INTRODUCTION TO THE ARBITRATION COURSE
Welcome to the course on Arbitration.
As an insurance adjuster or insurance agent, you should gain relevant and adequate information on Arbitration. This course will help you achieve that goal. By completion of this Arbitration course, you should be able to comprehend the fundamentals of Arbitration.
Arbitration can be utilized to resolve a dispute between an insurance provider and a policyholder in an insurance claim. The insurer and the policyholder would each present their respective cases to the Arbitrator, rather than bringing a lawsuit against one another. The Arbitrator conducts a thorough investigation of the facts and then makes a decision on how to resolve the disagreement. Among other possible determinations subject to the conflict at hand, the provider could be forced to pay for damages for which it attempted to reject coverage, or a policyholder would be forced to pay for damages that the Arbitrator determines were not covered by the insurance policy. This information should not only be applied to domestic clients but to international clients as well hence the need to also study international arbitration.
You should keep in mind that the information contained in the course materials is only designed to serve as a broad introduction and overview of the course. It will not be possible to cover all of the elements associated to Arbitration in the course due to its dynamic nature, which is continually evolving and differing from one jurisdiction to another. Because of this, you are urged to improve your understanding by reading more materials on the subject. Furthermore, please keep in mind that some of the classes may cover specific interrelated topics that have been covered in more than one class.
The following is a list of the course’s topics and objectives:
- Introduction to Arbitration
- The History of Arbitration
- Steps in Arbitration
- Alternative Dispute Resolution (ADR)
- Advantages of Arbitration
- Disadvantages of Arbitration
- The Arbitrator
- Sample arbitration clause in an agreement
- The American Arbitration Association (AAA)
- International Arbitration
- The Federal Arbitration Act (FAA)
- The International Bar Association (IBA)
- The International Criminal Court’s (ICC) Rome Statute
Introduction to Arbitration
Arbitration is a method of resolving disagreements that involves the private resolution of the dispute by a third party who is not involved in the dispute. In an arbitration proceeding, either a single Arbitrator or a panel of Arbitrators may be convened. Any number of Arbitrators can be appointed to a tribunal, though some legal systems require an odd number of Arbitrators in order to avoid a tie in decision-making. The most frequently encountered Arbitrator numbers are one and three. The disputing parties delegate their decision-making authority to the Arbitrator in order to resolve their differences (s). An arbitration proceeding is a non-judicial alternative to litigation that is generally just as final and binding as a court of justice.
Arbitration can be conducted on an ad hoc basis or with the assistance of an institutional provider such as the American Arbitration Association (AAA), International Centre for Dispute Resolution (ICDR), International Chamber of Commerce (ICC), JAMS (formerly identified as Judicial Arbitration and Mediation Services), CPR Institute for Conflict Prevention and Resolution (CPR), the London Court of International Arbitration (LCIA) and the Singapore International Arbitration Centre (SIAC).
Arbitration can be either voluntary or mandatory, depending on the circumstances. In compulsory arbitration, the conflicting parties arbitrate their differences either pursuant to a statute, a court order, or a particular clause included in the contract that they entered into resulting in the dispute. In contrast, in voluntary arbitration, it is entirely up to the decision of the parties whether or not to participate in arbitration. The determination that is reached as a result of the arbitration proceeding is referred to as an ‘arbitral award.’ Arbitration has been referred to as the “businessman’s method of resolving disputes”, it is governed by both state and federal law. A provision for arbitration is included in the civil practice rules of most states, and these provisions provide guidance on the arbitration procedures, rules, and regulations.
Notwithstanding the fact that some states have adopted their own arbitration procedures, rules, and regulations, the Uniform Arbitration Act has been adopted by many states. The act was revised in 2000, and it has since been adopted by a total of twelve states. Title 9 of the United States Code establishes federal law promoting arbitration in the case of national arbitration. Because Congress has plenary power over interstate commerce, it is the foundation of the Act. Although there are a slew of state laws governing alternative dispute resolution, when Title 9 is in effect, its provisions take precedence over state law. As a result, both state and federal laws now recognize the arbitration agreement and award as binding. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Convention,” was drafted in 1958 to assist in the enforcement of awards granted in foreign countries in domestic courts. The United States of America became a member in 1970.
In order to spell out important conditions to be followed in the arbitration process such as the number of Arbitrators to be appointed, how the Arbitrator/Arbitrators will be appointed, where the arbitration will be conducted, the amount of arbitration fees to be paid, and other vital conditions, parties normally enter into an agreement that contains an arbitration clause before there is a dispute. Arbitration is founded on the following fundamental concepts: in order to achieve a fair resolution of disputes by an unbiased third party without wasting time or money, parties should be free to come to an agreement on how to resolve their differences, but in the process, they should be alive and respect the interest of the public, and the courts generally do not involve themselves in the arbitration proceedings.
Arbitration is divided into several types, some of these types include; commercial, consumer and labor arbitration. Commercial arbitration is the most frequently encountered type of dispute. It is, exactly as the name implies, a dispute between two commercial enterprises. In the case of a dispute between a consumer and a supplier of goods or services, consumer arbitration is used to resolve the dispute. Labor arbitration is a method of resolving disputes arising from employment relationships. Arbitration in the form of rights arbitration and interest arbitration are the two main categories of labor arbitration.
