Comparative Guides
Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.
Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.
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Results: 4 Answers
International Arbitration
8.
The tribunal
8.1
How is the tribunal appointed?
 
United States
There are generally no restrictions on the parties’ autonomy to select the arbitrators. The Federal Arbitration Act (FAA) expressly favours the selection of arbitrators by the parties rather than the courts (Shell Oil Co v CO2 Comm, Inc, 589 F3d 1105, 1109 (10th Cir 2009)). In their arbitration agreement, therefore, the parties may specify the number of arbitrators, their qualifications and the method of their selection.

Section 5 of the FAA (9 USC § 5) authorises judicial intervention in the arbitral process to select an arbitrator, on a party’s application, if:

  • the arbitration agreement does not specify a method for selecting arbitrators;
  • any party fails to follow the method specified in the agreement for selecting arbitrators; or
  • there is a “lapse in the naming of an arbitrator or arbitrators”.

Unless the agreement specifies otherwise, the court shall appoint a single arbitrator. The arbitrators chosen by the court “shall act . . . with the same force and effect” as if they had been specifically named in the arbitration agreement (id).

State laws may also expressly empower courts to appoint arbitrators (see New York Civil Practice Law and Rules (NY CPLR), § 7504: “If the arbitration agreement does not provide for a method of appointment of an arbitrator, or if the agreed method fails or for any reason is not followed, or if an arbitrator fails to act and his successor has not been appointed, the court, on application of a party, shall appoint an arbitrator”).

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.2
Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
 
United States
There are generally no restrictions, statutory or otherwise, on the parties’ autonomy to select the arbitrators. The FAA expressly favours the selection of arbitrators by the parties rather than the courts (Shell Oil Co v CO2 Comm, Inc, 589 F3d 1105, 1109 (10th Cir 2009)). In their arbitration agreement, therefore, the parties may specify the number of arbitrators, their qualifications and the method of their selection.

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.3
Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
 
United States
The FAA does not provide procedures for challenging the appointment of an arbitrator. Except in rare cases, a court will not intervene pre-award to remove an arbitrator for bias, corruption or evident partiality (eg, see John Hancock Life Ins Co USA v Employers Reassurance Corp, 2016 WL 3460316 (D Mass 21 Jun 2016) (“challenges to a party-appointed arbitrator, such as allegations of bias, are properly considered by courts only at the conclusion of the arbitration”).

Section 10 of the FAA provides that an award may be vacated:

(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were 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[,] or of any other misbehaviour by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject-matter submitted was not made. (9 USC § 10(a)).

A majority of the circuits follow the rule that evident partiality means that an award will be vacated “only when a reasonable person, considering all of the circumstances, would have to conclude that an arbitrator was partial to one side” (Applied Indus Materials Corp v Ovalar Makine Ticaret Ve Sanayi, AS, 492 F3d 132, 137 (2d Cir 2007)).

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.4
If a challenge is successful, how is the arbitrator replaced?
 
United States
Under the FAA, if the arbitration agreement provides the method for replacing an arbitrator, that method must be followed (9 USC § 5). If no method is provided, then “upon application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators” (id). State laws may also expressly empower courts to appoint arbitrators (see NY CPLR § 7504: “If the arbitration agreement does not provide for a method of appointment of an arbitrator, or if the agreed method fails or for any reason is not followed, or if an arbitrator fails to act and his successor has not been appointed, the court, on application of a party, shall appoint an arbitrator”).

Most arbitral organisations have provisions in their rules that address arbitrator replacement. Under American Arbitration Association (AAA) Rule R-20(a), for example: “If for any reason an arbitrator is unable or unwilling to perform the duties of the office, the AAA may, on proof satisfactory to it, declare the office vacant. Vacancies shall be filled in accordance with the applicable provisions of these rules.”

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.5
What duties are imposed on arbitrators? Are these all imposed by legislation?
 
United States
Arbitrators’ powers are determined by the terms of the arbitration agreement, the designated arbitration rules and the provisions of the FAA. State law may also potentially apply.

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.6
What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
 
United States
(a) Procedure, including evidence?

The FAA does not refer to rules of evidence except to provide, in Section 10(a)(3), that courts have authority to vacate an award where the tribunal “refuses to hear evidence pertinent and material to the controversy” (9 USC § 10(a)(3)). The parties are free to address evidentiary matters in their agreement and incorporate institutional arbitral rules that address document disclosure. Arbitral tribunals typically do not follow the Federal Rules of Evidence or the Federal Rules of Civil Procedure.

Section 7 of the FAA (9 USC § 7) provides that “[t]he arbitrators selected either as prescribed in this title or otherwise, or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case”. Courts are divided as to whether arbitrators can order the production of documents before the hearing or order witnesses to appear for a pre-hearing deposition. Some courts, including the Second Circuit, have held that the FAA does not grant an arbitrator authority to order non-parties to appear at depositions or provide parties with documents prior to a hearing (Life Receivables Tr v Syndicate 102 at Lloyd’s of London, 549 F3d 210, 216–17 (2d Cir 2008); Hay Grp, Inc v EBS Acquisition Corp, 360 F3d 404, 410 (3d Cir 2004)).

(b) Interim relief?

It is generally accepted that arbitrators have inherent authority to order interim or preliminary relief pending a final award. Arbitrators may also have express authorisation to order interim relief by the terms of the arbitration agreement and/or the terms of the chosen arbitral rules (see AAA Arbitration Rule R-37(a): “The arbitrator may take whatever interim measures he or she deems necessary”). Interim relief may also include preliminary injunctions and temporary restraining orders, as well as measures intended to preserve evidence.

(c) Parties which do not comply with its orders?

