organizations, which include the American Arbitration Association (“AAA”), JAMS, the ICC, and the Institute for Conflict Prevention and Resolution ("CPR") have different administrative costs and different methods of setting arbitrators’ fees. The largest such organization in the U.S., the AAA, charges administrative fees that are based on the amount in dispute. As to arbitrators’ fees, the AAA will broker an agreement between the parties and the arbitrators as to the appropriate fees. Failing this, the AAA will fix the arbitrators’ fees based on hourly rates, the amount in dispute and the complexity of the case. In general, for a given amount in dispute, AAA administration costs are much lower than in ICC arbitration.

Attorneys in the U.S. charge varying fees depending largely on location. Lawyers in large commercial centers such as New York tend to charge higher fees that can result in a higher overall cost than in many countries.

Availability of arbitrators

There is a large pool of arbitrators in all disciplines for both domestic and international arbitrations. The AAA as well as other domestic organizations maintain lists of arbitrators. The arbitrators on the AAA and other lists are of uneven quality. In the face of recent criticism, the AAA has made efforts to strengthen the quality of its lists of international arbitrators. Some organizations, JAMS and CPR for instance, maintain a strong list of domestic arbitrators consisting of many former judges. To assure the appointment of arbitrators with appropriate expertise and experience, the parties should provide in their agreement for a process by which they can appoint their own arbitrators. The most common procedure is for each party to appoint an arbitrator with the appointed arbitrators jointly selecting the chair.