Commercial Arbitration

Last verified on Thursday 2nd April 2020

Commercial Arbitration: USA

David M Orta

Quinn Emanuel Urquhart & Sullivan , Quinn Emanuel Urquhart & Sullivan

Infrastructure

1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

USA

The New York Convention was acceded by the United States in 1970, subject to the reciprocity and commercial reservations. It is codified in Chapter 2 of the Federal Arbitration Act (FAA) 9 U.S.C. § 201 et seq. The FAA limits application of the New York Convention to arbitration awards and agreements arising out of “commercial” relationships between US citizens and foreign citizens. 9 U.S.C. § 202. 

Answer contributed by David M Orta

2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

USA

In addition to the New York Convention, the United States is a party to the Inter-American Convention on International Commercial Arbitration (the Panama Convention), the Convention Between States and Nationals of Other States (ICSID), the North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty. The United States is also a party to several bilateral and multilateral investment treaties.  A list of the United states’ bilateral investment treaties can be found at: https://www.state.gov/investment-affairs/bilateral-investment-treaties-and-related-agreements/united-states-bilateral-investment-treaties/.

Answer contributed by David M Orta

3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

USA

In the United States, legislation governing arbitrations exists at both the federal and state level. The primary federal law governing arbitrations is the FAA. The FAA applies to all arbitrations that involve interstate commerce. Allied-Bruce Terminix Cos v Dobson, 513 U.S. 265 (1995). Each state has its own set of arbitration laws, which govern arbitrations involving commerce based entirely within one state, but in the event of any conflict, the FAA supersedes and trumps the application of any inconsistent state law involving arbitration under the doctrine of federal pre-emption. Id.; Preston v Ferrer, 552 U.S. 346, 353, (2008); AT&T Mobility LLC v Concepcion, 563 U.S. 333, 341 (2011).

The FAA precedes and is not based on the UNCITRAL Model Law, although it is consistent with it in many respects. The FAA differs from the Model Law with respect to the procedures for the appointment of arbitrators, the power of arbitrators to rule on their own jurisdiction, the power of the courts to modify or correct an award, and the grounds for setting aside an award, among other issues.

Answer contributed by David M Orta

4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

USA

The leading institutions that administer international arbitrations that are based within the United States are:

  • The American Arbitration Association’s international division, called the International Centre for Dispute Resolution (ICDR);
  • the International Institute for Conflict Prevention and Resolution (CPR);
  • the International Chamber of Commerce (ICC), which has a branch office in New York City; and,
  • JAMS (formerly known as Judicial Arbitration and Mediation Services, Inc), whose panel of arbitrators includes over 400 retired US federal and state court judges.

Answer contributed by David M Orta

5. Can foreign arbitral providers operate in your jurisdiction?

USA

Yes. The International Chamber of Commerce Court of Arbitration and the World Intellectual Property Association have branch offices in New York. Other foreign providers are free to operate proceedings in the United States.

Answer contributed by David M Orta

6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

USA

There is no specialist arbitration court at the federal level in the United States. All article III federal judges have the power to decide cases involving international arbitrations. US federal courts are quite familiar with, supportive of and deferential to international arbitration, as is required by the FAA. Courts have recognised that section 2 of the FAA sets forth a national policy favouring arbitration and protecting the validity, irrevocability and enforceability of arbitration agreements in both state and federal court. Southland Corp v Keating, 465 U.S. 1, 10 (1984). Some states, such as New York, have specialist arbitration judges.

Answer contributed by David M Orta

Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

USA

Under the FAA, to be enforceable an arbitration agreement must be in writing. 9 U.S.C. § 2. Apart from the writing requirement, the only permissible validity requirements are those the governing state law places on all contracts.  Doctor's Assocs, Inc v Casarotto, 517 U.S. 681, 686–87 (1996). Arbitration agreements may cover existing or future disputes.

Answer contributed by David M Orta

8. Are any types of dispute non-arbitrable? If so, which?

USA

Generally speaking, the FAA permits the arbitration of virtually any type of civil or commercial dispute. Recently, state courts and legislatures have sought to place restrictions on arbitration clauses in the employment context. For example, California recently enacted a statue prohibiting employers from requiring that job applicants and employees sign an arbitration clause as a condition of employment. California Assembly Bill 51. 

