Optional Appellate Arbitration Rules

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The American Arbitration Association recently released Optional Appellate Arbitration Rules, which aim to provide parties with an opportunity to have appeals of an arbitral award heard within the arbitration process itself. Typically, applications to vacate arbitral awards are heard in courts, and the grounds for vacatur are quite limited pursuant to federal and state arbitration statutes.

If parties to elect to use the new Option Appellate Arbitration Rules, the standard of review is designed to be more expansive than that permitted by the Federal Arbitration Act and state arbitration statutes. Specifically, pursuant to Section A-10 of the new Rules a party may appeal on the grounds that the underlying award “is based upon: (1) an error of law that is material and prejudicial; or (2) determinations of fact that are clearly erroneous.” By contrast, the Federal Arbitration Act sets out the following grounds for vacatur of an arbitral award: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing or in refusing to hear pertinent and material evidence; and (4) where the arbitrators exceeded their powers or executed them so imperfectly that a final award was not made.

Appeals made under the new Rules will most often be heard on the papers, with no opportunity for oral argument. See Section A-15 (“Unless otherwise directed by the appeal tribunal, all appeals will be determined upon the written documents submitted by the parties.”) The briefing schedule set forth in the new Rules — which can be modified by the appeal tribunal — calls for appellate briefs to be served 21 days after the appeal is filed, and response briefs to be served 21 days thereafter. According to the AAA, the appellate arbitration process is estimated to take approximately three months under the new rules. Applications for vacatur under the Federal Arbitration Act are heard as motions (9 U.S.C. § 6), so the length of the vacatur process is heavily dependent on docket congestion in the federal district where the movant files.

As arbitration grows in popularity, the limited statutory grounds for appeal of an arbitral award have been the source of much commentary and some frustration. It remains to be seen whether the AAA’s Optional Appellate Arbitration Rules provide parties to arbitrations with a viable option to expand those grounds.


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