The main aim of this study is examine the rules of the American Arbitration Association (AAA) and its bias toward Anglo-American legal traditions as compared to The International Chamber of Commerce (ICC). AAA is a private entity obligated to provide arbitration proceedings to all interested parties. The organization also provides alternative mechanism for dispute resolutions. The study explores the comparison between the American Arbitration Association and the ICC and how both systems related to the American Judicial system. Study also evaluates the notion that American Arbitration Association is biased toward the rules of the American Judicial system based on the comparison.
Arbitration is a mechanism for resolving disputes geared through a binding decision enforced upon individuals. The primary mission of an arbitrator is carrying out a just and effective proceeding and makes the ultimate reward that settles the dispute. An arbitrator is not particularly appointed to help the parties in resolving their dispute and what differentiates arbitration from other forms of dispute resolution mechanisms such as mediation. The arbitrator’s role is very broad and involves decision-making and upbeat encouragement of settling disputes throughout the proceedings.
Based on different practices and customs in various legal backgrounds, the apparent role of the arbitrator varies from absolute sanction to categorical denunciation of the arbitrator’s support in settling disputes. In general, while majority of the legal systems have customarily considered the principal duty of judges and arbitrators is to encourage settlement, their common legal counterparts have not been permitted to be rigorously involved in facilitation of resolution, or at any rate have not been brave enough to rigorously contribute to the agreeable resolution of the dispute out of apprehension of being identified as unbiased if resolution effort does not bear fruit.
Arbitration and court case are forms of dispute settlement that engages the third party. Forms of dispute settlement other than court case are normally categorized under the heading of optional dispute settlement and are common topics in US. Other methods of settling disputes include mediation, renting a judge, conciliation and dispute boards especially for companies undertaking construction contracts. Of all these alternative dispute settlement methods, arbitration is the only one that is closest to the court proceedings. Arbitration awards are carried out by state courts in US and in other courts globally.
International arbitration traces its roots back to the Roman era when the Romans employed arbitration to settle disputes between states within their jurisdiction. In the Middle Ages through to the Renaissance, European states leaned more towards war than dispute settlement. However, there were a number of instances where the states solved their disputes through arbitration instead of war. International arbitration only became dominant in the 19th century. At the end of 19th century, the initial peace conference was summoned in Hague, which set up a Permanent Court of Arbitration, and this was strictly for arbitration between countries. Arbitration for non-state parties in the international court only started after the 2nd world war. Countries wanted to cooperate to end the war and increase international trade thus minimize chances of dispute among them.
In US, the New York arbitration statute was established in 1920 which made arbitration settlements possible in the New York courts. The New York statute offered a platform for what became federal law for arbitration, US arbitration Act of 1925, later named as Federal Arbitration Act (FAA). In 1958, the UN conference on international arbitration was hosted in New York and commonly known as the New York Convention among many scholars. Besides other provisions, the New York convention demanded recognition and enforcement of the arbitral awards and use of national litigation in support of arbitration. In the mid 80’s, international arbitration came up with principles of solving international business disputes and this has grown very tremendously in the past 20 years. In summary, the main aim of the international arbitration was to encourage international trade, peace and rule of law.
Even though numerous bills have been introduced in Congress, some of the bills introduced by a prominent politician illustrated some necessary problems which existed in the previous legislation. These laws include Arbitration Fairness Act of 2007 and a Fair Arbitration Act of 2007. Fair Arbitration Act offers among other things, pre-dispute arbitration settlement. Those taking part in the international arbitration disputes this provision on two grounds. First, this law does not provide for the definition or enumeration of provisions that control contracts or business transactions of parties with lopsided bargaining rights. Secondly, it gives power to the arbitrator to challenge their authority to make a decision a case. Calling for foreign arbitrators to take part in resolving US, this federal law overlooks the real purpose of the international arbitration.
Rules of the American Arbitration Association
American Arbitration Association (AAA) is a private entity that provides arbitration proceedings. This organization is based in New York City. For parties seeking to settle their dispute(s), they must have to seek arbitration from this institution or follow its rules on arbitration. Before the arbitration process take its cause there must be tribunal to aid in decision-making and this applies mostly under labor rules. When parties agree to follow this rule and administrator must be sought after and the administrator’s obligation is provided under the rules.
In most cases, a panel is always established to help in appointing arbitrators as per the set rules. Arbitration under the collective bargaining agreement clause follows the following guidelines: First, when a party is giving a notice to another partner, they have to do so in writing stating the nature of the dispute and the solution sought after. The copies of these documents are then taken to any AAA office to authenticate the dispute and parties involved. When a copy of the notice is send to the partner and does not reply after ten days then the case is regarded as rejection of the claim.
The parties must also fix a location for the proceedings and if this was not defined under the agreement, the association shall come to the rescue of the parties. The rule also gives direct guideline on the qualification of the arbitrator and the panel which has to be neutral. The number of arbitrator is limited to one unless the parties opt for more. An arbitrator has to disclose any thing that can influence the outcome of the process such as bias or any form of interest.