Parties may themselves elect to include clauses in their arbitration agreements prohibiting class arbitrations. Recently, some states, federal regulatory agencies and courts have sought to restrict parties from including such clauses. However, the Supreme Court has consistently ruled against those restrictions, making it clear that, under the FAA and the doctrine of federal pre-emption, which provides that federal laws pre-empt inconsistent state laws, parties’ agreements as to the availability of class arbitrations must be honoured. AT&T Mobility LLC v Concepcion, 563 U.S. 333, 336 (2011); American Express Co v Italian Colors Restaurant, 570 U.S. 228 (2013); Oxford Health Plans LLC v Sutter 133 S. Ct. 2064 (2013).

Answer contributed by David M Orta

9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

USA

A third party not a signatory to an arbitration agreement can in some circumstances be joined to an arbitration. Absent an express agreement to arbitrate, there are only limited theories upon which a court will enforce an arbitration agreement against a non-signatory, including:

  • incorporation by reference;
  • assumption;
  • agency;
  • veil-piercing/alter ego; and
  • estoppel. Arthur Anderson v Carlisle, 556 US 624 (2009).

Some courts have also held that a non-signatory cannot compel arbitration unless one of these five theories is proven.  See, eg, Scheurer v Fromm Family Foods LLC, 202 F. Supp. 3d 1040, 1043 (W.D. Wis. 2016), aff'd, 863 F.3d 748 (7th Cir. 2017). The issue of whether a non-signatory may compel arbitration based on estoppel is currently before the Supreme Court in GE Energy Power Conversion France SAS v Outokumpu Stainless USA LLC, Docket No. 18-1048.

Answer contributed by David M Orta

10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

USA

 The FAA is silent on the issue of consolidation. Many district courts have held that the question of whether consolidation is permissible is a procedural question for the arbitrator to decide. Blue Cross Blue Shield of Massachusetts, Inc v BCS Ins Co, 671 F.3d 635 (7th Cir. 2011); Shaw’s Supermarkets, Inc v United Food and Commercial Workers Union, Local 791, 321 F.3d 251 (1st Cir. 2003). 

In the class action context, the US Supreme Court has held that a party may not be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party expressly agreed to do so. Stolt Nielsen SA v Animal Feeds Int’l Corp, 559 U.S. 662 (2010). Most arbitral bodies, including AAA/ICDR and JAMS, provide a mechanism for joining additional parties or consolidating arbitrations. By virtue of agreeing to arbitrate in accordance with the rules of such institutions, parties may be said to have agreed to the rules allowing for the consolidation of certain arbitral proceedings.

Answer contributed by David M Orta

11. Is the "group of companies doctrine" recognised in your jurisdiction?

USA

US courts traditionally do not use the group of companies doctrine to join non-signatory affiliated companies. Instead, US courts use the principals of incorporation by reference, assumption, agency, veil-piercing or alter ego, and estoppel. See Arthur Anderson v Carlisle, 556 U.S. 624 (2009). Courts in the United States can pierce the corporate veil to enforce arbitration agreements against parent or sister companies. Id. The factors courts use in their analysis differs by jurisdiction, but they are typically quite rigorous and fact-specific.

Answer contributed by David M Orta

12. Are arbitration clauses considered separable from the main contract?

USA

Under federal law, arbitration clauses are severable from the main contract. Buckeye Check Cashing, Inc v Cardegna, 546 U.S. 440, 445 (2006). That law applies in state court as well under the doctrine of federal preemption. Id.

Answer contributed by David M Orta

13. 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 tribunals jurisdiction and competence?

USA

The United States recognises the principle of competence-competence. In the United States, parties may, by agreement, elect to have competence-competence (the principal of allowing the arbitrator to determine arbitrability or questions related to their own jurisdiction). Courts will use ordinary state-law principles governing the formation of contracts to determine whether the parties have reached such an agreement. First Options of Chicago, Inc. v Kaplan, 514 U.S. 938, 944 (1995). If a contract clearly delegates the question of arbitrability to an arbitrator, a court may not override the contract, even if the court thinks that an arbitrability claim is wholly groundless. Henry Schein, Inc v Archer & White Sales, Inc 139 S. Ct. 524, 526 (2019).  If the agreement is silent, courts have authority to determine the jurisdiction of the arbitrator. Chicago, Inc v Kaplan, 514 U.S. at 943.

