Download Arbitration and Mediation FAQs: What do the Terms Arbitrable

This page was exported from Loree Reinsurance and Arbitration Law Forum [ http://loreelawfirm.com/blog ]
Export date: Thu Jun 8 11:10:41 2017 / +0000 GMT
Arbitration and Mediation FAQs: What do the Terms
Arbitrable, Arbitrability, and Question of Arbitrability
Mean, and Why do they Matter?
Arbitrable, Arbitrability and Question of
Arbitrability
If you've ever been unfortunate enough to be privy to a conversation about arbitration law, you probably heard
things like:
“The dispute arguably falls within the scope of the agreement and is therefore arbitrable.”
“Oxford expressly pointed out that none of the parties argued that consent to class arbitration
is a question of arbitrability.”
“Did the parties clearly and unmistakably agree to arbitrate arbitrability? Because if they did,
questions of arbitrability are arbitrable.”
Arbitration-law parlance is probably more arcane and cryptic than it has to be, but it has been with us for
several decades and there's no indication that it is likely to change any time soon. Learning it may be painful,
but is usually well worth the modest effort required.
Today we'll define in plain English some of the most bandied-about arbitration-law terms: “arbitrable,”
“arbitrability” and “question of arbitrability.” And in the process we'll try to explain why these closely-related
terms are significant in matters governed by the Federal Arbitration Act (the “FAA”).
What does “Arbitrable” Mean?
“Arbitrable” is an adjective that means, in its most general sense, capable of resolution by arbitration, and, in a
more specific sense, subject to arbitration because of party consent.
Under the first definition of the term, a breach of contract dispute is arbitrable in the sense that private parties
having the authority and capacity to enter into contracts generally can agree to submit to arbitration disputes
arising out of or relating to their contracts, including ones for breach of contract. A breach-of-contract dispute
is capable of resolution by arbitration—and thus arbitrable in this general sense—because the parties are
empowered to enter into a legally-enforceable agreement to arbitrate such a dispute.
There are, however, certain disputes that cannot be the subject of a judicially enforceable agreement to
arbitrate. Suppose Congress enacted a statute that: (a) created a private right of action; and (b) expressly
declared void and unenforceable any agreement to waive either party's right to bring or defend such an action
in a federal judicial forum. Claims arising out of the statute would not be considered “arbitrable” because
federal law forecloses judicial enforcement of agreements to arbitrate such claims (and awards purporting to
resolve them), even if the parties freely consented to arbitrate those claims.
But as a practical matter, the vast majority of disputes that might arise between two parties are usually
arbitrable in that general sense, so the term “arbitrable” is far more frequently used in its specific and more
narrow sense, under which a dispute is "arbitrable" only if the parties have entered into a valid and enforceable
agreement to arbitrate it.
Arbitrability and Questions of Arbitrability
“Arbitrability,” a noun, means the state or characteristic of being subject to arbitration or not, and if so, to what
extent. A “question of arbitrability' is thus simply a question concerning whether, and if so, to what extent, a
dispute is arbitrable. Questions of arbitrability thus usually turn on whether: (a) the dispute is capable of
resolution by arbitration; (b) the parties have entered into an arbitration agreement (a contract formation
question); (c) the arbitration agreement is valid and enforceable; and (d) the dispute falls within the scope of
the arbitration agreement.
Why does it Matter Whether Something is a
Question of Arbitrability as Opposed to a
Question about Something Else?
There are two closely interrelated reasons why the FAA treats questions of arbitrability differently than it treats
other questions. First, whether or not an issue is a question of arbitrability usually determines who, as between
court and arbitrator, gets to decide the question. Courts generally presume that parties do not intend to agree to
submit questions of arbitrability to arbitrators unless they clearly and unmistakably express that intent in their
arbitration agreement or in a document that they incorporate by reference into their agreement (e.g., rules of an
arbitration provider that clearly and unmistakably delegate questions of arbitrability to arbitrators). Absent
such a clear and unmistakable expression of party intent, questions of arbitrability are answered by courts, not
arbitrators.
Second, because the classification of a dispute or issue as a question of arbitrability generally determines who
is supposed to decide the question, it affects the standard of review courts apply to reviewing an arbitration
award that purports to resolve issues that the challenging party contends are questions of
arbitrability. Ordinarily, when arbitrators decide issues concerning the merits of the dispute or procedural
questions arising out of the parties' dispute on the merits, a court reviewing an arbitration award will apply a
very deferential standard of review and vacate the award only if the arbitrator exceeds her powers, has
committed prejudicial procedural misconduct, is guilty of evident partiality or corruption or if the award was
procured by fraud or corruption. See 9 U.S.C. §§ 10(a)(1)-(4).
Assuming a party challenges an award on the ground that the arbitrator's decision on the merits exceeded her
authority, the court does not review the decision for factual or legal errors, even egregious ones. It reviews the
arbitrator's decision deferentially for the limited purposes of determining only whether the award was the
product of at least an arguable interpretation of the agreement out of which the arbitrable dispute arose. That
means the arbitrator's award on the merits will be vacated only if the arbitrator did not perform the task that the
parties asked her to perform: to interpret and apply the parties' agreement.
But if the arbitrator decides an issue that a court determines was a question of arbitrability, then the court will
determine the arbitrability question independently, that is without regard or any deference to the arbitrator's
decision.
If you are interested in learning more about “arbitrability” and “questions of arbitrability,” Associate Justice
Stephen G. Breyer has authored three excellent opinions concerning those subjects. The first two are landmark
decisions, the third was decided earlier this month, and all three are recommended reading:
1. First Options of Chicago, Inc. v. Kaplan, 543 U.S. 938 (1995);
2. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002); and
3. BG Group plc v. Republic of Argentina, No. 12-138, slip op. (March 5, 2014).
Associate Justice Clarence Thomas' opinion in Granite Rock Co. v. International Brotherhood of Teamsters,
561 U.S. 287 (2010) is another excellent source of information.
Post date: 2014-03-26 22:35:47
Post date GMT: 2014-03-27 02:35:47
Post modified date: 2016-12-14 12:40:19
Post modified date GMT: 2016-12-14 16:40:19
Powered by [ Universal Post Manager ] plugin. MS Word saving format developed by gVectors Team www.gVectors.com