On November 26th, the Chartered Institute of Arbitrators (CIArb) launched a major survey into the costs of international arbitration. According to the CIArb News: The ‘Costs of Arbitration’ survey will gather data to inform parties, legal representatives and arbitrators about the overall costs of international commercial arbitration and how these are incurred at each stage. The results will be analysed and presented at an international conference organised by CIArb and sponsored by Alvarez & Marsal on 27 – 28 September 2011 in London, aimed at uncovering ways in which costs might be reduced and the process streamlined to become more cost-effective and efficient. International arbitration has a justifiable reputation as the preferred method of dispute resolution for international commercial disputes. The worldwide economic downturn has accelerated a rising trend in favour of the use of international arbitration, where the enforceability of awards under the New York Convention gives it a major advantage over litigation in national courts. Globally, governments have invested in bringing their arbitration laws up-to-date and building modern arbitration centres to capitalise on this growing market. However, as the size and complexity of disputes referred to international arbitration has increased, so too have concerns about the growing complexity, cost and time involved in the process, diminishing some of the very factors that make it preferable to the courts for commercial dispute resolution. CIArb’s Costs of Arbitration survey will play a key role in understanding the present position and, together with the international conference on the Costs of International Arbitration, finding ways of tackling the problem and reducing the costs of arbitration. Party representatives or arbitral tribunal members may complete the survey here. More information about the conference at which survey results will be presented is available here. The full article may be read here. Technorati Tags: law, ADR, arbitration

After 34 years, the United Nations Commission on International Trade Law (UNCITRAL) has revised its International Arbitration Rules. The revised Rules seek to expedite the arbitration process and account for changes in technology since the Rules were originally adopted in 1976. According to Ben Allen and Adam Hunter of Norton Rose LLP’s Sydney Office, the following changes apply to international arbitration agreements that took effect after August 15, 2010: Parties no longer have to agree in writing that the UNCITRAL rules will apply to the arbitration. Any record that displays an agreement to be bound by the Rules is sufficient (Article 1). The Notice of Arbitration may now be transmitted electronically; arguments that address sufficiency of notice will no longer hinder the constitution of the tribunal (Articles 2 & 3). Parties waive the right to bring any claim against the arbitrators and the appointing authority based on any act or omission in connection with the arbitration (other than intentional wrongdoing) (Article 16). Third parties may now be joined to the proceedings and claims made against them in response to the Notice of Arbitration (Article 17). New interim measures outline the Tribunal’s power to require the applicant to provide security, to alter or terminate the interim measure imposed and use costs and damages awards to prevent or compensate for abuse of the procedure (Article 26). The revised Rules introduce the right to external review and correction of arbitrators’ fees (Article 41). The revised Rules do not govern confidentiality. You may read more about the revisions here and here. Disputing previously discussed the new Rules here. Technorati Tags: law, ADR, arbitration

The Supreme Court of Texas has held that the Federal Arbitration Act (FAA) preempted the Texas General Arbitration Act (TAA) in three related general arbitration clauses, but that a similar, more specific clause was unenforceable under the TAA. In In re Olshan Foundation Repair Company, LLC, Nos. 09-0432, 09-0433, 09-0474, 09-0703, (Tex. December 3, 2010), Olshan was sued by four different customers (Waggoner, Kilpatrick, Tisdale and Tingdale) who alleged the company performed faulty foundation repair work on their respective homes. Each repair contract was in writing and contained an arbitration clause. None of the agreements were signed by the parties’ attorneys or exceeded $50,000 in consideration. Olshan filed a plea of abatement in each of the four cases and sought to compel the disputes to arbitration under the FAA. A trial court denied Olshan’s plea in Waggoner by stating the TAA applied to the dispute and held that the arbitration clause was unenforceable pursuant to Chapter 171 of the Texas Civil Practice and Remedies Code. The trial court also held the arbitration agreement was unconscionable due to the costs which would be associated with an arbitral proceeding. In the remaining three cases, trial courts also denied Olshan’s pleas of abatement. Olshan next filed four writs of mandamus at the appellate level. After an appellate court consolidated two of the cases, all four writs were denied. In response, Olshan filed writs of mandamus to the Supreme Court of Texas, who consolidated all of the cases for argument. The arbitration clauses in Kilpatrick, Tisdale and Tingdale provided: Notwithstanding, any provision in this agreement to the contrary, any dispute, controversy, or