Answer contributed by David M Orta

14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

USA

As explained above, the FAA’s only formal requirement is that arbitration agreements must be written. 9 U.S.C. § 2. As with any contract, it is also in the parties’ interest to state clearly the specific terms of their agreement such as whether consolidation and class arbitration is permissible, and whether the arbitrator has jurisdiction to decide arbitrability.

Answer contributed by David M Orta

15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

USA

While there is no reliable data available as to which is more common, the authors are of the view that institutional arbitration is more common than ad hoc, un-administered arbitration in the United States. Having said that, both ad hoc and institutional international arbitrations are used in the United States. The UNCITRAL Rules are commonly used in ad hoc arbitrations.

Answer contributed by David M Orta

16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

USA

Multi-party arbitration agreements can take the form of a single contract with multiple signatories, or separate related contracts with different parties. Where the form is the latter, the clauses should be the same, or as similar as possible and should specifically reference each other. An umbrella arbitration agreement may be used to establish rules governing multiple subordinate contracts that may be entered into over time. Multi-party agreements should clearly state whether consolidation and class arbitration is permissible and should clearly provide the rules to follow with respect to the number of arbitrators and the method for their appointment. In the absence of such guidance in the arbitration agreement, the rules of the arbitral institution referenced in the arbitration agreement may fill the gaps on these issues.

Answer contributed by David M Orta

Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

USA

The FAA does not contain any rules for the commencement of arbitrations. Parties may specify the means for commencing an arbitration in their agreement or incorporate certain arbitral rules. Under the CPR, and the ICDR rules, an arbitration commences when written notice is provided to the arbitral institution and to the respondent. Under the JAMS rules, an arbitration commences when JAMS issues a commencement letter based on one of the following:

    • a post-dispute arbitration agreement fully executed by all parties specifying JAMS administration or use of any JAMS rules;
    • a pre-dispute written contractual provision requiring the parties to arbitrate the dispute or claim and specifying JAMS administration or use of any JAMS Rules or that the parties agree shall be administered by JAMS;
    • a written confirmation of an oral agreement of all parties to participate in an arbitration administered by JAMS or conducted pursuant to any JAMS rules;
    • the respondent's failure to timely object to JAMS administration; or
    • a copy of a court order compelling arbitration at JAMS.

Under the ICC Rules, an arbitration commences when a party submits its Request for Arbitration to the Secretariat. If the agreement does not specify the means for commencement, state law where the arbitration is seated shall apply.

There is no statute of limitations for the commencement of an arbitration. Parties may include a temporal limit in their arbitration agreements, however, parties cannot expand any limits already set by the laws governing the timeliness of causes of action under state common laws or statutes.

Answer contributed by David M Orta

Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

USA

Parties may specify the choice of law in their arbitration agreements. Where the arbitration agreement is silent as to the applicable law, courts commonly look to the law designated in the main contract to determine what law applies. See, eg, Mortensen v Bresnan Communs, LLC, 772 F.3d 1151 (9th Cir. 2013).

Answer contributed by David M Orta

Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a partys choice of arbitrator?

USA

The FAA does not place any restrictions or requirements on the selection of an arbitrator. State laws also do not provide any such limitations. However, most states have laws providing procedures for challenging an appointment.  For example, the California Arbitration Act requires that arbitrators make disclosures and allows the parties to challenge the appointment within 15 days of disclosure. Cal. Civ. Proc. Code § 1281.9 (a). Most arbitration institutions, including IDCR, JAMS and CPR also have rules allowing parties to challenge appointments based on an arbitrator's lack of impartiality or independence and alleged conflicts of interest. 

Following an arbitration, a party may challenge an arbitration award on the basis that an arbitrator lacked impartiality or independence or had a conflict of interest. See, eg, Ceriale v AMCO Ins Co. 48 Cal App.4th 500 (Cal. Ct. App. 1996); Middlesex Mut Ins Co v Levine, 675 F.2d 1197 (11th Cir. 1982).   

Answer contributed by David M Orta

20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

USA

Yes, there are no nationality restrictions built into the US laws in terms of serving as an arbitrator. Non-US nationals will be required to comply with any applicable visa requirements, if any, for working within the United States, should such laws apply. Of course, parties are free to build in nationality restrictions within their arbitration agreements, and the US courts will enforce the parties agreements in this regard.