It is the responsibility of rights arbitration also known as grievance arbitration to deal with accusations that a collective agreement has been breached or misconstrued. Various jurisdictions require the parties to a collective bargaining agreement to lay out a mechanism for resolving disagreements and disputes once the agreement commences. The idea behind it is that parties should meet at various stages of their own specific grievance procedure in order to assess and talk about the dispute but many conflicts cannot be addressed by the parties themselves, and arbitration is required to resolve the case. In most circumstances, arbitration awards deal with a complaint that a collective bargaining agreement provision has been violated. Interest arbitration also known as contract arbitration is usually a statutory requirement that entails determination of the terms and conditions of employment that will be included in a final collective agreement. Contract difficulties must be resolved in some manner due to the fact that most legislation forbid a legal strike or lockout. One method of doing so is through interest arbitration.
Some states, have restrictions on what may be referred to arbitration such as in New York. Mandatory arbitration clauses in written consumer contracts for selling or buying of consumer products are prohibited under New York law. Some specific categories of divorce or child custody issues have been excluded from arbitration (Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Benjamin). There has been some attempts in some state to prohibit or minimize arbitration clauses in consumer and employment-related matters. Employer-mandated pre-dispute agreements to arbitrate claims of discrimination and sexual harassment are prohibited under Section 7515 of the New York Civil Practice Law and Rules (CPLR); this legislation has however been held to be overridden by the Federal Arbitration Act (FAA) that does not limit matters that can be arbitrated.
The History of Arbitration
One of the earliest recognized Arbitrator is King Solomon who arbitrated between two women who both lay claim to a child in 1 Kings 3:16-28.The practice of commercial arbitration was well-known to the desert caravans during Marco Polo’s time, and it was also popular among Phoenician and Greek traders and in the Homeric period. Athenian tyrant Peisistratus, in the middle of the sixth century B.C., strengthened his policy of keeping people out of the city by assigning justices to travel around villages; if they were unable to reach a mutually beneficial agreement, they were given the authority to make binding arbitration decisions. A dispute between Athens and Megara over ownership of the island of Salamis erupted around 600 BCE, and the matter was presented before five Spartan judges, who decided that Athens should be granted possession of the island through arbitration. An arbitration award was also made by Themistocles in 480 B.C. in a dispute between Corinth and Corcyra over the ownership of Leucas. In addition, a conflict over a boundary line between the Genoese and the Viturians was finally resolved by arbitration in 117 B.C.
The wages of seamen were one of the first conflicts brought before the earliest known American arbitration tribunal, which was established in 1786 by the Chamber of Commerce of New York. As early as 1768 in New York, 1794 in New Haven, and 1801 in Philadelphia, arbitration had established itself in chambers of commerce. In 1920, a new era in American arbitration began. It was marked by the modernization of arbitration law, methodical planning, machinery organization, the cultivation of an arbitration spirit, and the establishment of knowledge foundations. It was motivated by World War 1; the desire to avoid future wars insofar as the resolution or management of disputes using arbitration may help achieve that goal. There was adoption of the first modern arbitration statute in the United States, in the state of New York, in 1920. It resulted in the establishment of the first permanent, independent arbitration institution; the Arbitration Society of America which was founded in 1922. It enabled the establishment of tribunal systems overseen by an independent and responsible institution. It liberated arbitration from commodity and geographic constraints, allowing it to serve all people at all times.
Arbitration was the most popular form of dispute resolution in the Middle Ages. The first intercity (international) private jurisdiction was established by the disciplinary council of tradesmen. The revival of arbitration was inescapable given the rise of international trade following WWII. The Treaty of New York was signed on June 10, 1958, and it stated that all UN members acknowledged arbitration as a private jurisdiction delivering judgments of similar legitimacy to those of state courts, and that arbitral awards pronounced in another signatory country are proper. Because they are not infused in the Napoleanic Code, which grants significant power and practically a divine function to the state, arbitration developed more quickly in Anglo-Saxon countries than on the European continent. Prior to the 20th Century, Arbitration had not been embraced and was often sneered upon due to the fact that it involved private settlement of cases.
George Washington’s will also provided for arbitration by stating “…and that, although it has occupied many of my leisure hours to digest, & to through it into its present form, it may, notwithstanding, appear crude and incorrect. But having endeavoured to be plain, and explicit in all Devises–even at the expence of prolixity, perhaps of tautology, I hope, and trust, that no disputes will arise concerning them; but if, contrary to expectation, the case should be otherwise from the want of legal expression, or the usual technical terms, or because too much or too little has been said on any of the Devises to be consonant with law, My Will and direction expressly is, that all disputes (if unhappily any should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chosen by the disputants–each having the choice of one–and the third by those two. Which three men thus chosen, shall, unfettered by Law, or legal constructions, declare their sense of the Testators intention; and such decision is, to all intents and purposes to be as binding on the Parties as if it had been given in the Supreme Court of the United States.”
Steps in Arbitration
Some of the steps in arbitration include:
- Request for an Arbitrator/ Arbitration.
- Appointment of an Arbitrator/ Arbitrators. One or all the disputing parties may appoint an Arbitrator or the Arbitrators who have been appointed by the parties may appoint an Arbitrator who may act as the only or third Arbitrator.