Under Section 7 of the FAA (9 USC § 7), when a party fails to comply with a tribunal’s order to testify or produce documents, the party seeking to enforce the order may petition a court for enforcement. If the subpoenaed party does not comply with the court order, the party may be held in contempt. However, Section 7 does not provide an independent grant of federal subject-matter jurisdiction.

(d) Issuing partial final awards?

The FAA refers to final and partial awards. Section 16, for example, which concerns appeals, expressly allows an appeal from both a final and a partial award.

The JAMS arbitration rules provide that arbitrators can “render a Final Award or a Partial Final Award” (JAMS Comprehensive Arbitration Rules and Procedures, Rule 24(a) (2014)). Courts have enforced arbitrators’ partial awards that have, among other things:

  • removed a lien on a vessel;
  • ordered accountings;
  • required that documents be produced;
  • ordered the sale of property;
  • determined that claims were not time barred; and
  • required that tax records be made available.

The interim award must fully resolve a discrete issue (Sperry Int’l Trade v Government of Israel, 532 F Supp 901, 909 (SDNY 1982), aff’d, 689 F2d 301 (2d Cir 1982) (order of arbitrator requiring defendant to place letter of credit in escrow pending final determination was “a final Award on a clearly severable issue”); Southern Seas Navigation Ltd of Monrovia v Petroleos Mexicanos of Mexico City, 606 F Supp 692, 694 (SDNY 1985) (“[j]ust as a district court’s grant of a preliminary injunction is reviewable as a discreet and separate ruling…so too is an arbitration award granting similar equitable relief”)). State arbitration laws may differ (eg, see Kaiser Foundation Health Plan, Inc v Superior Court, 13 Cal App 5th 1125 (Ct App 2017) (partial final arbitration award lacked finality under the state arbitration statute and could not be appealed, but was subject to mandamus jurisdiction)).

(e) The remedies it can grant in a final award?

The FAA does not limit the remedies available in arbitration. Subject to the parties’ agreement, arbitrators may award any type of relief, including damages, specific performance, injunctions, interest, costs and attorneys’ fees. On the other hand, an arbitration agreement that expressly eliminates certain relief will be enforced (Archer & White Sales v Henry Schein, Inc, 878 F3d 488 (5th Cir 2017) (enforcing the terms of an agreement that eliminated injunctive relief as an available remedy), petition for cert granted on other grounds, 2018 WL 1280843 (25 June 2018)). The Supreme Court has held that under the FAA, arbitrators may award punitive damages unless the parties’ agreement expressly prohibits such relief (Mastrobuono v Shearson Lehman Hutton, Inc, 514 US= 52, 58, 60-61 (1995)). The AAA Arbitration Rules permit any relief deemed “just and equitable” within the scope of the parties’ agreement (Rule R-47(a)).

(f) Interest?

The FAA does not address interest. Whether interest is permitted and at what rate will depend on the agreement of the parties, the applicable institutional rules and the substantive law governing the contract. AAA Arbitration Rule R-47(d)(i), for example, permits the inclusion of interest in the award “from such date as the arbitrator(s) may deem appropriate” (see Bergheim v Sirona Dental Sys, Inc, 2017 WL 354182, at *4 (SDNY 24 January 2017) (“There is a presumption in favor of awarding pre-judgment interest running from the time of the award through the court’s judgment confirming the award, at a rate prescribed by the state statutory law governing the contract”)).

Federal law controls post-judgment interest in federal cases, including cases based on diversity of citizenship. Under federal law, once a court judgment confirming the award is entered, the award is merged into the judgment and the interest rate is governed by the federal post-judgment interest rate statute (28 USC § 1961) (see Bayer Cropscience AG v Dow Agrosciences LLC, 680 Fed App’x 985, 1000 (Fed Cir 2017): “Numerous circuits have concluded that once a federal court confirms an arbitral award, the award merges into the judgment and the federal rate for post-judgment interest presumptively applies”). The parties may contract around the statute if they clearly and expressly agree on a different post-judgment interest rate and that rate is consistent with state usury laws. Alternatively, they can agree to submit the question of post-judgment interest to arbitration.

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.7
How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
 
United States
Where a party to a valid arbitration agreement does not participate in the arbitration, the FAA permits federal courts to compel the party to participate (see 9 USC § 4: “A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement”). Most state arbitration acts confer similar authority on state courts. If a party nevertheless does not participate in the proceedings, the rules of most arbitral institutions empower arbitrators to enter a default award, but require that the non-defaulting party provide evidence in support of its claims. Such default awards are enforceable in the United States.

For more information about this answer please contact: Jonathan Landy from Williams & Connolly
8.8
Are arbitrators immune from liability?
 
United States
While the FAA does not address arbitrator immunity, the decisional law recognises that arbitrators exercise quasi-judicial duties and, like judges, have absolute immunity from civil suits for acts taken within the scope of the arbitral process (Landmark Ventures, Inc v Cohen, No 13 Civ 9044 (JGK), 2014 WL 6784397, at *4 (SDNY 26 November 2014: “Under well-established Federal common law, arbitrators and sponsoring arbitration organizations have absolute immunity for conduct in connection with an arbitration”). The institutional arbitral rules also provide arbitrators and arbitral institutions with immunity from liability for conduct in connection with an arbitration. For example, AAA Arbitration Rule R-52(d) provides that “[p]arties to an arbitration under these rules shall be deemed to have consented that neither the AAA nor any arbitrator shall be liable to any party in any action for damages or injunctive relief for any act or omission in connection with any arbitration under these rules” (see also International Institute for Conflict Prevention and Resolution (CPR) Arbitration Rule 20: “Neither CPR nor any arbitrator shall be liable to any party for any act or omission in connection with any arbitration conducted under these Rules”; JAMS Arbitration Rule 30(c) (same)).

For more information about this answer please contact: Jonathan Landy from Williams & Connolly