John V. H. Pierce, Santiago Bejarano and Grace Jang | Latham & Watkins
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Introduction
As a general matter, US courts continue to provide robust support to international arbitration. This chapter provides an overview of recent US legal developments in the field of arbitration, with a focus on international arbitration. First, we provide general background on the US legal system and the structure of arbitration law in the United States. We then cover the most relevant developments over the past year, including notable Supreme Court decisions that have addressed matters relating to arbitration, as well as decisions of federal courts on key issues such as the availability of discovery in aid of arbitration, the enforcement and recognition of arbitral awards, and vacatur or setting aside of arbitral awards. The chapter also addresses recent relevant statutory developments that could impact international arbitration in the United States.The structure of the US court system
The US court system includes a federal system and 50 state systems (plus the District of Columbia and territorial courts) with overlapping jurisdictions. The federal system is composed of district courts (courts of first instance), intermediate courts of appeal organised by ‘circuits’ covering different geographical areas, and the US Supreme Court, which is the court of last resort. Each state has its own court system, governed by its state constitution and its own set of procedural rules. While state systems vary, most mirror the federal system’s three-tiered hierarchy of trial courts, appellate courts and courts of last resort. There are no specialist tribunals in the federal or state systems that deal solely with arbitration cases, although certain states have made provision for special handling of international arbitration matters in certain of their state courts. Because of the structure of US law, most cases involving international arbitration are heard and decided by the federal, rather than state, courts.The structure of arbitration law in the United States
The Federal Arbitration Act (FAA) governs most types of arbitration in the United States, regardless of the subject matter of the dispute. It is by no means a modern statute, nor is it comprehensive. It is not modelled on more modern proposals such as the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the UNCITRAL Model Law), that have been adopted in many jurisdictions. The FAA’s limited scope provides a framework that generally applies to arbitrations at the beginning and end of their life cycles.
Under the FAA, all arbitration agreements ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract’. Upon the application of any party, judicial proceedings are stayed as to any issues determined to be subject to arbitration. As long as an arbitration agreement is deemed enforceable and a dispute arbitrable, the FAA leaves it to the parties and the arbitrators to determine how arbitrations should be conducted. While the FAA allows for some judicial review of arbitral awards, the grounds upon which an order to vacate the award may be issued are limited and (with limited exceptions) exclusive. In general, these grounds are designed to prevent fraud, excess of jurisdiction or procedural unfairness, rather than to second-guess the merits of the arbitral tribunal’s decision.
The FAA’s largely hands-off approach reflects US federal policy favouring arbitration as an alternative to sometimes congested, ponderous and inefficient courts. In the international context, this pro-arbitration policy is evidenced by the implementation of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the Inter-American Convention on International Commercial Arbitration (the Panama Convention) in Chapters 2 and 3, respectively, of the FAA.
Notwithstanding the continued use of ‘pro-arbitration’ to describe the approach of US federal courts towards arbitration, it is important to highlight that the Supreme Court has suggested, in recent decisions, that this federal policy should not be understood too broadly; in essence, it is intended to ensure that arbitration agreements are enforced on an equal footing with other contracts, and that the interpretation of arbitration agreements adheres to the same canons of contractual interpretation applicable to any commercial agreement.
State law, by comparison, plays a reduced role in the regulation of arbitration in the United States, particularly as it relates to international disputes. The FAA pre-empts state law to the extent that it is inconsistent with the FAA and applies in state courts to all transactions that ‘affect interstate commerce’; a term that the Supreme Court has interpreted to include all international transactions and many domestic ones. Thus, for international commercial disputes, state arbitration law is relevant only as a gap-filler where the FAA is silent. Notwithstanding the limited relevance of state law to international arbitration, it is notable that eight states (Florida, California, Texas, Connecticut, Illinois, Georgia, Louisiana and Oregon) have enacted international arbitration statutes modelled on the UNCITRAL Model Law. Distinctions between international and domestic arbitration law in the United States
As a general matter, there are no significant distinctions at the federal level between international and domestic arbitration law. The FAA, which incorporates the New York and Panama conventions, gives federal courts an independent basis of jurisdiction over any action or proceeding that falls under these treaties, opening the federal courts to international parties that otherwise would have to demonstrate an independent basis for federal jurisdiction. As previously mentioned, some states have international arbitration statutes that purport to govern only international arbitrations taking place in those states but these statutes are pre-empted by the FAA to the extent that they are inconsistent with it and are thus of limited relevance to international arbitration.
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