Answer contributed by David M Orta

21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

USA

If parties have agreed to adopt a particular set of arbitral institutional rules like the ICDR, there are default rules parties can follow to appoint an arbitrator. When parties cannot agree upon a method and the arbitration agreement is silent with respect to an appointment process, the FAA and state laws authorise the courts of the state where the arbitration is seated to appoint an arbitrator upon the request of one of the parties.

Answer contributed by David M Orta

22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

USA

Arbitrators are immune from civil liability in conduct arising out of the arbitral functions. However, immunity does not extend to every act of an arbitrator. See Sacks v Dietrich, 663 F. 3d 1065, 1069-70 (9th Cir. 1987). The tests courts employ to determine if an arbitrator’s conduct is immune from liability is whether “whether the claim at issue arises out of a decisional act”. Pfannenstiel v Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 (10th Cir. 2007). In such event, immunity applies. See id at 1159-60.

Answer contributed by David M Orta

23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

USA

The FAA does not contain any provisions regarding securing arbitration fees. However, most arbitral institutions like the ICDR have rules regarding deposits and payments for arbitrators, and they routinely set up trust accounts for cases to pay for the arbitrators’ fees as well as the costs of administering the arbitration. In ad hoc arbitrations, the arbitrators can build in requirements for the payment of their fees in their procedural orders and/or by virtue of correspondence with the parties.

Answer contributed by David M Orta

Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

USA

Under the FAA, a party may challenge an arbitration award on the ground that there was “evident partiality or corruption in the arbitrators”. 9 U.S.C. §10.2. The US circuit courts are split on how to interpret the “evident partiality” standard. Some courts find “an impression of possible bias” sufficient (eg, California) while others require proof that one would “have to conclude the arbitrator was biased” (eg, New York). New Regency Production, Inc v Nippon Herald Films, Inc., 501 F.3d 1101, 1108 (9th Cir. 2007). The standard for vacation of an arbitration award due to ‘evident partiality’ is heavy, and the claimant must establish specific facts that indicate improper motives on the part of an arbitrator. Id. Whether arbitrators will take into account the IBA Guidelines on Conflicts of Interest depends on the rules of procedure for the particular arbitration, but in general these guidelines are taken into account by arbitrators handling international arbitrations.

Answer contributed by David M Orta

Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

USA

The FAA is silent on the issue of interim relief. However, federal and state courts have authority to issue interim relief while an arbitration is pending in the form of preliminary injunctions and attachments of property as well as ex parte temporary restraining orders. Most arbitration institutions also have rules permitting arbitrators to provide interim relief, including injunctions, preservation of evidence or assets, security for costs and temporary restraining orders.

Answer contributed by David M Orta

26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

USA

The FAA does not address security for costs. Many arbitral institutional rules permit a tribunal to order a party to provide for security of costs and US courts have approved security for costs. See, eg, in re Abeinsa Holding, Inc. Case No. 16-10790 (KJC), 2019 WL 647032 (Bankr. D. Del. Feb. 14, 2019). There are no specific laws in the US on this precise issue, but parties are able to seek injunctive relief, which could take the form of a request for security for costs, although the standard to obtain such relief is quite high.       

Answer contributed by David M Orta

Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

USA

Arbitration between parties is contractual in nature and thus parties are generally free to agree upon any customised arbitration process. There generally are no specific laws that govern the conduct of the arbitration. This being said, the professional conduct rules governing lawyers in each jurisdiction will impose certain requirements on counsel representing parties in an arbitration, including rules of ethics, duties of candour to the tribunal and candour and loyalty to one’s client. However, a state arbitration act that is not pre-empted by the Federal Arbitration Act may require basic safeguards to ensure fairness in the arbitration process. For example, many states (eg, California) may have an unconscionability doctrine that will void an arbitration agreement that is unreasonably favourable to one side. See Carlson v Home Team Pest Defense, Inc, 239 Cal. 4th 619, 638-39 (2015).

Parties may create an agreement that adopts a particular jurisdiction’s procedural process or one that is entirely unique. Agreements commonly include provisions for how an arbitrator will be selected, if issues are to be limited, which parties are allowed to arbitrate, and if a decision rendered by the arbitrator is to be kept confidential.

