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National arbitration laws
What legislation applies to arbitration in your jurisdiction?
The Federal Arbitration Act applies to federal court proceedings relating to domestic (and international) arbitration (9 USC Sections 1-16, 201-208 and 301-307).
In state court proceedings relating to domestic arbitration, the law of the state in which the action was commenced will apply. Most states have adopted either the Uniform Arbitration Act or the Revised Uniform Arbitration Act, but the applicable law will depend on the state in which the action is brought.
Are there any mandatory laws?
Arbitration in the United States is by agreement of the parties, which are generally free to choose the substantive law that will apply. However, the Federal Arbitration Act provides for the vacatur of arbitral awards when certain enumerated procedural or due-process deficiencies are present, so a minimum level of process is also required (see 9 USC Section 10(a) and Article 5 of the New York Convention).
New York Convention
Is your country a signatory to the New York Convention? If so, what is the date of entry into force?
The United States is a signatory to the New York Convention, which entered into force in the United States on December 29 1970. The New York Convention is incorporated into the Federal Arbitration Act at 9 USC Section 201.
Are there any reservations to the general obligations of the convention?
Like many contracting states, the United States will apply the convention only to arbitral awards made in other contracting states, when the underlying arbitration flowed from a commercial relationship.
Treaties and conventions
What other treaties and conventions in relation to arbitration is your jurisdiction party to?
Along with the New York Convention, the United States is also a party to:
- the Inter-American Convention on International Commercial Arbitration (Panama Convention) of January 30 1975; and
- the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
Has your jurisdiction adopted the UNCITRAL Model Law?
The United States has not adopted the UNCITRAL Model Law and the Federal Arbitration Act is not based on the UNCITRAL Model Law. However, several individual US states have legislation based on the model law (www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html).
Are there any impending plans to reform the arbitration laws in your jurisdiction?
There are no pending amendments to the Federal Arbitration Act. However, the Uniform Arbitration Act – promulgated in 1955 and adopted by most states – was revised in 2000 (the Revised Uniform Arbitration Act). The Revised Uniform Arbitration Act has been adopted by at least 18 states and is under consideration in a number of additional states.
What are the validity requirements for an arbitration agreement?
The Federal Arbitration Act explicitly requires that the arbitration agreement be in writing and included as part of a valid contract (9 USC Section 2). However, so long as there is a written arbitration agreement (stemming from a commercial transaction), Section 2 further states that such agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”. As the Federal Arbitration Act explicitly subjects arbitration agreements to ordinary contract rules, the rules regarding the validity of contract formation also apply.
Enforcement of agreements
How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?
Arbitration agreements are enforced through the Federal Arbitration Act, which requires US district courts – once satisfied that the dispute before the court falls within the scope of the arbitration agreement – to “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement” (9 USC Section 3).
Federal courts strongly favour arbitration. According to several Supreme Court cases, there is a “liberal federal policy favoring arbitration agreements” (Moses H Cone Memorial Hospital v Mercury Constr Corp, 460 US 1, 24 (1983)) and a “national policy favoring arbitration” (Buckeye Check Cashing Inc v Cardegna, 546 US 440, 443 (2006)).
Many state courts also favour arbitration, although the applicable laws vary from state to state.
Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?
The Federal Arbitration Act does not expressly address the arbitral tribunal’s authority to consolidate separate proceedings. However, the act does provide that arbitration agreements will be enforced as written. Therefore, whether the tribunal has the authority to consolidate separate arbitral proceedings will typically depend on the arbitration agreement between the parties and/or the applicable procedural rules (see 9 USC Sections 2-4; John Wiley & Sons, Inc v Livingston, 376 US 543, 558 (1964); and Rule P-2 of the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association, Including Procedures for Large, Complex Commercial Disputes).
Choice of law
How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?
The Federal Arbitration Act does not expressly address the applicable substantive law. Absent an agreement between the parties, the arbitral tribunal will decide on the substantive law based on the conflict-of-law analysis that it deems appropriate.