- A preliminary meeting is held among the Arbitrator, the parties, as well as their legal counsel, to assess the dispute and come up with the appropriate procedures and a timeframe.
- Statement of Claim and Response — In a statement of claim, the claimant outlines the issues in dispute as well as the remedy sought. This is required to inform the respondent about the questions that must be answered. It describes the alleged facts but excludes the evidence that will need to be substantiated. The respondent’s statement of response is an admission or denial of the accusations. The responder may also file a counterclaim, which necessitates a response from the claimant. These declarations are referred to as ‘pleadings.’ Their goal is to discover problems and avert unpleasant surprises.
- Each party provides a list of all pertinent documents within their possession. This is known as ‘discovery.’ The parties then inspect the newly discovered documents and produce a list of documents for the Arbitrator. (discovery and inspection)
- There is exchange of evidence, prior to the hearing, the written evidence is exchanged and given to the Arbitrator for evaluation.
- A hearing is conducted, a hearing is a meeting during which the Arbitrator listens to any oral remarks, questions witnesses, and requests clarification on any facts. Both parties have the right to present their case and be present when the other does so. However, if the issues can be resolved wholly through the documents, a hearing may be avoided.
- Both parties’ attorneys submit a summary of their evidence and applicable legislation to the Arbitrator. These submissions can be made orally during the hearing or afterwards in writing.
- The Arbitrator weighs all of the evidence before making a judgement. The proceedings are summarized and decisions are made in an award. The reasons for the Arbitrator’s judgment are frequently included in the award.
Alternative Dispute Resolution (ADR)
Dispute resolution methods are options through which parties may result to should there be a dispute under an agreement. Dispute resolution methods may be categorized into two i.e litigation and Alternative Dispute Resolution (ADR) mechanisms. Litigation refers to going to court while alternative dispute resolution mechanisms do not include going to court.
Arbitration is an alternative dispute resolution mechanism. Any way of resolving conflicts without resorting to litigation is referred to as Alternative Dispute Resolution (“ADR”). Alternative Dispute Resolution (ADR) is a general term that refers to any method of settling disputes that does not involve going to court. ADR encompasses any conflict resolution processes and techniques that occur outside of the purview of any governmental entity. Mediation, arbitration, conciliation, and negotiation are the most well-known ADR processes. All alternative dispute resolution (ADR) methods share some characteristics – namely, that they allow the parties to reach admissible solutions to their disputes outside of normal court proceedings, they are however regulated by different rules. Arbitration is more formal than mediation, and it resembles ordinary court processes in many ways, including limited discovery and simplified evidence requirements.
Although arbitration and mediation are the two most well-known forms of alternative dispute resolution (ADR), most disputes are resolved through negotiation first. Negotiation is a process that allows the parties to come together in order to resolve a disagreement. The most significant advantage of this method of dispute resolution is that it allows the parties themselves to have complete control over the process and the outcome. A negotiation process is significantly less formal than other forms of alternative dispute resolution (ADR) and provides significantly more flexibility.
During a negotiation, multiple parties come together to achieve a common end goal by reaching a compromise or reaching a resolution that is acceptable to everyone involved. In this scenario, one party will present its position, and the other will either agree to the conditions presented or challenge with a position of its own. The process will continue until both parties have reached an agreement on a solution. The negotiation period is determined by the specific circumstances of the situation. Using a negotiator, with special skills may be necessary in certain negotiations that involve complex contracts.
The following are some of the advantages of negotiating: as a result of the informal nature of the negotiation process, it is a versatile process, when compared to litigation, faster decisions are achieved, it aids in the maintenance of a healthy relationship between the parties to a dispute, if done correctly, and the event takes place in a private setting.
Negotiation has a number of disadvantages: it is possible that the disputing parties will not reach a settlement, the absence of legal protection for the parties involved in the conflict, and t is possible to have a power differential between the parties during a negotiation.
Mediation is a procedure in which the disputing parties discuss their differences with the help of an experienced impartial third party (or group of third parties) who assists them in reaching a resolution. Mediation is also a less formal alternative to courtroom proceedings. Mediators are professional negotiators who bring opposing parties together to try to reach an agreement or settlement that both parties approve or disapprove. Mediation is not a legally enforceable agreement. Participation in the mediation conference is entirely voluntary on the part of the parties, unless otherwise required by legislation or the contract. It is a consensual process, and unlike arbitration, it allows for greater flexibility; as a result, the parties in a dispute are not required to accept a settlement offer. As a result, an agreement reached through mediation will only be binding on the parties for as long as they both consent to it. Parties may be directed to participate in mediation in certain situations; however, the outcome is ultimately up to the parties in these situations.
The mediator is merely an enabler, and he or she has no authority to bring about a resolution to the conflict. As the mediator conducts the mediation, the parties will come up with a solution on their own. In most cases, the mediator is also an attorney, but he or she is not permitted to provide legal advice while acting in the capacity of a mediator. Where the mediator possesses special skills, those skills may be used by the disputing parties in making the mediated agreement, as well as in situations where the parties are open to a neutral evaluation of their situation.
The following are some of the benefits of mediation: the settlement is completely under the control of the parties, when contrasted to litigation and arbitration, there is less stress, the relationship between the two parties is usually not significantly harmed, the mediation process is kept strictly confidential, and the process is effective in resolving the dispute speedily.