Incase the arbitrator leaves the office, AAA advertises the vacancy and fills the vacancy following g its guidelines. Parties can be represented by their attorney or any authorized individual. Any medium to be used in collecting information must be put on notice in advance and parties must agree on it. Witnessed have to testify under oath and the verdict should be based on the majority rule unless the concurrence of every statement or evidence is required. Evidence to be used in the process can be availed voluntarily or on authorization. Arbitrator is the only person allowed to judge on the authenticity of the evidence and not the law. Consequently, the arbitrator can inspect the documents on authorization by the parties. A fee of about $50 is charged per each proceeding and $150 incase the hearing is postponed. These are just some of the numerous rules of AAA which are geared towards achieving just and equitable decisions.
Comparison of the American Arbitration Association and the International Chamber of Commerce
International court of arbitration is often used because it is considered to be very reliable as compared to the local judicial systems plus this court is faster than court cases and maintains confidentiality of the subject in question. The role of arbitrators in settling disputes in ICC is quasi-judicial meaning that they are subjected to strict code of conduct to ensure that they are of high integrity, impartial and transparent in their proceedings. Because of the above code of conduct, arbitrators are required to disclose tangible and possible conflict of interest that could influence their decision when carrying out the proceeding. In a broad-spectrum, the most significant qualification for an arbitrator is independence and neutrality. The same characteristics are also demanded of an appointing authority. The main motive for this is to ensure free and fare decision without bias and pressure from any quota. ICC and the AAA are identical in this clause except that under AAA parties can appoint their own arbitrators whom might have some form of interest in the matter as long as they adheres to the AAA rules.
One of the major differences between the American Arbitration Association (AAA) and the International Chamber of Commerce is the standards of documents used and discovery allowance in the arbitration process. Many legal practitioners outside the US view the American style of discovery with shock since parties are able to offer each other extensive requests for production of relevant information or documents required in arbitration. Parties can also acquire oral evidence of the witnesses prior to the hearing. Countries under civil law do not allow such discoveries and is considered as an insult to the privacy and confidentiality of the parties’ business information. Foreign firms in US always persist on this clause in their contracts specifically to evade the possibility of discovery and other litigation risks in US.
At present, the restricted amount of discovery is characteristically available, though under the strict control and judgment of the tribunal. Under the tenet of the international arbitral institutions for instance the International Chamber of Commerce, the arbitral tribunal is given the power and discretion to decide on the possibility and the degree to which discovery is allowed. Even though discovery is permitted to certain level, the extent of such discovery is usually more limited than is allowed in the US.
In US, arbitration document sets are usually tabled in a panel sometime before a hearing of a case is done. These documents thus become legitimate and are used in the hearing to attract the attention of the arbitrator to main provisions without an opening introduction by a witness. In contrast, a common law attorney presents the similar documents to the ICC tribunal but has to substantiate the documents by using a witness. This becomes costly in terms of the cost since live witness has to authenticate each and every document in use.
Another difference between the American Arbitration Association (AAA) and the International Chamber of Commerce (ICC) lies on the degree of application. US states have different laws on arbitration and the AAA only provides an overall directive. When the disputes involving commercial or non- commercial entities from different states arise, then New York convention applies. On the other hand, ICC applies to any commercial or non-commercial entity across the divide or on a global scale.
In the ICC, high level of confidentiality is maintained in contrast with the AAA. Unlike the International Chamber of Arbitration, most of the decisions under the AAA are often available to the public or often a common subject in the public domain. In the international arbitration court, the process is always viewed as private and the parties are the one entitled to agree on the procedure or rules to be applied in settling their disputes. Under the ICC dispute is solved confidentially and the arbitration award is only issued to the involved parties.
Bias of the American arbitration Association
Recent years has been characterized by rigorous debates relating to the American Arbitration systems which many legal experts perceive to be broken. These legal experts believe that the arbitration system no longer provides adequate benefits compared to the litigation. They mainly mention the arbitrator’s failure to control the process so that protracted proceedings, findings and the time to make a reasoned decision to craft a process that has all the defects and none of the benefits of litigation. Lawyers blame their clients for demanding lengthy process and arm-twisting their opponents plus arbitrators fail to make tough decisions to control the whole process. Research shows that the cost of the whole arbitration process and the length of time spent in US are almost closer to litigation.
Many legal practitioners outside the US view the American style of discovery with shock since parties are able to offer each other extensive requests for production of relevant information or documents required in arbitration. Parties can also acquire oral evidence of the witnesses prior to the hearing. American Judicial system does not allow such discoveries and is considered as an insult to the privacy and confidentiality of the parties’ business information. Foreign firms in US always persist on this clause in their contracts specifically to evade the possibility of discovery and other litigation risks in US.