Are there any provisions on the separability of arbitration agreements?
The Federal Arbitration Act does not explicitly address the separability of the arbitration agreement from the underlying contract. However, separability has been established in the case law; in Prima Paint Corp v Flood & Conklin Mfg Co, 388 US 395, 409 (1967), the court ruled that:
“[the] arbitration clause in the contract is ‘separable’ from the rest of the contract and that allegations that go to the validity of the contract in general, as opposed to the arbitration clause in particular, are to be decided by the arbitrator, not the court.”
Are multiparty agreements recognised?
The Federal Arbitration Act does not expressly address multiparty agreements, although federal courts will enforce arbitration agreements as written. Provided that the multiparty arbitration agreement is “clear and unmistakeable”, the agreement will be recognised (see 9 USC Sections 2-4 and Volt Info Scis v Bd Of Trs, 489 US 468, 476).
Criteria for arbitrators
Are there any restrictions?
The Federal Arbitration Act contains no substantive restrictions on arbitrators. However, an arbitral award may be vacated under the act “where there was evident partiality or corruption in the arbitrators, or either of them” (9 USC Section 10(a)(2)).
What can be stipulated about the tribunal in the agreement?
The Federal Arbitration Act does not limit the matters that can be stipulated regarding the tribunal in the arbitration agreement. The composition of the tribunal is therefore left to the parties.
Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics?
When the parties have not expressly agreed, the default rule under the Federal Arbitration Act is that a single arbitrator will be appointed (9 USC Section 5).
Challenging the appointment of an arbitrator
Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?
The Federal Arbitration Act does not provide grounds for challenging the appointment of an arbitrator during the underlying arbitration; such challenges must be made either in accordance with the parties’ agreement or pursuant to the applicable procedural law or rules.
However, after the arbitration has concluded, Section 10(a)(2) provides that the arbitrator’s award may be challenged when there is evidence of partiality or corruption on behalf of the arbitrator.
How should an objection to jurisdiction be raised?
If a party does not believe that a particular dispute is subject to a valid arbitration agreement, that party can commence an action in district court to litigate the dispute. If the opposing party then moves to stay the action in favour of arbitration (pursuant to Section 3 of the Federal Arbitration Act), the court must satisfy itself “that the issue involved in such suit or proceeding is referable to arbitration under such an agreement” before referring the dispute to arbitration or letting the case proceed in court.
Replacement of an arbitrator
Why and how can an arbitrator be replaced?
When there is an arbitrator vacancy, the parties may apply to a US district court to assist in replacing the arbitrator (9 USC Sections 5 and 206). If a method of appointment is specified in the arbitration agreement, the court will appoint the replacement arbitrator “in accordance with the provisions of the agreement”. If no such method is specified, the court will appoint an arbitrator in its discretion.
Powers and obligations
What powers and obligations do arbitrators have?
Arbitrators have the power to summon witnesses, compel their attendance in arbitral proceedings and compel them to produce documents deemed ‘material’ in their possession, custody or control (9 USC Section 7).
Liability of arbitrators
Are arbitrators immune from liability?
The Federal Arbitration Act does not address arbitrator immunity, but US case law has established that arbitrators are immune from liability. In Wasyl, Inc v First Boston Corp, 813 F.2d 1579, 1582 (9th Cir 1987), the court stated:
“While the [Federal Arbitration Act] does not so provide, case law dictates that arbitrators are immune from civil liability for acts within their jurisdiction arising out of their arbitral functions in contractually agreed upon arbitration hearings.”
Communicating with the tribunal
How do the parties communicate with the tribunal?
The Federal Arbitration Act does not address how the parties should communicate with the tribunal. The parties are therefore free to agree on how communications will be exchanged. In the absence of such an agreement, most procedural rules state that no ex parte communications are allowed with the tribunal (eg, Rule R-19(a) of the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association, Including Procedures for Large, Complex Commercial Disputes).
Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?