The following are some of the disadvantages of mediation: due to the fact that the decision is at the choice of the parties, there is a possibility that a settlement between the parties will not be achieved, it does not have the support of any judicial authority in its operations, as a result of their lack of foundation in any legal principle, mediation proceedings are devoid of any procedural formalities, and it is possible that the truth about a situation will not be revealed.
Conciliation is a method of dispute resolution that takes place outside of the courtroom. Conciliation is voluntary, flexible, confidential, and interest-based process. The parties seek to resolve their dispute through the use of the conciliator, who serves as an unbiased third party in the negotiation process. The most significant distinction between conciliation and mediation proceedings is that, at some point during the conciliation process, the parties will request that the conciliator issues them with a non-binding settlement proposal that they can consider. For his or her part, a mediator will, in the vast majority of cases and as a matter of principle, refrain from making such a suggestion. Unless all parties sign it, it is not legally binding on them.
Conciliation is a voluntary process in which the parties involved are free to reach an agreement and attempt to resolve their dispute through conciliation on their own initiative. Conciliation is a highly flexible process that allows the parties to determine the duration, framework, and subject matter of the conciliation proceedings. These hearings are only rarely made public. When recommending a settlement, the conciliator will bear in mind not only the parties’ legal positions but also their commercial, financial, or personal interests, as well. Similarly, to mediation proceedings, the parties retain the final decision on whether or not to reach an agreement on a settlement.
Conciliation has the following advantages: because the conciliation process is informal, it can be tailored to meet the needs of the parties, the conciliator is frequently a subject matter expert in the area of contention, when compared to litigation, conciliation proceedings, like any other form of alternative dispute resolution, are more cost-effective and if the parties to the dispute are dissatisfied with the outcome of the proceeding, they have the option of taking their case to court.
Conciliation has a number of disadvantages, including the following: the parties to the dispute are not required to follow the procedure, there is no option of recourse such as appeal available, and it is possible that the parties will not be able to reach a settlement in their dispute.
Mediation and arbitration are combined in med-arb. The difference between arbitration and mediation is that in mediation, an impartial, qualified mediator aids the disputing parties to come to an agreement through (generally not legally binding) the mediation process at the parties’ free will. This is different to arbitration where the Arbitrator compels the parties to adhere to the arbitral award. In a med-arb proceeding, the parties must first agree on the procedure’s terms. They must usually agree in writing that the outcome of the procedure will be binding, which is unlike most mediations.
Then, with the assistance of a mediator, they seek to find a resolution to their conflict. Apart from having the disputants convene together to vent their perspectives and come up with solutions, the mediator may recommend meeting with each side separately to explore viable proposals, as in conventional mediation. The procedure isn’t over in med-arb if the mediation concludes in a deadlock or if issues remain unresolved. The parties can thereafter proceed to arbitration. If the mediator is authorized, he or she can act as an Arbitrator and deliver a binding decision on the whole issue or on undecided issues. Alternatively, after speaking with the mediator, an Arbitrator can assume over the case.
Generally, the med-arb procedure concludes with a satisfactorily negotiated agreement, eliminating the need for arbitration. The fear of having a third party render a binding arbitration judgement frequently inspires parties to a dispute to come to an agreement. As a result, med-arb can be a good option when parties are under a lot of pressure to reach an agreement by a certain date. It can also be useful when parties to a dispute need to collaborate efficiently in the future. using a single individual to serve as both a mediator and an Arbitrator can save time and money because it eliminates the need to start the arbitration process again from the beginning if mediation fails.
The arb-med process begins with an arbitration hearing, followed by the issuance of a non-binding arbitration award. The parties then collaborate with a mediator to try to resolve their conflict.
Advantages of Arbitration
The following are just a few examples of the Arbitration benefits.
- Parties get to choose an Arbitrator. This is important especially in some cases where an Arbitrator with a specific skill will be an added advantage to the parties, in understanding the facts of the case and coming up with a decision. Arbitrators do not have to be lawyers; parties can choose Arbitrators from other disciplines who they believe are more suited to resolving the dispute, which is common when the arbitration involves a complex topic.
- Arbitration is frequently more efficient than court proceedings since arbitration matters are usually heard faster than court proceedings. In addition, the arbitration hearings are generally shorter than court proceedings, and the preparation less strenuous. Generally speaking, arbitration hearings last between a few days and a week, and meetings go for a few hours every day. After that, the Arbitrators or single Arbitrator deliberates and issues a written binding judgement or arbitral award in accordance with the arbitration agreement.
- Arbitration offers privacy, the hearings are private, secret discussions that the media and members of the public are not permitted to attend. Final verdicts are also not made public and are not easily accessible.
- Hearings are scheduled at times and locations that are convenient for the parties, Arbitrators, and witnesses.
- Arbitration is generally flexible where procedures can be made more flexible to fit the parties.
- In arbitration, there is generally no recourse of appeal, although the court’s ability to set aside or remit an award is restricted, this offers finality in the matters.
- Generally speaking, arbitration awards are more easily enforced than court verdicts, which is a significant advantage.
Disadvantages of Arbitration
Arbitration has the following disadvantages:
- The Arbitrator’s services will be paid for by one or both parties, whereas the court system will supply an adjudicator free of charge. An Arbitrator’s fees can be quite high.
