Originally from American Review of International Arbitration - ARIA

Preview Page

I.   HALL STREET ASSOCIATES

So the illicit character of contractual provisions purporting to “expand judicial review” of arbitral awards is firmly established.  As every reader of this journal certainly knows by now, the Supreme Court, in a highly anticipated decision, has held that the FAA’s “statutory grounds for prompt vacatur and modification” may not be “supplemented by contract.”
[...]

II.    “EXPANDED JUDICIAL REVIEW”

“One keeps saying the same thing, but the fact that one has to say it is eery.”

Given the extent to which this problem has claimed the attention of the arbitration community—engrossing practitioners and academics alike—it must now seem that there can be nothing more remaining to be said.  However inadequate the briefing and argument before the Court—however much they were limited to a series of sound bites and question-begging bromides, invoking respectively “finality” or “freedom of contract”—there seems no particular point in going over once more the merits of the case.    Perhaps though, I may be forgiven simply for raising—for absolutely the last time—two points that I had foolishly, fondly, thought that someone, some time, one day, might possibly have wished to address: 

(1)         Even to phrase the issue in Hall Street in terms of “extended judicial review” is already tendentious:  For it is not even necessary to characterize in that way an agreement to subject arbitral “conclusions of law” to a court’s second look.  For example:

•            The question could as easily be framed as a commonplace matter of the scope of arbitral power—that is, as a matter of defining the issues entrusted by the parties to the arbitrators for a final decision.  Just as contracting parties may agree to arbitrate claims of breach of contract—but not claims of misappropriation of trade secrets; just as they may choose to arbitrate claims of past breaches—but not claims for future adjustments of the contract—so, too, they may vary the many features of the common law of arbitrability that presume certain allocations of arbitral power. They may, for example, choose to arbitrate the “merits” of a claim but not a claim of fraudulent inducement of the contract itself—thereby reversing the default rule of Prima Paint —or they may choose to arbitrate even the question

•            of the arbitrators’ own jurisdiction—thereby reversing the default rule of First Options.

Given this familiar background, can we understand that the parties—relying here on hoary considerations of comparative advantage —might choose to submit to their arbitrators only “any unresolved questions of fact as distinguished from questions of law”?  To do so is merely to carve out a particular class of disputes as “arbitrable”—entrusting factual determinations to arbitrators chosen specifically for that purpose—while withholding from their arbitrators the power to make ultimate determinations of other, “legal” issues.