The Federal Arbitration Act does not address whether unanimous agreement of the tribunal is required or whether a majority will suffice in the event of a disagreement. However, unless the parties have agreed otherwise, a decision of the majority will be valid and enforceable (eg, see Colombia v Cauca, 190 US 524, 528 (1903)).
Are there any disputes incapable of being referred to arbitration?
The Federal Arbitration Act explicitly states that it does not apply to employment contracts for transportation workers engaged in interstate commerce. Specifically, Section 1 of the act excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce”.
While parties may still agree to arbitrate these disputes, enforcement of an ensuing award must be brought under the relevant labour statute.
Can the arbitrability of a dispute be challenged?
Yes ‒ arbitrability or ‘gateway matters’ may be challenged before a US district court, so long as there is no clear and unmistakeable agreement to submit arbitrability issues to the arbitrator (see Rent-A-Center, W, Inc v Jackson, 561 US 63, 78-79 (2010)).
Jurisdiction and competence-competence
Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
Section 3 of the Federal Arbitration Act provides that the district court can conduct a review to satisfy itself that the dispute falls within the ambit of the arbitration agreement. The default rule is that matters of arbitrability or competence of the tribunal should be decided by the courts; however, parties can stipulate in the arbitration agreement that the tribunal is vested with the authority to determine its own jurisdiction. Similarly, the parties can incorporate arbitration rules that provide for competence-competence, which the courts will generally recognise. In Contec Corp v Remote Solution Co, 398 F.3d 205, 209, the court stated:
“We have held that when, as here, parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.”
Starting an arbitration proceeding
What is needed to commence arbitration?
The Federal Arbitration Act specifies no requirements for the commencement of arbitration, so arbitrations must normally be commenced in accordance with the applicable procedural law or rules. Further, the courts will not typically determine procedural compliance: “For questions of so-called ‘procedural arbitrability,’ the arbitrator, not the court, generally decides whether the parties complied with the agreement’s procedural rules” (Gen Warehousemen & Helpers Union Local 767 v Alberton’s Distrib, Inc, 331 F.3d 485, 488, quoting John Wiley & Sons, Inc v Livingston, 376 US 543, 557 (1964)) (inner quotations omitted)).
Are there any limitation periods for the commencement of arbitration?
The Federal Arbitration Act provides no limitation periods for the commencement of arbitration. Any limitations or restrictions will therefore depend on:
- the agreement between the parties;
- the type of dispute; and
- any applicable statute of limitations under the applicable substantive law.
Are there any procedural rules that arbitrators must follow?
The Federal Arbitration Act provides no specific procedural rules that arbitrators must follow. However, the award can be set aside if the arbitrators do not allow the parties to present their case or to present evidence. Section 10(a) of the act provides:
“the United States court in and for the district wherein the award was made may make an order vacating the award…(3) where the arbitrators where 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”.
Are dissenting opinions permitted under the law of your jurisdiction?
The Federal Arbitration Act does not address whether dissenting opinions are permitted, but courts can confirm an award where an arbitrator has dissented. In Merck & Co PeriCor Therapeutics, Inc, 2016 US Dist LEXIS 112976, *12, *40 (SDNY, August 24 2016), an award was confirmed where one of the arbitrators dissented from the majority of the panel.
Can local courts intervene in proceedings?
The US district courts maintain original jurisdiction, but the Federal Arbitration Act expressly provides that the courts can order a stay of court proceeding pending arbitration (9 USC Sections 3, 4 and 203). In the event that arbitration has commenced, the preclusive effect of the arbitration on a concurrent US court proceeding and the court’s authority to issue a stay of arbitration or injunctive relief (ie, to intervene in the arbitration) are unclear. In Dean Witter Reynolds Inc v Byrd, 470 US 213, 223 (1984), the court stated: “The question of what preclusive effect, if any, the arbitration proceedings might have is not yet before us, however, and we do not decide it.” Justice White concurred:
“The Court’s opinion makes clear that a district court should not stay arbitration, or refuse to compel it at all, for fear of its preclusive effect. And I can perceive few, if any, other possible reasons for staying the arbitration pending the outcome of the lawsuit” (id 225).