- Because of the looser requirements of proof in arbitration and the Arbitrator’s discretion to make decisions based on fairness, the Arbitrator may issue an award that splits the award by awarding each side a portion of what they asked. As a result, both sides depart the table with the impression that justice was not served.
- There is only a very little window of opportunity for appeal. The award is final and usually not appealable unless there is proof of outright corruption or fraud. As a result, if the Arbitrator makes a mistake or is plain incompetent, the losing party is frequently without recourse.
- Interlocutory applications are not permitted in arbitration under the rules of procedure.
- There is a Narcotic/Chilling Effect. When neither party is ready to compromise during negotiations in the hopes of reaching an arbitrated agreement, it is called chilling. The number of issues resolved during discussions compared to the number of issues remaining for arbitration, as well as a comparison with the management and union’s original offers, are two of the most widely used methods to weigh this effect. The narcotic effect refers to the parties’ increased reliance on arbitration, which results in a loss of negotiation skills. The percent of units going to arbitration in the course of time and, probably more importantly, the number of times an individual unit goes to arbitration throughout a series of discussions are two common techniques of gauging the narcotic effect.
- As a result, if arbitration is required by contract between the parties, they forfeit their ability to go to court to resolve the dispute.
- Arbitration awards are not directly enforceable; rather, they are executable only if they are sanctioned by a court of law.
- In contrast to other methods of dispute resolution, once a matter has been submitted to arbitration, neither party has the right to withdraw from the proceeding at any time.
The following characteristics constitute a competent Arbitrator:
- Excellent communication skills. The Arbitrator must ensure that all parties have an equal opportunity to be heard and to fully explain their grievances and their respective parts of the case.
- A competent Arbitrator is formal while also being adaptable, and he or she does not burden the parties with excessive formalities. His responsibility also includes making sure that the important issues raised by the parties are taken into consideration and that the parties feel comfortable enough to express their grievances to him.
- An Arbitrator should be well-versed in the subjects on which he or she is presiding and possess extensive knowledge and skill in those subjects. Academic skills, professional competence in the subject matter, or past arbitration experience are frequently used to determine eligibility. A competent Arbitrator promptly and accurately comprehends the issues involved in the case and utilizes his or her knowledge in accordance with the applicable rules and guidelines.
- Due to the fact that an Arbitrator’s decision is final and can only be appealed in rare cases in court, a good Arbitrator considers all relevant factors while making his or her decision. Before he can form a decision, he needs to hear both sides of the argument.
- The United Nations’ Universal Declaration of Human Rights states that an Arbitrator must be independent and unbiased. In international arbitration, the neutrality of an Arbitrator is more commonly used to denote the Arbitrator’s nonexistence connections to any of the parties, their counsels, or co-arbiters. An Arbitrator must not only be independent, but he or she must also be regarded to be independent by a third party who is not involved in the dispute. An Arbitrator must avoid being biased against any party and must undertake the proceeding in a fair and impartial manner. When the arbitral proceedings are conducted in a manner that is consistent with reasonable expectations and free of any favoritism, the parties in dispute are more likely to accept the arbitral verdict.
- An Arbitrator is required to maintain the confidentiality of the disagreement and may not engage in discussion with third parties to the dispute only if the parties’ consent to the disclosure.
Under Section R-18. Disqualification of Arbitrator of the AAA Commercial Arbitration Rules and Mediation Procedures the following is highlighted;
“(a) Any Arbitrator shall be impartial and independent and shall perform his or her duties with diligence and in good faith, and shall be subject to disqualification for:
i. partiality or lack of independence,
ii. inability or refusal to perform his or her duties with diligence and in good faith, and
iii. any grounds for disqualification provided by applicable law.”
The Section goes on to state that an Arbitrator directly appointed by the parties under Section R-13, may be non-neutral if the parties agree to it in writing. Such an Arbitrator shall not need to be impartial or independent and partiality or lack of independence shall not be a reason for disqualifying them. The AAA is charged with deciding whether or not an Arbitrator should be disqualified or not once a party request for the disqualification or subject to the AAA’ discretion. The decision of the AAA therein shall be conclusive.
Sample arbitration clause in an agreement
The American Arbitration Association (AAA) in its Commercial Arbitration Rules and Mediation Procedures provides for the following Arbitration clause in future and current disputes respectively.
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.”
“We, the undersigned parties, hereby agree to submit to arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules the following Controversy: (describe briefly). We further agree that the above controversy be submitted to (one) (three) Arbitrator(s). We further agree that we will faithfully observe this agreement and the rules, that we will abide by and perform any award rendered by the Arbitrator(s), and that a judgment of any court having jurisdiction may be entered on the award.”
Another sample arbitration clause is as follows:
Unless as hereinafter provided, all disputes or differences between and arising under or related to this Agreement that cannot be resolved amicably within days will be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award entered by the arbitrators may be entered in any Court of competent jurisdiction. The Court of Arbitrators established herein will interpret this Agreement in light of current reinsurance customs and practices in the insurance business. The Court of Arbitrators will be made up of three neutral arbitrators who must be active or retired officials of insurance firms other than those of the conflicting parties, or any of their affiliates having experience in the reinsurance business.
