arbitration rules

At the CIArb Fellowship Program Training, A Firsthand Arbitration Experience

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By Sakshi Solanki

The Chartered Institute of Arbitrators’ Accelerated route to Fellowship (International Arbitration) Assessment was held Oct. 7-8,  2022, at Williams & Connolly LLP’s Washington, D.C., office. It was sponsored by CPR.

I was invited to join and participate with nearly 15 senior practitioners, who attended this training program and brought their litigation, arbitration, and mediation backgrounds.

The CIArb faculty included five moderators, John Buckley, senior counsel at Williams & Connolly LLP in Washington; Jim Reiman, who heads his own Chicago ADR practice; Merriann Panarella, an arbitrator and mediator based in Wellesley, Mass., who also serves as a board member of CIArb’s North America Branch; Kenneth Reisenfeld, a Washington-based partner in Baker & Hosteler LLP, who heads the firm’s global investor-state arbitration practice, and Gaela Gehring Flores, an international arbitration practice partner in the Washington office of Allen & Overy. 

The faculty reviewed with the students the laws, rules and procedures governing arbitration. They also assessed participants on their legal knowledge, understanding of the problems presented, and skills as an acting arbitrator or lead counsel.

The participants worked on a fact pattern that involved a complex international construction dispute. The insurance contract between the parties had an arbitration clause which was subject to UNCITRAL Arbitration Rules, and the working documents were based on Panamanian and English law.  The place of the arbitration was Toronto.

The training involved 22 interesting exercises, either in a discussion or a roleplaying format, where the participants were divided as either the claimant or the respondent, and where they often played the role of an arbitral tribunal.

There were two breakout rooms for the exercises, and students were shuffled four times in the two training days so that everyone could engage with each other on the exercises. 

Among the problems implicated were the constitution of the tribunal, the language of the arbitration, and the challenge and replacement of an arbitrator.  Each attendee argued diligently for their assigned side or roleplayed as the arbitral tribunal. I found each exercise to be fun and highly interactive when we discussed various possibilities in resolving a particular issue.

As the training proceeded, the fact pattern got more intense. Issues of fraud, corruption, and expert witnesses were discussed. Toward the end of the first training day, Jim Reiman lectured on drafting procedural orders. He emphasized the importance of drafting orders in a way to avoid difficulties at the latter stage of the proceedings. After the end of the first day, the attendees were asked to draft either an interim award or a procedural order overnight, based on what was discussed.

The training not only relied on UNCITRAL arbitration rules but also made references to the CIArb Code of Professional and Ethical Conduct, which often comes into play to govern arbitrator conduct. There were also references made to the International Bar Association Rules on the Taking of Evidence in International Arbitration to deliberate on issues of discovery and production of documents.

All the attendees were also expected to draft a final award as the presiding arbitrator. They had to decide the case on the merits and rule on every issue that was submitted.

This was an excellent opportunity for me to be present in a room full of senior knowledgeable practitioners and see them strategize on various accounts and in different roles. The training had a perfect blend of real-time scenarios and use of substantive laws, which I thoroughly enjoyed. It was an unforgettable experience, and I appreciate the faculty of the CIArb, CPR, and the fellow participants who were extremely kind and gracious in allowing me to observe as well as participate in these two days of extensive training.

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The author, an LLM candidate at the American University Washington College of Law in Washington, D.C., focusing on International Arbitration and Business Law, is a Fall 2022 CPR Intern.

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#CPRAM22 Highlights: Hot Topics/Initiatives in ADR

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By Andrew Ling

Lucila Hemmingsen, a partner in the New York office of King & Spalding practicing international commercial and investment arbitration and public international law, moderated a third-day CPR Annual Meeting panel on cutting-edge topics in ADR. The panel focused on arbitration cases pending before the U.S. Supreme Court, new arbitration legislation, an initiative to reduce arbitration’s carbon footprint, and diversity in ADR.

Hemmingsen was joined at the March 4 online #CPRAM22 session by three panelists:

  • Angela Downes, who is assistant director of experiential education and professor of practice law at University of North Texas Dallas College of Law;
  • Benjamin Graham, an associate at Williams & Connolly, in Washington, D.C., who focuses on complex commercial litigation and international arbitration. He has represented sovereign states and multinational corporations in investment-treaty disputes before ICSID and commercial disputes before leading arbitral institutions, and
  • Rachel Gupta, a mediator and arbitrator with her own New York City-based ADR practice, Gupta Dispute Resolutions. She is a mediator for state and federal court ADR panels and is an arbitrator and panelist for CPR, the American Arbitration Association, and FINRA.