On the other hand, it is well established that US district courts can assist ongoing international proceedings, including arbitrations. For example, 28 USC Section 1782 –provides:
“The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.”
Can the local courts assist in choosing arbitrators?
US district courts can assist the parties in choosing an arbitrator, but only when the parties cannot agree or when there is an arbitrator vacancy (9 USC Sections 5 and 206).
What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?
When a counterparty refuses to participate in arbitration, the aggrieved party:
“may petition any United States district court which, save for such agreement, would have jurisdiction . . . for an order directing that such arbitration proceed in the manner provided for in such agreement” (9 USC Section 4).
Section 7 of the Federal Arbitration Act also provides that arbitrators are authorised to summon third parties to the proceedings “in the same manner as subpoenas to appear and testify before court”, and that:
“if any person or persons so summoned to testify shall refuse or neglect to obey said summons, upon petition the United States district court… may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for comtempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.”
In what instances can third parties be bound by an arbitration agreement or award?
Arbitration agreements are typically enforceable only against the signatories to the agreement. However, a third party can be bound by an arbitration agreement (or award) based on several theories for binding non-signatories. Such theories include incorporation by reference, assumption, agency, veil-piercing or alter ego, and estoppel (see Thomson-CSF, SA v American Arbitration Ass’n, 64 F 3d 773, 776 (2d Cir 1995)).
Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?
The Federal Arbitration Act does not address the default language or location of arbitrations. These are therefore determined by the parties or, if the parties cannot agree, by the default rules (if any) provided in the applicable procedural law or rules.
How is evidence obtained by the tribunal?
The Federal Arbitration Act does not address the applicable evidence procedure in arbitrations, other than to state that arbitrators may compel the attendance of witnesses and documents at hearings. Procedural matters are therefore determined by the parties, the applicable procedural law or rules, or (if no agreement can be reached) the tribunal.
What kinds of evidence are acceptable?
The Federal Arbitration Act does not address evidence rules applicable to arbitration. The kinds of evidence that are acceptable or admissible will therefore depend on the agreement between the parties and/or the applicable procedural law or rules.
Is confidentiality ensured?
The Federal Arbitration Act does not require or address confidentiality. Whether confidentiality is ensured will therefore depend on the agreement between the parties and possibly the applicable procedural law or rules.
However, if a party is forced to seek confirmation of an arbitral award in court, the award must be disclosed as part of the application.
Can information in arbitral proceedings be disclosed in subsequent proceedings?
If an arbitral proceeding is the subject of a subsequent domestic litigation, the award must be produced in that litigation.
In addition, documents produced in the earlier arbitration are not necessarily shielded from disclosure in subsequent proceedings. In Contship Containerlines, Ltd v PPG Indus, Inc, 2003 US Dist LEXIS 6857, *7 (SDNY, April 17 2003), motion was granted to compel disclosure of expert submissions, correspondences with the panel and arbitrators, submissions to the panel and hearing transcripts that were prepared for the arbitration between the parties. In United States v Panhandle Eastern Corp, 118 FRD 346, 349, 351 (D Del 1988), motion was denied for a protective order against production of documents relating to an arbitration because the movant failed to show “good cause by demonstrating a particular need for protection”.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
The Federal Arbitration Act provides no applicable ethical codes or professional standards. However, attorneys participating in an arbitration are subject to the ethical rules of (at least) the state or states in which they are admitted to practise law and the state in which the arbitration is seated. If the arbitrators are also practising attorneys, they are similarly subject to the ethical rules of the state or states in which they are admitted to practise and the state in which the arbitration is seated.
Although not legally binding, ethical codes for arbitrators are also issued by private organisations, which provide guidance on various topics (eg, the Code of Ethics for Arbitrators in Commercial Disputes published by the American Bar Association).
