THE NEUTRAL’S NOTEPAD: Writing an Award that Withstands the Scrutiny of the Parties and the Courts
The end game in arbitrations is the final award. In most business-to-business commercial arbitrations, the final award is a reasoned explanation of the facts and law, and the relief being awarded. Since most arbitration awards are confidential, the audience for the written award is the parties and if subject to a review, the courts. What should be considered in writing an award that will withstand their scrutiny?
The first consideration is the title of the award. How the award is labeled is important and has consequences. If it is titled an “Interim Award,” its duration should be no longer than the arbitration itself and it should be entitled to reconsideration at any time before the final award is entered.
If it is a “Partial Final Award” – such as a finding as to liability only – it generally would not be subject to a reconsideration and may be appealable to the courts unless the tribunal indicates otherwise. The tribunal should make its intention clear as to whether it intends for the award to be judicially reviewable at that stage or not.
If it is a “Final Award,” the assumption is the tribunal has completed its task and the award is subject to enforcement or judicial review. The tribunal’s authority is over at that point.
Once the award has been labeled properly, the next step in preparing the award is to identify the parties and their status. This may seem obvious, but the issues and the relief may depend upon which party is raising a claim or defense. With the frequency of counterclaims, characterizing who is bringing the claim and the relief sought becomes an important point in the analysis.
Most arbitrators then like to proceed with a factual and procedural background to set the framework for the issues and analysis. This certainly makes sense, but first it may be helpful to consider the issues that you are going to be resolving. The issues really control the findings and facts which are necessary to recite in the award. What facts are material to the issues will become more evident once you have articulated the issues being decided.
Most arbitrators then set forth the procedural history by identifying what has occurred prior to the hearing. This section is really more for reviewing courts than for the parties because the parties know what has transpired. But is important for someone new to the arbitration to understand that the parties had an ample opportunity to engage in discovery, make their arguments, submit their exhibits and have their witnesses heard and examined. Some of the grounds for vacatur are based upon whether the parties had a fair and meaningful opportunity to present their case, so spelling out in detail how the arbitration progressed lends credence to the award.
Then the crux of the award follows with the statement of the issues that the parties are raising and how they are decided. It is critical that a party understands that the tribunal understood what issues they were raising. The tribunal may not agree with a party’s position on a given issue, but both for the purposes of confidence in the award and its possible reviewability, every material issue that was raised should be identified and ruled upon. A “sweeper” clause that issues not identified were fully considered (a clause I have used myself at times) is not generally satisfactory to the parties or to reviewing courts. The tribunal’s ruling on the merits of the issue is really secondary to the fact that the issues were properly identified.
Next is the analysis of the material issues and the reasoning behind the conclusions reached. Each conclusion should be supported by a logical interpretation of the facts and law. References to case law are not always necessary but if there are statutes or authorities on given issues that the parties have relied upon, some reference to them in the award will at least signal that they were considered.
Most tribunals are both very measured in their analysis of the issues and not unduly critical of a party’s position. Arguments made by the parties are generally made in good faith and, even if you disagree with them, they should be treated with the same measure of good faith.
Last but not least, the award should specify the relief being afforded. It is a good practice to have the parties in the prehearing briefs state specifically the relief they are seeking in the claims or counterclaims. Sometimes an earlier filed claim is not clear as to what relief the party is seeking, and the relief sought may change as the discovery in the arbitration unfolds. So a delineation in the prehearing brief of the issues and the relief sought is very helpful to the tribunal.
After considering the specific relief requested, it is a good idea to review the arbitration agreement again to determine whether it has any limits on what relief can be given. Limits on punitive damages in particular are frequently included in the arbitration agreement. Other limitations may include a bar on consequential damages or attorneys fees.
Finally, do a gut check on what final relief should be ordered. Is it warranted by the facts in the law? Are you compromising the award because you do not agree with the law? Is it what the parties expect? Before you pull the trigger, you want to make sure your aim is on what the arbitration agreement contemplates and more importantly, requires.
In conclusion, each step in writing the award from the title to the relief must be carefully considered. The result is sometimes not as important as the process achieving it. Make sure the award informs parties and the courts as to how you arrived at it.
Tim Eaton is a Fellow of the College of Commercial Arbitrators and a member of the CPR Panel of Distinguished Neutral Arbitrators in Chicago. He is a member of the National Academy of Distinguished Neutrals and a member of the American Arbitration Association’s Roster of Commercial Arbitrators. He has lectured and written on arbitration topics. He is a litigation partner at the law firm of Taft, Stettinius & Hollister.