Graham and Downes began the discussion by reviewing arbitration cases pending before the U.S. Supreme Court. Downes highlighted Henry Schein Inc. v. Archer and White Sales Inc., No. 19-963, in which the question concerned whether a delegation provision in an arbitration agreement constitutes clear and unmistakable evidence that the parties intend the arbitral tribunal to decide questions of arbitrability.

Traditionally, courts are presumed to decide whether a dispute is subject to arbitration, phrased as the “question of arbitrability.” But in recent Supreme Court decisions, the Court has looked at the parties’ agreement and allowed the arbitral tribunal to decide questions of arbitrability if there is clear and unmistakable evidence indicating parties’ intent to delegate the authority to arbitrators.

Panelist Angela Downes said she views the fundamental Henry Schein issue as the drafting of the arbitration agreement, noting that disputes often arise when the agreement or provision lacks clarity. She pointed out that the case, which was dismissed a month after the oral arguments in January 2021 in a one-line opinion in which the Court said that it had “improvidently granted” review in the case, leave the status of delegation agreement still unsettled enough for potential future litigation.

Rachel Gupta then led the discussion on recent legislation on arbitration, focusing on H.R. 4445, titled Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.

The panel discussed the Congressional backdrop to the bill, which was signed into by President Biden on March 3, the day before the panel discussion. In many employment contracts, employees have been bound by arbitration agreements and prohibited from bringing sexual harassment claims to a court. Arbitration proceedings are generally confidential, and the amount of an arbitral award tends to be lower than the damages rendered by a court. And when parties settle the dispute, employees are usually required to sign non-disclosure agreements. As a result, victims of sexual harassment are often silenced.

There are four amendments to the Federal Arbitration Act. First, it does not categorically ban arbitration agreements between employers and employees, but it allows plaintiffs to bring sexual harassment claims to courts. Second, plaintiffs have the option to bring the case individually or on behalf of a class, even if the employer’s arbitration agreement prohibits class arbitration. Third, FAA applicability will be decided by a federal court, not the arbitral tribunal. Finally, the amendments are retroactive.

Gupta pointed out that the bill does not address non-disclosure agreements. Angela Downes said she believed the omission was intended as a compromise to gain bipartisan support for the bill. In addition, many lawmakers and sexual harassment victims view binding arbitration agreements as the cause of the “broken system,” not the non-disclosure agreements.

The new law, the panel suggested, could drastically change employment arbitration practices. As Rachel Gupta commented, it will be interesting to observe if lawmakers intend to make similar amendments to other areas of arbitration, such as consumer class arbitration.

On reducing arbitration’s carbon footprint, Gupta first discussed the Campaign for Greener Arbitrations, founded by U.K. arbitrator Lucy Greenwood in 2019. The Campaign developed a set of Green Protocols to reduce the environmental impact of international arbitrations, such as using electronic correspondence and organizing virtual conferences.

Moderator Hemmingsen shared several changes in international arbitration practice: sending iPads to arbitrators instead of papers; reducing in-person meetings, and using advanced technology to take construction-site photos instead of traveling. She also predicted that more conferences and hearings would be held virtually.

The panel concluded by discussing diversity and inclusion among arbitrators and mediators. There have been several initiatives on appointing diverse neutrals and offering training and networking opportunities, such as the Ray Corollary Initiative, the JAMS Diversity Fellowship Program, New York Diversity and Inclusion Neutral Directory, the ADR Inclusion Network, and the Equal Representation in Arbitration pledge. Many arbitral institutions have taken action to place more women in arbitration panels. And CPR incorporated a “Young Lawyer” Rule in its Administered, Non-Administered and International Arbitration Rules to increase opportunities for junior lawyers to take a more active role in arbitration hearings (see Rule 12.5 in the rules available at https://www.cpradr.org/resource-center/rules/arbitration).

The panelists agreed that promoting diversity among arbitrators and mediators must be a concerted effort from ADR providers, arbitrators, law firms, and clients. Progress in diversity and inclusion is needed to grow the profession and benefit the next generation of ADR practitioners.

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The author, a third-year law student at the University of Texas School of Law, in Austin, Texas, is a CPR 2022 Spring Intern.

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Florida’s Top Court Takes on ‘Who Decides?’ in Airbnb Arbitration Case

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By Arjan Bir Singh Sodhi

Wednesday’s Florida Supreme Court argument presented a foundational issue on the adoption of arbitration proceedings—more on the question of who decides whether a case is arbitrated, based on the incorporation into a consumer contract of a set of arbitration rules.