lawsuit between any of the parties to this agreement about any matter arising out of this agreement, shall be resolved by mandatory and binding arbitration administered by the American Arbitration Association (“AAA”) pursuant to the arbitration laws in your state and in accordance with this arbitration agreement and the commercial arbitration rules of the AAA . . . . (emphasis added). According to the Court, The arbitration clause in the Waggoner (No. 09-0474) agreement is identical except for the language in bold, which states “pursuant to the Texas General Arbitration Act.” (emphasis added). After the Court examined FAA preemption and choice of law jurisprudence, the Texas Supreme Court discussed the Kilpatrick, Tisdale and Tingdale cases: Courts rarely read such general choice-of-law provisions to choose state law to the exclusion of federal law. See Mastrobuono, 514 U.S. at 59; L & L Kempwood, 9 S.W.3d at 127 n.16. Further, just as the FAA is part of the substantive law of Texas, the FAA would be part of the arbitration laws in Texas. See L & L Kempwood, 9 S.W.3d at 127 n.15 (quoting Capital Income Props., 843 S.W.2d at 23). The language of the arbitration clause designating arbitration pursuant to “the arbitrations laws in your state” includes the FAA. See id. at 127–28. Thus, the FAA applies to the three agreements that include the “arbitration laws in your state” language, and the FAA preempts the provisions of section 171.002(a)(2) of the TAA that would otherwise render the agreements unenforceable. The trial courts abused their discretion in denying Olshan’s requests to compel arbitration based on the unenforceability of the arbitration under section 171.002(a)(2) in the Kilpatrick, Tisdale and Tingdale cases. In contrast, the Court denied Olshan’s writ of mandamus in the Waggoner case: This is not the same general choice-of-law provision. This provision chooses a state’s substantive law, specifically the TAA, to govern disputes under the agreement. A valid choice-of-law provision makes a conflicts-of-law analysis unnecessary; this provision expresses a preference between federal and state law. [L & L Kempwood at 127–28] The FAA is part of the arbitration laws of Texas and can be applied to arbitration administered pursuant to the laws of Texas. However, the FAA is not part of the TAA, at least to the extent the two are inconsistent. According to the Court, the plain language of the Waggoner agreement indicated the parties’ intent that the TAA govern the scope of the arbitration agreement. The court also held that Section 171.002(a)(2) of the TAA “would render the Waggoners’ arbitration agreement unenforceable.” The TAA renders arbitration agreements unenforceable if the agreements containing the arbitration clauses are agreements for services “in which the total consideration to be furnished by the individual is not more than $50,000” and the agreements are not in writing, signed by each party, and each party’s attorney. TEX. CIV. PRAC. & REM. CODE § 171.002(a)(2). The Texas Supreme Court next addressed Kilpatrick, Tisdale and Tingdale’s contention that arbitration in accordance with the agreements would be cost prohibitive, which rendered the arbitration provisions unconscionable and thus unenforceable: The homeowners bear the burden to show the likelihood of incurring excessive costs, yet no homeowners provided any concrete idea of the amount of their claims. It is impossible to know how much they will be charged under the AAA rules, even if the fees charged by AAA were excessive. In refusing to hold the arbitration agreements unenforceable, the Court stated: The record contains no specific evidence that the homeowners will actually be charged excessive arbitration fees, and thus there is no legally sufficient evidence that such fees prevent the homeowners from effectively pursuing their claim in the arbitral forum. Finally, the Supreme Court addressed Kilpatrick, Tisdale and Tingdale’s contention that their contracts with Olshan violated the Texas Home Solicitation Act (THSA) because Olshan failed “to include in the agreements certain language regarding cancellation in at least 10-point boldfaced type, where the transactions occurred by personal solicitation outside Olshan’s place of business. TEX. BUS. & COM. CODE §§ 601.002(a), .052, .053, .201.” The Court refused to allow a trial court to determine whether the contract was valid and held the issue was for an arbitrator to decide: As the U.S. Supreme Court stated in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., when the parties have contracted for arbitration of their disputes, a trial court “may consider only issues relating to […]