The parties agree that, if this Agreement is adopted, the Court of Arbitrators will be held in the State of at a location chosen by the Arbitrators. The parties agree to arbitrate any dispute arbitrable under this Agreement within days of receiving a written demand from either party. Within _______days of receiving notice of a written demand to arbitrate, each party shall designate an arbitrator and notify the other party of the arbitrator’s name and address. Where a party does not appoint an Arbitrator within the specified time, or the two appointed Arbitrators do not select a third Arbitrator, within _____days of being appointed, then the such second and/or third Arbitrator shall be appointed by the President of the American Council of Life Insurance or its successor.
The Court of Arbitrators will be made up of the three arbitrators who have been chosen. A majority decision of the Court of Arbitrators is final and binding, and there is no right of appeal. The Court of Arbitrators is not limited by legal standards of process and is free to receive evidence in a manner that is fair to both parties. The Court of Arbitrators shall provide an award as soon as possible that is fair to all parties, and the award shall be backed up by a written opinion. The losing party shall bear the cost of arbitration, including but not limited to arbitrator and attorney fees, unless a Court of Arbitrators determines otherwise.
The American Arbitration Association (AAA)
The American Arbitration Association (AAA) has various rules governing Arbitration, these include the: Commercial Arbitration Rules and Mediation Procedures, Construction Industry Arbitration Rules and Mediation Procedures, Consumer Arbitration Rules, Employment Arbitration Rules and Mediation Procedures, Labor Arbitration Rules, International Dispute Resolution Procedures, and Optional Appellate Arbitration Rules.
The AAA Commercial Arbitration Rules and Mediation Procedures are presumed to be included in an arbitration agreement where the parties to the agreement have stated that arbitration shall be conducted by the American Arbitration Association (AAA) under its Commercial Arbitration Rules or that the AAA shall be in charge of domestic commercial dispute without stipulating specific rules.
Under Section R-4. Filing Requirements, of the Commercial Arbitration Rules and Mediation Procedures
“(a) Arbitration under an arbitration provision in a contract shall be initiated by the initiating party (“claimant”) filing with the AAA a Demand for Arbitration, the administrative filing fee, and a copy of the applicable arbitration agreement from the parties’ contract which provides for arbitration.
(b) Arbitration pursuant to a court order shall be initiated by the initiating party filing with the AAA a Demand for Arbitration, the administrative filing fee, and a copy of any applicable arbitration agreement from the parties’ contract which provides for arbitration.
i. The filing party shall include a copy of the court order.
ii. The filing fee must be paid before a matter is considered properly filed. If the court order directs that a specific party is responsible for the filing fee, it is the responsibility of the filing party to either make such payment to the AAA and seek reimbursement as directed in the court order or to make other such arrangements so that the filing fee is submitted to the AAA with the Demand.
iii. The party filing the Demand with the AAA is the claimant and the opposing party is the respondent regardless of which party initiated the court action. Parties may request that the Arbitrator alter the order of proceedings if necessary pursuant to R-32.
(c) It is the responsibility of the filing party to ensure that any conditions precedent to the filing of a case are met prior to filing for an arbitration, as well as any time requirements associated with the filing. Any dispute regarding whether a condition precedent has been met may be raised to the Arbitrator for determination.
(d) Parties to any existing dispute who have not previously agreed to use these rules may commence an arbitration under these rules by filing a written submission agreement and the administrative filing fee. To the extent that the parties’ submission agreement contains any variances from these rules, such variances should be clearly stated in the Submission Agreement.
(e) Information to be included with any arbitration filing includes:
i. the name of each party;
ii. the address for each party, including telephone and fax numbers and e-mail addresses;
iii. if applicable, the names, addresses, telephone and fax numbers, and e-mail addresses of any known representative for each party;
iv. a statement setting forth the nature of the claim including the relief sought and the amount involved; and
v. the locale requested if the arbitration agreement does not specify one.
(f) The initiating party may file or submit a dispute to the AAA in the following manner:
i. through AAA WebFile, located at www.adr.org; or
ii. by filing the complete Demand or Submission with any AAA office, regardless of the intended locale of hearing.
(g) The filing party shall simultaneously provide a copy of the Demand and any supporting documents to the opposing party.
(h) The AAA shall provide notice to the parties (or their representatives if so named) of the receipt of a Demand or Submission when the administrative filing requirements have been satisfied. The date on which the filing requirements are satisfied shall establish the date of filing the dispute for administration. However, all disputes in connection with the AAA’s determination of the date of filing may be decided by the Arbitrator.
(i) If the filing does not satisfy the filing requirements set forth above, the AAA shall acknowledge to all named parties receipt of the incomplete filing and inform the parties of the filing deficiencies. If the deficiencies are not cured by the date specified by the AAA, the filing may be returned to the initiating party.”
The American Arbitration Association (AAA) has an international component called the International Centre for Dispute Resolution (ICDR). The ICDR provides dispute resolution services in places chosen by the parties all around the world.
As defined by the UNCITRAL (The United National Commission on International Trade Law) Model Law’s (which has not been adopted by the United States but has been adopted by a number of US states) and incorporated by the ICDR, International Arbitration is invoked where: the parties have their principal places of business in different countries, where the location of performance of the parties’ important commercial obligations is outside a party’s country, the most associated location of the subject matter is outside a party’s country, the arbitration location is outside any party’s location, or a party has more than one place of business (parent and/or subsidiary) outside the country of any party.