The Nov. 3 argument, in Airbnb v. Doe, No. SC 20-1167, explores whether contract provisions are “clear and unmistakable”—the case law standard—in allowing the arbitration tribunal to determine its jurisdiction, and in allowing an assessment of the evidence from the contract that the parties agreed to arbitrate arbitrability.

Both federal and Florida cases back Airbnb, the best-known accommodations rental app, in finding that by incorporating a set of contract rules—in the case, the American Arbitration Association Commercial Arbitration Rules—the parties are agreeing to have an arbitration tribunal decide whether a case is to be arbitrated. 

But a Florida appeals court bucked the trend, and in a detailed opinion, found that the click-thru web interface didn’t provide adequate notice to the app users that they were agreeing to arbitration via a link to the rules which stated the arbitrability provision.

In the case, an anonymous Texas couple filed a complaint against Airbnb and the condominium owner who had listed the Florida property on the Airbnb platform. The complaint includes intrusion against the condo owner, and constructive intrusion against Airbnb. The plaintiff rented the condo for three days in 2016 and later learned that the owner had installed hidden cameras and recorded the couple without their knowledge.

The Does filed their complaint in the Manatee County, Fla., circuit court. Airbnb moved to compel to settle the dispute through an arbitration proceeding. Airbnb claimed that the Does are bound to an arbitration proceeding under the signed terms and conditions when they accepted the app’s click-wrap agreement—that is, the legal contract in the Airbnb online software in which the customer indicates acceptance by typing in yes, or selecting a particular icon or link before they may use the service.

The click-wrap agreement included a dispute resolution clause stating that the parties must arbitrate under the rules of the American Arbitration Association, with a link to the rules.  The rules contain the provision that the determination of whether the case is arbitrable goes to the arbitrator, not a court.

The Manatee County Circuit Court granted Airbnb’s motion to compel the arbitration. But Florida’s Second District Court of Appeal reversed. John Doe & Jane Doe v. Natt & Airbnb Inc., 299 So. 3d 599 (Fla. 2d DCA 2020) (available at https://bit.ly/3BPYPcu). The appellate court held that reference does not clearly and unmistakably suppress the court’s power to decide the arbitrability. The decision noted that the click-wrap agreement is not clear enough on the issue of who should decide the jurisdiction of the arbitration proceedings.  It stated that the reference “was broad, nonspecific, and cursory: the clickwrap agreement simply identified the entirety of a body of procedural rules. The agreement did not quote or specify any particular provision or rule.  . . .”

The appeals court also held that AAA Commercial Arbitration Rule 7 on arbitrability is not an exclusive power for the arbitrator.

Oral Argument

At Wednesday’s oral argument, Joel S. Perwin, who heads his eponymous Miami law firm, argued on behalf of petitioner Airbnb that the click-wrap clause covered everything, including the arbitrator’s resolution of deciding the arbitrability.

Justice Carlos G. Muñiz asked Perwin to clarify whether parties who accept the contract are expected to understand caselaw and legal language—whether they should understand that the courts have deemed such agreements referring to rule to be a “clear and unmistakable” indication that arbitrability goes to the tribunal.  

Perwin replied that he does not expect the parties to read the case law. “I would never suggest that,” he said. But he quickly added that the parties “are required to read the [contract] language.” He cited the “overwhelming weight of the authority” to indicate that the incorporation of the rules is accepted and customary.

Perwin addressed the parties’ sophistication, which was an argument that the Does made against the effectiveness of the click-wrap agreement.  He said the Does introduced no evidence that they were not sophisticated, and added that the parties’ sophistication level is not even a relevant factor in the matter.  

He said that in applying an objective test—Is the contract clear and unambiguous?–as to whether the agreement applies doesn’t depend on an analysis of the parties’ sophistication. “This language is clear and unambiguous as a matter of law,” he said.

* * *

Thomas Seider, an attorney in the Tampa, Fla., office of Brannock Humphries & Berman, arguing on behalf of the respondents, the Does, opened by noting that arbitration is a matter of consent. He said the question is whether the respondents gave their consent to the arbitration proceedings.

Justice Ricky Polston strongly suggested that while looking at federal law, the AAA rules, and the incorporation by reference of the rules into the contract, that the rules indeed are a part of the contract.

Justice Polston asked why, in reading AAA Rule 7, it wasn’t clear and unmistakable that that arbitrators have the ability to decide the jurisdiction. Focusing on the contract language, Seider argued that the Does only needed to read the rules if they needed to know, for example, about how the arbitration would be conducted, or the costs, not the “condition precedent” question of whether the case was subject to arbitration.

Justice John D. Couriel was skeptical. “The trouble with the argument is that none of this is in the contract,” he said.  Seider replied that if the consumer gets to the rule, then the party would understand that the arbitrator decides.  But even then, Seider noted, the language itself was “permissive but not mandatory.”