Estimation & allocation
How are the costs of arbitration proceedings estimated and allocated?
The Federal Arbitration Act does not address costs; therefore, cost allocation is left to the discretion of the arbitrator and will be determined according to the arbitration agreement and the applicable procedural law or rules.
Security for costs
Can the national court or tribunal order security for costs under the law in your jurisdiction?
The Federal Arbitration Act does not address security for costs, but there is no general prohibition on a tribunal’s authority to order such security. Further, domestic procedural rules may specifically provide for securities for costs (eg, Rule R-37(a)-(b) of the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association, Including Procedures for Large, Complex Commercial Disputes). On the other hand, applicable state law may prohibit or restrict the participation of third-party funders in arbitration and should be considered.
Regarding international arbitral awards, Article VI of the New York Convention provides that the competent court where the award is being challenged is authorised to order suitable security “on the application of the party claiming enforcement of the award”.
The US federal courts are also authorised to enact rules providing for security for costs (see Fed R Civ Pro 83).
What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?
The Federal Arbitration Act provides that an arbitral award “shall” be confirmed, unless any of the narrow, enumerated grounds for vacatur is present. As stated in Florasynth, Inc v Pickholz 750 F.2d 171, 176 (2d Cir 1984), “the confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court".
For an international arbitral award, a party can apply to a district court to confirm the award within three years of the making of the award (9 USC Section 207). The party seeking recognition must furnish:
- the duly authenticated original award or a duly certified copy;
- the original arbitration agreement between the parties or a duly certified copy; and
- an official or sworn translation when the award is not made in an official language (Article IV of the New York Convention).
For the recognition of a US domestic arbitral award, Section 9 of the act provides:
“If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award.”
When no court is designated, the act provides no time limits on an application for the confirmation of an award. Under Section 13, the party seeking enforcement must file several documents from the underlying arbitration with the court, including:
- the arbitration agreement;
- any agreements regarding the selection or appointment of arbitrators;
- any agreements regarding the making of the award; and
- the award.
Under Section 9 of the act, the party seeking enforcement must also give notice to the adverse party.
There is no requirement that the award be reasoned. In United Steelworks of America v Enterprise Wheel & Car Corp, 363 US 593, 598, the court stated: “Arbitrators have no obligation to the court to give their reasons for an award.” In Sobel v Hertz, Warner & Co, 469 F.2d 1211, the court stated: “forcing arbitrators to explain their award even when the grounds for it can be gleaned from the record will unjustifiably diminish whatever efficiency the process now achieves”.
Timeframe for delivery
Are there any time limits on delivery of the award?
The Federal Arbitration Act places no time limits on rendering an arbitral award. The parties are therefore free to decide on any time restrictions or the issue can be left to the tribunal to resolve. However, in the absence of agreement, domestic procedural rules may require that the award be rendered within a specified timeframe (eg, Rule R-45 of the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association, Including Procedures for Large, Complex Commercial Disputes requires awards to be made within 30 days of closing of the hearing).
Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?
The Federal Arbitration Act places no limitations on the available remedies. The parties are free to agree on the kinds of dispute and available remedies that are available in the arbitration. In Mastrobuono v Shearson Lehman Hutton, 514 US 52, 58, the court stated:
“if contracting parties agree to include claims for punitive damages within the issues to be arbitrated, the Federal Arbitration Act ensures that their agreement will be enforced according to its terms”.
In Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, 473 US 614, 629 (1985), the court held that in an international arbitration, an antitrust statutory claim with the possibility of being awarded treble damages was arbitrable.
What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?
The Federal Arbitration Act does not address interim measures; however, the district courts maintain original jurisdiction over disputes that were first brought in federal court and then stayed pending arbitration (9 USC Sections 3 and 4).