- The Federal Arbitration Act (FAA)
The Federal Arbitration Act (FAA) generally governs international arbitration in the United States. When there is a conflict between the FAA and state law, the FAA usually takes precedence. Both domestic and foreign arbitration are covered by Chapter 1 of the FAA. It stipulates, among other things on how: arbitration agreements are enforced, non-parties are compelled to testify in arbitral procedures, arbitral awards are enforced, and the reasons for annulling arbitral awards.
The FAA: addresses the legality of arbitration agreements and allows for their enforcement by US courts, describes the circumstances in which a court may refuse to confirm an award, and implements the New York Convention and the 1975 Inter-American Convention on International Commercial Arbitration (Panama Convention). Under the Act, If specific circumstances are met, US courts must confirm awards, that is, transform them into judgments. The FAA does not impose any limitations on the types of disputes that can be settled through arbitration.
Under Section 5. Appointment of arbitrators or umpire “ If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement the arbitration shall be by a single arbitrator.”
Certain time constraints apply to the confirmation and vacation of awards under the FAA: Section 9. Award of arbitrators; confirmation; jurisdiction; procedure “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, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made. Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.”
- The International Bar Association (IBA)
The International Bar Association (IBA) was founded in 1947, on the belief that an organization comprised of the world’s bar associations could add value to global stability and peace through the administration of justice. It is an organization of worldwide legal practitioners, bar associations, and legal societies. The IBA has grown from being a group of bar organizations and law societies to one that includes individual international lawyers and complete legal firms. In its current form, the organization includes more than 80,000 individual international lawyers representing the majority of the world’s biggest legal firms as well as around 190 bar associations and law societies from more than 170 different nations.
A number of rules and guidelines relating to international arbitration have been published by the International Bar Association (“IBA”), and are intended to smoothen the arbitration process and make it easier to employ international arbitration as an alternative dispute resolution method. Because the IBA rules and guidelines are not legal requirements, they do not take precedence over any applicable national law or arbitration procedures that the parties have chosen in their dispute.
They become legally binding only if the parties have agreed to them.
Under the IBA, we will focus on the IBA Rules on the Taking of Evidence in International Arbitration. The International Bar Association adopted the amended IBA Rules on the Taking of Evidence in International Arbitration on December 17, 2020, published on 17 February 2021, which supersede the previous versions of the rules, which were adopted in 1999 and 2010. Without a contrary indication, the revised rules will apply to all arbitrations in which the parties agree to apply the IBA Rules after December 17, 2020, either as part of new arbitration agreements or in deciding the rules of procedure in an ongoing or future arbitration. The 2020 revisions are intended to reflect changes in arbitration by aligning the rules with the current agreement in international arbitration, as well as to discuss the increased use of and reliance on technology as a result of the COVID-19 pandemic.
Under Article 1 of IBA Rules on the Taking of Evidence in International Arbitration; Scope of Application
“1. Whenever the Parties have agreed or the Arbitral Tribunal has determined to apply the IBA Rules of Evidence, the Rules shall govern the taking of evidence, except to the extent that any specific provision of them may be found to be in conflict with any mandatory provision of law determined to be applicable to the case by the Parties or by the Arbitral Tribunal.
2. Where the Parties have agreed to apply the IBA Rules of Evidence, in whole or in part, they shall be deemed to have agreed, in the absence of a contrary indication, to the version as current on the date of such agreement.
3. In case of conflict between any provisions of the IBA Rules of Evidence and the General Rules, the Arbitral Tribunal shall apply the IBA Rules of Evidence in the manner that it determines best in order to accomplish, to the extent possible, the purposes of both the General Rules and the IBA Rules of Evidence, unless the Parties agree to the contrary.
4. In the event of any dispute regarding the meaning of the IBA Rules of Evidence, the Arbitral Tribunal shall interpret them according to their purpose and in the manner most appropriate for the particular arbitration.
5. Insofar as the IBA Rules of Evidence and the General Rules are silent on any matter concerning the taking of evidence and the Parties have not agreed otherwise, the Arbitral Tribunal shall conduct the taking of evidence as it deems appropriate, in accordance with the general principles of the IBA Rules of Evidence.”
Some of the Rules’ contents include:
- As a result of the Rules, cybersecurity and data protection are now included among the evidential topics on which the tribunal may engage with the parties. Both the parties and the arbitral tribunal are urged to consider beforehand how these difficulties will be dealt with.
- It is the Requesting party’s right, if so directed by the Arbitral Tribunal, to answer to the opposing party’s challenges.
- Because there is widespread agreement that papers generated in response to a document request do not form part of the evidence record and do not need to be translated into the language of the arbitration proceedings, the International Bar Association Rules reflect this consensus. However, any documents presented to the evidentiary record, must be translated into the language of the arbitration.
- The Rules specifically stipulate that the arbitral tribunal may, if the parties request it or on its own initiative, order that the evidentiary hearing be held by remotely. The Rules state that, in the event of a remote hearing, the arbitral tribunal shall engage with the parties in order to adopt a procedure for the hearing. The protocol may address: the technology to be employed; progressive testing of technology, the start and completion times, the manner in which documents may be presented to a witness or the Arbitral Tribunal; and the procedures to guarantee that witnesses providing oral testimony are not unfairly persuaded or sidetracked.