Answer contributed by David M Orta

28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

USA

Under section 4 of the FAA, a party aggrieved by the alleged failure of another party to arbitrate may move for the court to enforce the agreement and must serve that party at least five days’ notice of the hearing.

A party who agrees to arbitrate in writing cannot avoid an arbitration by refusing to participate. See, eg, Merchant Cash & Capital, LLC v Ko, Case No. 14 Civ. 659 (KPF), 2015 WL 3822836 (S.D.N.Y. 19 June 2015). Some jurisdictions will allow a party to challenge a prior agreement in writing to arbitrate when a party cannot afford to pay for the cost and the agreement does not contemplate a fee waiver. See, eg, Gutierrez v Autowest, Inc, 144 Cal. App. 4th 77 (2003). However, this exception typically only applies when there is a public interest is at stake, such as consumer protection.

In the event that a party has received proper notice and fails to attend, the arbitration must still proceed unless there is a law to the contrary. See American Arbitration Association Commercial Arbitration Rules and Mediation Procedures, Rule 31. The present party will present its case and will have the same burdens of proof as if the absent party were in attendance. In determining the award, the arbitrator may not solely base his or her decision on the party’s absence and will still be required to issue a reasoned decision based on the applicable law and facts.         

Answer contributed by David M Orta

29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

USA

Because arbitration is contractual in nature, admissibility of evidence will entirely depend on the procedural rules the parties have agreed to adopt. Generally, there are less stringent evidentiary rules in arbitration than in a US court. In cases where the agreement is silent to evidentiary rules, arbitrators often rely upon the IBA rules though some also often turn to the Federal Rules of Evidence (FRE). The Prague Rules are less popular in the United States as they are designed for civil law systems that take an inquisitorial approach instead of an adversarial approach.

Evidence generally consists of documentary exhibits and live witness testimony. Direct examination may be submitted via written statement.  Arbitration typically also provides more flexibility for testimony by video conference or by telecommunications.

Answer contributed by David M Orta

30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

USA

Courts have recognised that arbitrators govern their own proceedings without court intervention. Generally, a court has no power to order discovery when parties litigate in arbitration proceedings. See, eg, In re Technostroyexpert, F. Supp. 695, 697-98 (S.D.N.Y. 1994). However, a court may enforce an arbitrator’s discovery ruling, such as an arbitrator’s subpoena for documents or witness testimony. See, eg, Western Employers Ins Co v Merit Ins Co, 492 F.Supp. 53 (N.D. Ill.1979). In relation to arbitration proceedings pending outside the United States, there is a federal statute that allows for any “interested party” to file a petition with the federal court in which the evidence or witness is located to seek court assistance to compel the taking or production of evidence in aid of the foreign proceeding. See 28 U.S.C. § 1782 (2018).

Answer contributed by David M Orta

31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

USA

Due to the contractual nature of arbitration, document production and discovery procedures will entirely depend on the parties’ agreement. The US Supreme Court and FAA recognize parties’ ability to customise provisions regarding the scope, availability and timing of document production. See Mastrobuono v Shearson Lehman Hutton, Inc, 514 U.S. 52, 57 (1995). Because parties may not be able to anticipate all discovery needs, they may elect to adopt a standard set of discovery procedures like the ICDR. Most often the discovery process in arbitration will be more succinct and have a narrower scope than the discovery rules applied in federal and state courts in the US.

Answer contributed by David M Orta

32. Is it mandatory to have a final hearing on the merits?

USA

No, unless the arbitration agreement makes a final hearing the merits mandatory. Akin to when courts decide a case on a motion for summary judgment, a tribunal may determine the outcome without an oral hearing if one of the parties files a request for summary disposition of the matter. However, arbitrators who determine the outcome without a hearing must ensure that the parties have had sufficient opportunity to present their case; otherwise they risk a court vacating the outcome. Several arbitral institutions also have guidelines for a minimum claim amount for a case to have a final hearing. The ICDR sets a guideline for disputes up to $100,000 to be decided on documents only should the parties agree to do so.

Answer contributed by David M Orta

33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

USA

The FAA does not have any provisions regarding the location of hearings and meetings.  Where meetings and hearings take place entirely depend on the parties’ arbitration agreement, or the discretion of the arbitration tribunal. Where an agreement is silent, tribunals will typically follow the procedural rules of jurisdiction in which the arbitration takes place.