Whether the courts are authorised to grant interim measures can depend on the agreement between the parties to submit their disputes to arbitration; but, where authorised, courts can issue standard interim measures. In Merrill Lynch, Pierce, Fenner & Smith, Inc v Hovey, 726 F 2d 1286, 1292 (8th Cir 1983), the court held that “where the Arbitration Act is applicable and no qualifying contractual language has been alleged, the district court errs in granting injunctive relief”. In Erving v Virginia Squires Basketball Club, 468 F 2d 1064, 1066 n 1, 1067 (2d Cir 1972), the court affirmed the grant of a preliminary injunction pending arbitration where the contract expressly provided for such relief and in Merrill Lynch, Pierce, Fenner & Smith, Inc v Bradley, 756 F 2d 1048, 1054, the court allowed injunctive relief in the context of an employment contract that contained a non-solicitation clause because immediate relief was necessary for the clause to have any effect.
Can interest be awarded?
If a domestic litigation ensues following arbitration, the courts can award pre-judgment interest from the time that the award was rendered until the date of the court decision (eg, in Ft Hill Builders, Inc v National Grange Mut Ins Co, 866 F.2d 11, 16 (1st Cir 1989), the court “confirm[ed] the arbitration decision and award[ed] interest from the date of the arbitration decision”). In such cases, the substantive law applicable to the arbitration will determine whether pre-judgment interest can be applied and, if so, at what rate.
With respect to post-judgment interest, absent an agreement between the parties, the courts will assess statutory interest pursuant to 28 USC Section 1961. Further, arbitrators are not authorised to grant post-judgment interest absent an agreement between the parties. In Tricon Energy Ltd v Vinmar Int’l, Ltd, 718 F 3d 448, 457 (5th Cir 2013), the court stated: “the circuits have unanimously agreed that ‘an arbitration panel may not establish a post-judgment interest rate’” (quoting Newmont USA Ltd v Ins Co of N Am, 615 F.3d 1268, 1277 (10th Cir 2010), in which the court held that the lower court had erred in modifying the final award’s granting of interest because the arbitrators had the authority to determine the issue since post-judgment interest was arbitrable under the parties’ agreement).
At what rate?
Courts can allow the awarding of pre-judgment interest pursuant to the substantive law governing the dispute, and post-judgment interest at the statutory interest rate pursuant to 28 USC Section 1961 or a non-statutory rate depending on the agreement between the parties. In Newmont USA Ltd (1268, 1276-77), the court stated:
“An agreement to apply a post-judgment interest rate other than that § 1961 specifies is enforceable so long as the parties indicate their intent to override the statute using ‘clear, unambiguous and unequivocal language’” (quoting Soc’y of Lloyd’s v Reinhart, 402 F.3d 982, 1004 (10th Cir 2005)).
Is the award final and binding?
Although awards are final, domestic awards are subject to review according to the enumerated grounds in Section 11 of the Federal Arbitration Act and international awards are subject to review according to the enumerated grounds in the New York Convention (9 USC Section 207).
What if there are any mistakes?
If there is a mistake, a party may apply to a US district court “wherein the award was made” and petition for “an order modifying or correcting the award” (9 USC Section 11). Under Sections 11 (a)-(c), there are grounds for modifying or correcting an award where:
- there is an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award;
- the arbitration tribunal has awarded on a matter not submitted to it, unless it is a matter not affecting the merits of the decision on the matter submitted; or
- the award is imperfect in matter of form not affecting the merits of the controversy.
Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
In Hall Street Associations, LLC v Mattel, Inc 552 US 576, 590 (2008), the Supreme Court held that the grounds for vacating an award enumerated in Section 11 are the exclusive grounds. An agreement by the parties to exclude the limited review provided for by the Federal Arbitration Act is likely not enforceable. In Kyocera Corp v Prudential-Bache T Servs, 341 F 3d 987, 1000, the court held that:
“a federal court may only review an arbitral decision on the grounds set forth in the Federal Arbitration Act. Private parties have no power to alter or expand those grounds, and any contractual provision purporting to do so is, accordingly, legally unenforceable.”
What is the procedure for challenging awards?