Couriel pressed Seider on the language.  Seider said that the AAA Rule 7 language—”The arbitrator shall have the power to rule on his or her own jurisdiction”—did not exclude a decision by a court on arbitrability.

Justice Alan Lawson asked about the agreement language and whether it satisfied the “clear and unmistakable” standard for a delegation, which derives from First Options of Chicago Inc. v. Kaplan, 514 U.S. 938 (1995 (available at http://bit.ly/2WEXGnF). He said it is “basic contract interpretation,” and “you apply the basic rules” on whether the contract reflects what the parties agreed to—in this instance, whether there was a “clear and unmistakable” parties’ agreement on the arbitrator deciding arbitrability. He asked “whether the rules count” in determining what the parties agreed to under the contract.

Seider agreed that the rules count in reading the contract, and Lawson asked whether the rules’ language is clear and unmistakable evidence. Lawson said that in analyzing the contract, look at the whole agreement, leaving the rules to return to the first part of the contract, “the more conspicuous part”: The first page which incorporates the AAA rules.  With that, said Lawson, “it just seems pretty straightforward” that the parties agreed to arbitrate.

Seider said that “the clear and unmistakable standard is not supposed to require these inferential leaps” with cross-referenced rules, which he said are recognized by the U.S. Supreme Court as arcane.  He said people do not understand the concept of arbitrability.

Justice Jorge Labarga was more sympathetic to the respondents’ argument.  He said that consent must be waived for arbitration, adding, “And what I’m hearing here today is that the agreement–they can attach as many attachments as they want to online, you can have 100,000 pages, and in there, in a footnote, someplace they can say, ‘Oh, by the way the arbitrator gets to decide whether this goes to arbitration or not,’ and that is OK as long . . . as it is a part of the text of the package.”

Seider quickly agreed that burying provisions in the agreement will become the norm. Justice Lawson asked about the need for conspicuous language, and Seider conceded that First Options doesn’t discuss that point in defining “clear and unmistakable.”

Justice Couriel asked Seider to clarify if there is a clear statement in the contract on how it will affect people’s rights, and how Airbnb encourages parties to read terms and conditions carefully. He asked if the advisory was “over and above” the First Options requirements.

Seider agreed that Airbnb advises parties to read the terms and conditions. He countered that reading and understanding about 60 pages of procedures and rules are hard to understand and is not clear and unmistakable.

Justice Polston wasn’t convinced, noting that the rules “were there.” Seider said they were, but again stressed that a court arbitrability determination was not excluded by AAA Rule 7.

Justice Carlos G. Muñiz asked Tom Seider to clarify why previous case law has been overwhelmingly against the petitioners. Seider said that early decisions didn’t thoroughly analyze the question of arbitrability. He pointed out a lack of discussion on how contract language can be clear and unmistakable. “The analytical foundation of these cases really isn’t there,” concluded Seider.

* * *

Airbnb attorney Joel Perwin rebutted, noting five points:

1. Every case is decided on its own merits and facts.  

2. The test for clear and unmistakable is a matter of federal law. Justice Polston pushed back and agreed that arbitrability is a federal concept, but strongly noted that contract review is state law.  

3. Party sophistication is not an issue because “clear and unmistakable” is an objective test. There is no evidence to prove that the Does are not sophisticated enough to understand the click-wrap agreement, Perwin emphasized, but regardless, it is an objective test.

4. Addressing Tom Seider’s argument that Rule 7 is permissive, Perwin noted that the language is clear enough for anyone reading it to understand that the arbitrator has “the power” to decide the matter. That is why the courts have said that when arbitrators are designated to get the power under the contract and nothing is said about the courts, it means the arbitrators have the power to decide alone.

5. The statute and contract should not be interpreted to be unreliable on arbitrability. In the past, courts have been clear on these issues.

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The Nov. 4 oral arguments in Airbnb v. Doe, which were televised and streamed on several web outlets including Facebook, are archived on YouTube at https://bit.ly/3EJ0rqa.  The full Florida Supreme Court docket on the case, with links to documents, is available at https://bit.ly/3GYoZxe.

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The author, a CPR 2021 Fall Intern, is an LLM candidate at the Straus Institute for Dispute Resolution, at Malibu, Calif.’s Pepperdine University Caruso School of Law.

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The Before Times: CCA Panel Looks at Arbitration Preparation

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By Bryanna Rainwater

An Oct. 1 College of Commercial Arbitrators online program provided interesting nuts and bolts on arbitration before proceedings begin. 