Answer contributed by David M Orta

Award

34. Can the tribunal decide by majority?

USA

Yes. There are no formal requirements under US law governing the number of arbitrators. Due to the contractual nature of arbitration under US law, it is entirely up to the parties if there are to be multiple arbitrators and if a majority can determine the outcome. According to the AAA Commercial Rules and Mediation Procedures, Rule 44, a majority of arbitrators must make all decisions unless otherwise required by law or the arbitration agreement. The rules of most other institutions similarly provide for majority rule decisions.

Answer contributed by David M Orta

35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

USA

The availability of remedies will entirely depend on the arbitration agreement. The FAA and state laws generally do not limit the types of relief that tribunal may award. If the arbitration agreement is silent with respect to the availability of remedies, then the tribunal essentially has as much freedom as a court when determining relief. However, most arbitration agreements expressly limit the type and amount of relief that can be awarded. Most states allow for agreements to limit relief so long as they are not overly one-sided as to be found unconscionable. The rules of some institutions also provide limits on the types of remedies that arbitrators may award, such as restrictions on the awarding of punitive or moral damages.

Answer contributed by David M Orta

36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

USA

Yes, dissenting opinions are allowed. It is difficult to assess the frequency of dissenting opinions and publicly available dissenting opinions are rare  In cases with three or more arbitrators, a dissenting arbitrator may elect to write an opinion so long as the arbitration agreement does not prohibit them or is silent to the issue.   

Answer contributed by David M Orta

37. What, if any, are the legal and formal requirements for a valid and enforceable award?

USA

The FAA does not explicitly outline formal requirements for a valid and enforceable award with respect to its form. However, the FAA and the laws of US states require that parties  present the award to a district or first instance court in order for it to confirm the award.  Foreign awards must be properly authenticated. See 9 U.S.C. § 13 (2018). Several states, including New York, require awards to be signed by the arbitrator. Parties may also agree to a particular form by contract. This said, most arbitrators will issue reasoned awards to ensure that they withstand challenges in set aside proceedings.

Even if not required by law, leading arbitral institutions generally recommend or require that a tribunal issue reasoned opinions, particularly for international arbitrations or when there are complex issues. The AAA’s IDCR article 30-1 states that “the tribunal shall state the reasons upon which the award is based, unless the parties have agreed that no reasons need be given.” The AAA’s Commercial Arbitration Rules and Mediation Procedures, Rule 46, prescribes that the arbitrator does not need to “render a reasoned award” unless the arbitrator deems it appropriate or it is required by the arbitration agreement set by the parties. 

Answer contributed by David M Orta

38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

USA

Absent requirements in the arbitration agreement or in the rules applicable to the arbitration, there are no specific requirements for the timing of the issuance of an arbitral award by a tribunal. 

The FAA provides parties seeking to vacate, modify or correct an arbitration award three months to do so. 9 U.S.C. § 12 (2018). 

Winning parties have one year to apply for a court order to enforce the award. 9 U.S.C. § 9 (2018). Once the winning party moves for enforcement, the FAA does not prescribe a time frame for the enforcement of that award. However, arbitration enforcement proceedings in a court are summary in nature and thus should typically move faster than other types of court proceedings.

Answer contributed by David M Orta

Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

USA

The default in the US is that parties bear their own costs unless there is a particular statutory basis for fee-shifting, such as in civil rights cases. However, parties can include a fee-shifting provision in their arbitration agreement. Many arbitral institutions like the ICDR permit the tribunal, upon their discretion, to apportion costs and fees.

Answer contributed by David M Orta

40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

USA

A tribunal may award interest and the parties may contract to set a particular rate. In the case that the arbitration agreement is silent, a tribunal has wide discretion to implement an interest rate, but will be constrained by the law applicable to the dispute. So, for example, if New York law applies to the substantive dispute, then normally the maximum rate of interest allowed under New York law for civil judgments will apply and constrain the arbitrator’s interest award. For the pre-award period (the time between the date of loss to the date the award is issued), arbitrators often consult the interest rates set by contract law in whichever state law governs the arbitration agreement. For example, New York currently has award interest set at 9 per cent. See New York Civil Practice Law and Rules §5004.