The applicable procedure for challenging an award depends on where the award was rendered.
For an international award covered by the New York Convention, a party may apply to the district court to refuse enforcement and recognition according to the grounds enumerated in Article V of the convention (9 USC Section 204 grants original jurisdiction to the district courts for issues arising out of the New York Convention).
For a domestic arbitral award, a party may apply to the district court for an order vacating the award (9 USC Section 10(a)). When applying to the district court to modify or vacate an award, the party must give its counterparty notice of the application (9 USC Section 12).
However, the Federal Arbitration Act does not provide district courts with federal-question jurisdiction, so parties must generally show subject-matter jurisdiction through diversity of the parties. If the parties are not completely diverse (or the amount in controversy does not exceed $75,000), then the award must be challenged in state court under the applicable state law.
On what grounds can parties appeal an award?
If an award is governed by the New York Convention, a district court “shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention” (9 USC Section 207). According to Article V(1)(a)-(b) of the convention, the recognition and enforcement of an award may be refused under any of the following circumstances:
- The parties to the agreement referred to in Article II were – under the law applicable to them – under some incapacity; or the 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.
- The party against which 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 its case.
- The award deals with a difference not contemplated by, or not falling within, the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. If the decisions on matters submitted to arbitration can be separated from those not submitted, the part of the award that contains decisions on matters submitted to arbitration may be recognised and enforced.
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or – failing such agreement – was not in accordance with the law of the country where the arbitration took place.
- The award is not yet 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) the award was made.
Under Article V(2)(a)-(b), the award may also be refused when the district court finds the following:
- “The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
- The recognition or enforcement of the award would be contrary to the public policy of that country.”
Regarding US domestic awards, under Section 10(a)(1)-(4) of the Federal Arbitration Act, the grounds for challenging or vacating an award in federal court are as follows:
- The award was procured by corruption, fraud or undue means;
- There was evident partiality or corruption in the arbitrators, or either of them;
- The arbitrators were guilty of misconduct in:
- refusing to postpone the hearing on sufficient cause shown;
- refusing to hear evidence pertinent and material to the controversy; or
- any other misbehaviour by which the rights of any party have been prejudiced; or
- The arbitrators exceeded their power, or so imperfectly executed it that a mutual, final and definite award on the subject matter submitted was not made.
However, if an award is challenged in state court, the applicable state law will determine the possible grounds for vacatur.
What steps can be taken to enforce the award if there is a failure to comply?
The award creditor can apply to the district court and obtain a judgment enforcing the award. The award-judgment creditor will have the available recourses under US law for the enforcement of domestic judgments (9 USC Section 13).
Can awards be enforced in local courts?
Yes ‒ domestic and international awards can be enforced in US district courts. Domestic awards can also generally be enforced in state courts under the applicable state law.
How enforceable is the award internationally?
Arbitral awards rendered in the United States are enforceable in foreign jurisdictions where the New York Convention is in force (Article III).
If enforcement is sought in a state that is not a party to the New York Convention, the awards properly entered for confirmation before a US court will have the same weight as a domestic court judgment and thus be enforceable to the same extent as a US court judgment abroad (9 USC Section 13).
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
The state action doctrine is precluded under the Federal Arbitration Act. According to Section 15 of the act:
“Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders confirming such awards shall not be refused on the basis of the Act of State doctrine.”
A state or state entity may successfully raise a sovereign immunity defence at the enforcement stage in limited circumstances. However, under the Foreign Sovereign Immunities Act, a foreign state waives its sovereign immunity from the jurisdiction of US courts when it agrees to arbitrate disputes with a private party (28 USC Section 1605(a)(6)). However, this waiver of immunity does not extend to later enforcement proceedings. Whether an award could reach the assets of a foreign state in the United States would depend on whether the assets independently satisfied the exemptions to sovereign immunity (28 USC Sections 1610-1611). For example, in Letelier v Republic of Chile, 748 F.2d 790, 779, the court held that the Foreign Sovereign Immunities Act “did not allow execution against the assets of LAN, the Chilean National airlines” because an act of political terrorism was not covered by the exceptions to sovereign immunity enumerated in the act.