At present, the restricted amount of discovery is characteristically available, though under the strict control and judgment of the tribunal. Under the tenet of the international arbitral institutions for instance the International Chamber of Commerce, the arbitral tribunal is given the power and discretion to decide on the possibility and the degree to which discovery is allowed. Even though discovery is permitted to certain level, the extent of such discovery is usually more limited than is allowed by the AAA.
In US, arbitration document sets are usually tabled in a panel sometime before a hearing of a case is done. These documents thus become legitimate and are used in the hearing to attract the attention of the arbitrator to main provisions without an opening introduction by a witness. In contrast, under US Judicial system the attorney presents the similar documents to the tribunal but must substantiate the documents by using a witness.
One of the conflicts surrounding the American Arbitration Association’s laws and the American Judicial system involves the availability of the court ordered temporary measures in support of arbitrations overseen by the New York convention. This has caused conflict among the legal institutions with some courts snubbing to order temporal relief in cases under the convention. Another common practice in US is the appointment of the arbitrators by the parties thus acting as a party lawyer than an impartial adjudicator. However, in 2004 a revised code on arbitration known as the ethics for arbitrators in commercial disputes was established. This was aimed at enforcing neutrality within all the arbitrators including the party appointed ones. This code of ethic is only binding to the parties and arbitrators who have agreed to it.
In the ICC, high level of confidentiality is maintained in contrast with the AAA. Unlike the International Chamber of Arbitration, most of the decisions under the AAA are often available to the public or often a common subject in the public domain. In the international arbitration court, the process is always viewed as private, and the parties are the one entitled to agree on the procedure or rules to be applied in settling their disputes. Under the ICC dispute is solved confidentially and the arbitration award is only issued to the involved parties. The confidentially clause both in AAA and the ICC denies the public vital information incase of commercial arbitration that affects the consumers unlike the court proceedings which usually open to the public and even the public.
In American arbitration, the arbitrators mostly are privately employed instead of being employed by the state and the panelists only derive a small fraction of their income as adjudicators. This means that even the most active arbitrator in the panel only obtains a small fraction of money from their income. This has limited even the most experienced people like retired judges from taking part in the arbitration process thus the process is left to the inexperienced or unqualified people who are bound to make mistake. This complete contrast of the normal court system where judges and other employees part with good allowances and salaries and this may compromise the impartiality of the verdict.
The pre-dispute clause in the US Arbitration requires that consumers sign away their right to jury trial before the dispute arises. These types of agreements are mostly designed to the advantage of the huge corporations by prohibiting lawsuits and denying consumers their right of going to court. Even though these types of agreement are jointly agreed upon, consumers are always very ignorant and unaware of their repercussions. This is a complete opposite of the US judicial system where everybody is entitled to an attorney in order to make sound judgment or decision.
Other critics argue that the cost of arbitration is on the rise and almost equals court resolutions plus the arbitration maintains confidentiality thus nobody can come to the consumer’s rescue. Many corporations in the US add to their arbitration clauses unjust provisions that intentionally incline the systems towards consumers. These provisions include those that strip the consumers of their considerable lawful rights, prohibit class actions and coerce people to arbitrate their claims thousands of miles away from their residence.
Arbitration Fairness Act which forms part of the AAA is believed to be making the situation even worse in the US legal system. The act enforces arbitration provisions in the employment, consumers and contract disputes as well as the collision of the law intended to protect individuals from civil rights or to control contracts or transactions between parties of lope-sided bargaining power. These clauses have overturned a number of Supreme Court rules in arbitration. Rather than being concerned only with the arbitration settlements, the act also includes disputes/claims that arises on and after the date on which it was enacted. As a result, the act nullifies arbitration clauses that are several years old and establishes hard to enforce system of arbitration designed when the latter was fully legal.
A survey carried in US established that most of the arbitration clauses (that about 30%) prohibited class action revealing the type of rotten self-dealing that dominate AAA. Enactment of the Arbitration fairness act killed arbitration between individuals and companies in US. While leaving the consumers in a devastating state, this act has benefited companies and more so the trial attorneys. These attorneys have found it easier to take law suites in the court and therefore extracting swift, easy, and rewarding settlements with high fees for the attorneys and small package for the individuals.
Organization and other stakeholders in the legal field have lobbied very hard for reforms in the US arbitration reform. Arbitration is considered to be the cheapest and fastest dispute resolution mechanism with simple procedural and evidentiary statutes. Arbitration also reduces hostility and encourages corporation among individuals and states. However, US arbitration system is experiencing unfair and unjust practices partly because of the law and others by deliberate disregard of the law by some legal practitioners. Arbitration Fairness Act seems to lean on the corporate side than on the consumer’s side. This law restricts class action and has also rendered some of the earlier legislations on arbitration futile. Federal Arbitration Act of 1925 provides that arbitration may be reached at before or after the dispute, thus limits the right to appeal a decision made by the arbitrator. In light with this Act and its associated policies, US Supreme Court has established that their domestic laws are not consistent with or place restrictions on arbitration. Therefore, arbitration laws are being federalized, giving them powers even in the state court.
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