A court will likely implement post-judgment interest (the period between when the arbitration award is accepted by the court and when the award is paid out) set by the tribunal provided that it is not punitive or against the state’s public policy. Federal courts will award the market rate of interest equal to the average yield on one-year US treasury bills for the calendar week preceding the date of judgment. 28 U.S.C. §1961 (2018). This rate is notably lower, currently less than 0.2 per cent. See https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield.

Answer contributed by David M Orta

Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

USA

Yes, the FAA provides an exhaustive list in sections 10-11. Section 10 of the FAA will allow a court to vacate an award where:

  • an award was procured by corruption, fraud or undue means;
  • there was evident partiality or corruption in arbitrators;
  • the arbitrators were guilty of misconduct in refusing to postpone the hearing or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehaviour by which the rights of any party have been prejudiced; or
  • a tribunal exceeds the scope of its authority 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 (2018).

Section 11 of the FAA allows for the modification of an award where:

  • there was a fundamental miscalculation of the award or an evident material mistake in the description of any person, thing, or property referred to in the award;
  • the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted; or
  • the award is imperfect in matter of form not affecting the merits of the controversy. 9 U.S.C. § 11 (2018).

The laws of each US state may provide other grounds for appealing or setting aside arbitral awards.

Answer contributed by David M Orta

42. Are there any other bases on which an award may be challenged, and if so what?

USA

The US Supreme Court in Hall Street Assocs v Mattel, Inc, 552 U.S. 576 (2008) held that the FAA §§ 10-11 provides the exclusive grounds for an expedited vacatur or modification of the arbitration award. The Court in Hall Street Assoc. left open the possibility for parties to appeal on the state and common law grounds. 

Answer contributed by David M Orta

43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

USA

Typically, US courts are loath to enforce contractual provisions that prevent a party from exercising any type of appeal. And usually, arbitration awards are reviewed by a trial court and can then be appealed to a court of appeal. At least one Federal Circuit Court of Appeal has held that parties may include an arbitration agreement provision that prohibits and appeal once the district court has accepted the award. See Mactec, Inc v Gorelick, 427 F.3d 821 (10th Cir. 2005).

Answer contributed by David M Orta

Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

USA

The FAA adopted the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Pursuant to article V of the Convention, if the court in the seat of arbitration that set aside the award belongs to a sovereign country that has signed the Convention, then a court in the United States will defer to that foreign court’s ruling and will not enforce the arbitration award unless there is a public policy exception that would preclude the court from recognising the foreign vacatur decision. See Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v Pemex–Exploración Y Producción, 832 F.3d 92, 105 (2d Cir. 2016); Chromalloy Aeroservices v Arab Republic of Egypt, 939 F. Supp. 907, 909 (D.D.C. 1996).

Answer contributed by David M Orta

45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

USA

In 2018, the Supreme Court in Epic Systems Corp v Lewis, 138 S. Ct. 1612, 1623 upheld the viability of class-action waivers in arbitration agreements. Since the decision, more corporations have added class-action waivers in the arbitration agreement section of employment contracts and consumer agreements. Several state legislatures with concerns for workers’ and consumers’ rights have considered enacting state law to disallow class action waivers but many believe that such laws would be pre-empted by federal law.

In this current term, the US Supreme Court in GE Energy Power Conversion France SAS v Outokumpu Stainless USA LLC, Docket No. 18-1048, is currently deciding whether the Convention on the Recognition and Enforcement of Foreign Arbitral Awards permits a non-signatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel. The outcome of this case could significantly impact the landscape of international arbitration in the United States, as one of the core underpinning of arbitration is party consent, normally through a signed arbitration agreement between parties.

Answer contributed by David M Orta

46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

USA

The Foreign Sovereign Immunities Act (FSIA) grants foreign states immunity from suit in courts in the US. However, the FSIA includes a specific exception where a party brings an action to enforce an arbitration agreement made by the foreign state with or by a private party. 28 U.S.C. § 1605(a)(6). If a foreign state enters into an arbitration agreement or engages in conduct that implies a waiver, such as filing as a responsive pleading, a federal court will likely hold that the foreign state waived immunity and will enforce arbitration.

Answer contributed by David M Orta

Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

USA

The FAA is silent as to the confidentiality of arbitral proceedings. However, it is common for the parties to include confidentiality provisions in the arbitration agreement. Courts will generally enforce any confidentiality provisions embedded in their agreements. Absent such party agreement, US courts are loath to infer an implied duty of confidentiality when the agreement is silent.