- When evaluating Requests to Produce, the arbitral tribunal is not required to consult with the parties, and parties are not required to submit numerous copies of documents that are substantially identical unless the tribunal orders them to do so. In actuality, the term “basically identical” can only refer to “identical,” not “similar,” and the criterion will have to be enforced extremely narrowly in order to be effective. An interested party may have a legitimate justification for requesting to see different versions of the same document
- Parties can submit second-round witness statements and expert reports to address new factual developments that were incapable of being addressed in a previous witness statement or expert report. In practice, the most effective strategy to restrict endless submissions and requests herein is to propose that the parties frontload their factual submissions, thereby limiting the possibility to submit new factual submissions in later filings.
- A tribunal-appointed expert does not have the authority to decide any disagreements between the parties about information or access to information. It is solely the arbitral tribunal that has the power to make decisions on these demands.
- The arbitral tribunal has the authority to remove evidence that has been obtained illegally, either at the request of a party or on its own initiative. The question of what criteria should be employed to establish whether evidence has been obtained illegally or whether such evidence should be outrightly be considered inadmissible has not been resolved. The arbitral tribunal retains complete authority over the admissibility and evaluation of evidence collected unlawfully and in violation of the law.
- The International Criminal Court’s (ICC) Rome Statute
The International Criminal Court’s (ICC) Rome Statute has been signed by 123 countries, who are known as States Parties. The African countries account for 33 of them, while the Asia-Pacific countries account for 19, 18 are from Eastern Europe, 28 are from countries in Latin America and the Caribbean and 25 are from Western European and other countries. When justified, the International Criminal Court (ICC) examines and, if necessary, brings criminal charges against individuals who have been accused of the most serious crimes of international concern: genocide, war crimes, crimes against humanity, and the crime of aggression. Since 2003, the court has been in existence.
The United States is not a signatory to the Rome Statute. The United States took part in the talks that resulted in the establishment of the court. However, in 1998, the United States was among the seven countries to vote against the Rome Statute, (China, Iraq, Israel, Libya, Qatar, and Yemen.
Despite signing the Rome Statute in 2000, President Bill Clinton did not submit the treaty to the Senate for ratification. President George W. Bush essentially unsigned the treaty in 2002, sending a statement to the Secretary-General of the United Nations stating that the United States no longer planned to ratify the treaty and that the United States had no further duties toward it. It is important to study the ICC’s under international arbitration herein notwithstanding the fact that the US is not a State Party to the ICC since US citizens will be subjected to the ICC where they commit crimes in jurisdictions that are State Parties to the ICC. In addition, the ICC serves an array of jurisdictions as mentioned above (123 countries).
The International Court of Arbitration of the International Chamber of Commerce (“ICC”) is an impartial arbitration body established by the ICC. The Court is not involved in the resolution of disputes. It is responsible for administering the resolution of disputes by arbitral tribunals in conformity with the International Chamber of Commerce’s Rules of Arbitration. According to the Rules, the only authority entitled to conduct arbitrations is the Court, which includes the examination and validation of awards made in line with the Rules. It establishes its own internal rules, which are detailed in Appendix II of the Rules.
According to Article 4(3) of the International Chamber of Commerce (ICC) Arbitration Rules, in the Request for Arbitration, a claimant must provide the following information:
- His or her full name, description, address, and other contact information;
- The full name, address, and other contact information of any person(s) who is or will be representing the claimant in the arbitration;
- Comprehensive information on the circumstances giving rise to the dispute and what the claimant is relying on to make the claim;
- Comprehensive information on the relief sought and monetary value anticipated from the claim.
- Important agreements including the agreement giving rise to the dispute at hand.
- When multiple arbitration agreements are invoked, an indication of the arbitration agreement under which each claim is asserted.
- In accordance with the provisions of Articles 12 and 13, all relevant particulars, as well as any observations or proposals regarding the number of Arbitrators and their selection in accordance with those provisions, as well as any nomination of an Arbitrator required by those provisions.
- All relevant information, including observations or proposals regarding the location of the arbitration, the applied rules of law, and the language of the arbitration.
- Any other papers or material that the claimant deems suitable or that would aid in the effective resolution of the dispute.
According to Article 4 (4) of the International Chamber of Commerce (ICC) Arbitration Rules, in addition to the request, the claimant must: pay the filing fee set forth in Appendix III (“Arbitration Costs and Fees”) in effect on the date the Request is submitted; and where the claimant asks transmission of the Request by delivery against receipt, registered mail, or courier, provide enough copies of the Request to each other party, each Arbitrator, and the Secretariat. If the claimant refuses to adhere to either of these requirements, the Secretariat may set a deadline for the claimant to conform, after which the file will be closed, without detriment to the claimant’s right to present the same allegations in a subsequent Request.
Under Article 4 (5) of the International Chamber of Commerce (ICC) Arbitration Rules, after the Secretariat has received enough copies of the Request and the requisite filing fee, the Secretariat will send a copy of the Request and the papers appended therein to the respondent for its Answer to the Request.
Article 6 of the International Chamber of Commerce (ICC) Arbitration Rules touches on the “Effect of the Arbitration Agreement”.
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