Part II.B: Section 2 Express Preemption – Purposive Analysis by Philip J. Loree Jr. I. Introduction In Part II.A, we considered a textual construction of Section 2’s savings clause and concluded that it supports AT&T Mobility’s position. This Part II.B examines the savings clause from a purposive interpretation and construction standpoint. For the sake of convenience, the term “purposive” or “purposivism” is used here as a convenient way to describe in general terms the two principal methods of statutory construction which permit resort to non-statutory sources: (a) “intentionalism;” and (b) true purposivism. Intentionalism seeks to divine a legislative intent from the words of the statute; applicable interpretation and construction rules; and non-statutory sources, such as legislative history. Generally, if the text of the statute is unambiguous, then an intentionalist will not resort to non-statutory sources. But, unlike a pure textualist, an intentionalist will resort to such sources if the meaning of the statute is unclear. Purposivism seeks to derive meaning from the purpose of the statute, interpreting it from the standpoint of (a fictional) “reasonable” member of the legislature. Even if the plain meaning of the statute, and statutory interpretation and construction principles, suggest a particular meaning, a true purposivist may conclude that a different – or at least a more nuanced – one best serves the purpose of the statute. Associate Justice Stephen G. Breyer is probably the only avowed true purposivist on the United States Supreme Court, although certain other members of the Court may be influenced by purposivism to at least some degree. Since a textual construction would support AT&T Mobility’s position, this installment considers whether non-statutory sources of statutory intent and purpose may support a construction of the savings clause that supports the Concepcions’ position that the “equal footing” principle embodied in the savings clause is satisfied so long as the Discover Bank rule places arbitration agreements with class waivers on the same footing as contracts that bar class action litigation outside the arbitration context. We conclude that consideration of Congress’ intent and purpose as respects the savings clause not only does not support the Concepcions’ position, but confirms that the textual construction of the savings clause – i.e., that it saves from preemption only state revocation law that applies equally and in the same manner to all contracts – best reflects the intention of the legislature and best implements the purpose of the statute. By contrast, interpreting Section 2 in the manner suggested by the Concepcions would significantly undermine the purposes of the statute and render it largely ineffectual, all in contravention of the Court’s prior Federal Arbitration Act jurisprudence. II. A Purposive Construction of Section 2’s Savings Clause A. Sources of Legislative Intent and Purpose The first step in a purpose- or intent-based statutory interpretation and construction analysis is to identify the relevant sources of legislative intent and purpose. As respects the Federal Arbitration Act there are three principal sources: The Act’s text; The legislative history; and The Court’s prior pronouncements of legislative intent and purpose based on its interpretations of the text and legislative history. B. Divining the Legislative Intent or Purpose Relevant to Section 2’s Savings Clause 1. The Act’s Text Part II.A discussed in some detail a textual interpretation of the savings clause based on the text and Court decisions construing it as written. That interpretation saves from preemption only state-law revocation grounds which apply equally to a contract of whatever kind, and thus to all contracts. If we are to take the 68th Congress at its word, and assume it intended what it said back in 1925, we can infer that it intended to protect arbitration agreements from state laws that would render them unenforceable – or impair their enforceability – but not render unenforceable — or impair the enforceability of — all other contracts. Thus, the savings clause provides broad protection from state laws that discriminate against arbitration agreements, whether or not they also happen to discriminate against another type of agreement as well. 2. Legislative History In Southland Corp. v. Keating, 465 U.S. 1 (1984), the Court analyzed the Federal Arbitration Act’s legislative history and concluded that the Act was designed to address two “large problems”: “the old common-law hostility toward arbitration;” and “the failure of state arbitration statutes to mandate enforcement of arbitration agreements.” Southland, 465 U.S. at 14. Of these, the problem of the “old common-law hostility to arbitration” is the one most pertinent to the interpretation of the savings clause. That “hostility” was a result of the infamous “ouster” doctrine developed by early English courts and incorporated into the common law of many or most of the states in existence as of 1925, the year Congress passed the Federal Arbitration Act. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11 & n.4 (1974); see also The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9 & n.10 (1972). A basic premise of that doctrine was that private persons could not effectively divest court A of jurisdiction to hear a case by agreeing that the case would be submitted to court B or to arbitration panel C. See 417 U.S. at 510-11 & n.4; 407 U.S. at 9 & n. 10. The rule thus targeted run-of-the-mill forum selection clauses in the litigation context as well as arbitration agreements, which are themselves forum selection agreements. See Scherk, 417 U.S. at 519 (“An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute.”) So in what Judge Richard A. Posner aptly termed the “bad old days,” “[a]greements to arbitrate were not enforceable, because they deprived the objecting party of his right to litigate the parties’ dispute in court,” and “invoking a forum selection clause as a ground for dismissal of a suit brought in violation of the clause was considered an improper effort to ‘oust’ the court’s jurisdiction.” Northwestern National Ins. Co. v. […]