There may be certain instances in which information regarding arbitral proceedings, even when confidential, may be disclosed. Corporations, particularly publicly traded entities, may be required by SEC regulations to disclose information regarding an arbitration to its shareholders. Courts also may require the publication of the final award when a party seeks to enforce the award or when a party seeks to set it aside. While confidential arbitrations may end up publicly disclosed when a reviewing court takes up an appeal, parties may be successful in sealing the award by requesting that the appellate court do so.

Answer contributed by David M Orta

48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

USA

What is deemed confidential will depend on the circumstances discussed in question 47. Any information that becomes public can be used in additional proceedings. Otherwise, there are no rules generally regulating this issue. A party can always apply to a court to lift the confidentiality of evidence or pleadings from an arbitral proceeding, and the court will have discretion to grant such a request in certain circumstances, but the requesting party will have a heavy burden in seeking to lift the cloak of confidentiality.

Answer contributed by David M Orta

49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

USA

Professional conduct standards for lawyers vary by jurisdiction. Which ethical standards apply in a particular arbitration will depend on the circumstances of the case and if the contract between parties elects to adopt a particular jurisdiction’s laws. The vast majority of states have adopted the American Bar Association (ABA)’s Model Rules of Professional Conduct. ABA Model Rule 8.5(b) outlines which jurisdiction’s rules of ethics govern counsel’s conduct in an arbitration. Model Rule 8.5(b) explains that counsel will be subject to the ethical rules in which the tribunal sits and, for any other conduct, the jurisdiction where the conduct takes place or has a “predominate effect”. These rules of ethics will also apply to arbitrators who are attorneys licensed by a jurisdiction in the United States.

Most jurisdictions in the United States place restrictions on attorneys to appear on the record in an arbitration that takes place in a jurisdiction in which they are not licensed.

ABA Model Rule 5.5(c)(3) allows a lawyer licensed in another US jurisdiction to appear in an arbitration “if the services arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission”. 

Though not necessarily binding, the AAA has issued a set of ethical guidelines for arbitrators to follow. Courts tasked with resolving professional conduct issues in arbitration, such as an arbitrator’s potential conflict of interest, have turned to guidelines set forth by the IBA, AAA and ABA even if they are not binding. See, eg, Applied Indus. Materials Corp v Ovalar Makine Ticaret Ve Sanayi, A.S., No. 05 CV 10540(RPP), 2006 WL 1816383 (S.D.N.Y. 2006); aff’d, 492 F.3d 132 (2d Cir. 2007).    

Answer contributed by David M Orta

50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

USA

Because arbitrations under American law are completely contractual in nature, the procedure will entirely depend on the parties’ arbitration agreement and sometimes may be impacted by the laws of the seat of the arbitration. Typically, the procedure and evidentiary rules are much more relaxed than a US federal district court. 

American law is based on English common law and deeply rooted in the adversarial system. Attorneys drive the development of facts and a theory of the case through examination of a witness, rigorous cross-examination and argument. It may be very different from civil law that employs more of an inquisitive approach where the arbitrator or judge takes a more active role in asking questions. Arbitrators and counsel who have experience deeply rooted in American law will likely be more used to the adversarial system of law.

Answer contributed by David M Orta

51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

USA

Third-party funding in international arbitrations is generally permitted in the United States and the law regulating such funding continues to develop. However, there are some states with champerty laws that either prohibit or place restrictions on third-party funders that do not have an underlying legal interest. 

Third-party funding will also impact counsel’s ethical obligations. Rules of professional conduct in US jurisdictions require attorneys to maintain their duty of loyalty to their client when a third party is paying the fees. In addition, counsel may have to take additional steps to ensure that information disclosed to the third-party remains protected by attorney-client privilege or as an attorney work product.

There is no uniform rule regarding the disclosure of third-party funders. Disclosure of litigation funders is not required by federal law unless the funding relates to an insurance carrier providing coverage for all or part of the court judgment. See Fed. R. Civ. Pro. 26(a)(1)(A)(iv). The AAA does not have specific rules regarding the disclosure of third-party funding arrangements. Disclosure of the relationship may be required to assess potential conflicts of interest for the arbitrator or in the discovery process. However, a party will likely be able to maintain the contents of the funding agreement with the third party confidential.

Answer contributed by David M Orta

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