Are there any other bases on which an award may be challenged, and if so, by what?
An award may be challenged for “manifest disregard of the law”. The Supreme Court has held that the enumerated grounds for vacating an award listed in Section 10 of the Federal Arbitration Act are exclusive grounds (Hall Street Associates LLC, 576, 584-85). However, there is a split among various federal circuit courts of appeal concerning whether manifest disregard is a valid basis for vacating an award or whether it is merely a shorthand for the statutory grounds listed in Section 10. In Compare Affymax, Inc v Ortho-McNeil-Janssen Pharm, Inc, 660 F 3d 281, 284-85 (7th Cir 2011), the court held that manifest disregard is an invalid ground for challenging an award, while in Stolt-Nielsen SA v AnimalFeeds Int’l Corp, 548 F 3d 85, 95 (2d Cir 2008), the court found that an arbitrator who is in manifest disregard of the law is “exceeding their powers” under Section 10.
How enforceable are foreign arbitral awards in your jurisdiction?
Foreign arbitral awards are enforceable in the United States pursuant to the New York Convention when the award was rendered in another contracting state. In CBF Indústria de Gusa S/A v AMCI Holdings, Inc, 2017 US App LEXIS 899, *35, the court found that the lower court had erred in deciding that the applicant was required to “confirm their foreign arbitral award before they would be allowed to enforce it”, holding that:
“[the] New York Convention and Chapter 2 of the Federal Arbitration Act require only that the award-creditor of a foreign arbitral award file one action in a federal district court to enforce the foreign arbitral award”.
In such cases, the courts “shall” confirm the award, unless one of the limited grounds to refuse enforcement (enumerated in the New York Convention) is satisfied (9 USC Section 207). Due to this high standard, successful challenges to enforcement of a valid award are rare.
Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
US district courts will defer to the decision of the court of the seat of arbitration, unless there is a showing that the decision of the seat is “repugnant to fundamental notions of what is decent and just in the state where enforcement is sought” (Corporación Mexicana de Mantenimiento Integral, S De RL CV v Pemex-Exploración, 832 F 3d 92, 106 (2d Cir 2016) – quoting Tahan v Hodgson, 662 F 2d 862, 864 (DC Cir 1981)), or that “The recognition or enforcement of the award would be contrary to the public policy of that country” (Article 5(2)(b) of the New York Convention). In TermoRio SA ESP v Electranta SP, 487 F.3d 928, 938 (DC Cir 2007), the court also stated:
“[W]hen a competent foreign court has nullified a foreign arbitration award, United States courts should not go behind that decision absent extraordinary circumstances not present in this case…Therefore, it is unsurprising that the courts have carefully limited the occasions when a foreign judgement.”
Rules and restrictions
Are there rules or restrictions on third-party funders?
The Federal Arbitration Act does not address third-party funding and third-party funding in arbitration is not generally prohibited. However, applicable state law may prohibit or restrict the participation of third-party funders in arbitration and should be considered.
Class-action or group arbitration
Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?
US courts recognise the concept of class arbitration, although it is rarely used. That said, parties to an arbitration may be compelled to class arbitration when there is a valid contractual basis whereby “the parties agreed to authorize class arbitration” (Stolt-Nielson v Animalfeeds Int’l Corp, 559 US 662, 687 (2010) (emphasis in original)). Sections 2-4 of the Federal Arbitration Act also state that US district courts will enforce the parties’ arbitration agreement as written.
Are there any hot topics or trends emerging in arbitration in your jurisdiction?
Several topics are gaining increasing attention from US commentators and practitioners, although there appears to be little consensus. Of note, there is serious dispute regarding:
- the impact of third-party funding on disclosure obligations;
- the inclusion of summary procedures to reduce time and expense of arbitration; and
- the credibility of witness testimony.