The CCA, an invite-only membership group of about 250 arbitrators based in Austin, Texas, that advocates for best practices, presented the first of a series of 20th anniversary arbitrator talks with Juris Publishing of New York.

“Using the Pre-Hearing Conference to Win Your Commercial Arbitration (CCA Series, Session I),” featured the following panelists:

The panel discussed issues surrounding preliminary hearings, including preparation before the hearing, knowledge of the arbitral rules that will govern the preliminary hearing, and advice for speaking with counsel beforehand.

The panel members stressed the value of flexibility among the parties and the need to come prepared to the preliminary hearing. Tyrone Holt advised, “You need to be as prepared to talk to the arbitrator as the arbitrator is to talk to you.” Laura Kaster noted, “One of the things that I think is very different about arbitration is that the advocates have an opportunity to define the process if they want to.”

Holt added, “As an arbitrator I come to the preliminary hearing with three modes and three goals. My first mode is to listen,” as a way to gather information and see if the parties are in line with the rules of arbitration they chose. He continued, “My second mode . . . is to try mediate, cajole, [and] serve as a communication link to resolve by agreement those disputes which you have, or disagreements that need to be addressed, in order to get a scheduling order in place.”

The final goal “which is by default, when necessary,” said Holt, “is to decide those issues which need to be decided that you all can’t agree upon during the scheduling conference.”

When asking whether the parties should routinely meet ahead of the preliminary hearing, Laura Kaster, who heads her own independent ADR practice, noted, “I think this is a topic that actually . . .  arbitrators differ about, and differ in different cases about.”

Panelist Eugene Farber said that he encourages the practice “because it saves time and money,” which is a key aspect and drawing point for parties interested in alternative dispute resolution. But he cautioned that “it depends on the nature of the case. If I perceive that counsel are not getting along, . . . and this is a really significant dispute, then I won’t do it.”

The panel also discussed issues surrounding subpoenas and depositions, noting arbitration’s difference from courts and that the practice is not subject to traditional civil procedure rules. Farber noted that “this is complicated.  . . . In some states like New York, and I think Illinois, counsel has the independent right to issue subpoenas, so that makes it more complicated. If you’re in one of those states, you may want to check with your arbitrator because a lot of arbitrators don’t like that. They don’t want counsel issuing their own subpoenas. They want to control their own proceeding.”

Farber also cautioned that, on the other hand, “There are some states and federal circuits that say that an arbitrator does not have the right to issue a subpoena to a third-party witness.”

As to arbitration hearing confidentiality, Laura Kaster said that “this is an area that most people confuse. Arbitration is private, but . . . there aren’t constrictions on confidentiality with respect to everyone. Most of the rules apply to the arbitral institution and the arbitrators but many of the rules do not apply to the parties, the counsel and the witnesses.”

She further stressed the need for witnesses to be subject to confidentiality since they are often overlooked.

Farber urged attorneys going into the preliminary hearing, “Know your rules,” because they differ among arbitral institutions, such as the American Arbitration Association and the International Institute for Conflict Prevention and Resolution. He added, “CPR, for example, says the entire proceeding is confidential. So you have to know your institution’s rules.” See Rule 20 on the presumption of confidentiality of CPR’s 2019 Administered Arbitration Rules at http://bit.ly/2SGoW0z.

When discussing relief requested and dispositive motions, the panel had differing views. On granting relief, Tyrone Holt said he uses the practice of setting out relief requested early on to avoid a possible “fishing expedition” for relief.

But panelists Laura Kaster and Eugene Farber noted that there are times when the amount or type of relief requested may change over the course of discovery and disclosure.

The panel members agreed that a request for a dispositive motion is a tricky subject. Farber noted that arbitrators are more reluctant than a typical trial judge to grant dispositive motions. “We got to get it right,” he said, “because there’s no appeal” in arbitration which makes the arbitrator’s decision more final than a judge’s ruling. Farber suggested that using an “ex-judge arbitrator” in these situations may be helpful.

Overall, the panel suggested that to make a positive impression on your arbitrator, come to the preliminary hearing well prepared. Kaster reminded the online attendees that “it is a small room when you’re in an arbitration. [In] a small room or a small Zoom, you have to keep the civility level up and the antagonism down.”

Holt said, “Come prepared based upon the facts, the law and the rules.” Farber advised to “not be particularly hard-nosed,” especially in light of family or personal issues in relation to the other parties in scheduling the session. The panel members emphasized as important arbitration management skills the need for knowing the rules, making an effort to speak to the other side before the session, being courteous, and perhaps even using humor when appropriate.

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The author, a second-year student at Brooklyn Law School, is a 2021 CPR Fall Intern.

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