Originially from: World Arbitration and Mediation Review (WAMR) 2002 Vol. 13, No. 4

The Impact of the Uniform Arbitration
Act of 2000 on Securities Arbitration
By Daniel Q Posin, Corporate and Securities Arbitration Editor
The National Conference of Commissioners on Uniform State Laws
(NCCUSL) recently sanctioned the Uniform Arbitration Act of 2000 (UAA). The
UAA will now undergo a review process by state legislatures, and it will probably
be enacted by most states within the next several years. The UAA replaces the
1955 Uniform Arbitration Act which was enacted by forty-nine states. The UAA
has potential impact on securities arbitration in several areas, as discussed below.
As such, it is an example of the interesting tension between the mandatory
arbitration system of the securities industry1 and the Federal Arbitration Act
(FAA)2 and the continued role of the federal and state courts in arbitration-related
litigation.3
Arbitrator Disclosure
Prior to the UAA, the issue of vacatur in the event of arbitrator bias was in
something of a confused state. If an arbitrator did not make a proper disclosure of
information, the failure may have indicated bias, although in practice it was often
difficult to vacate the arbitrator’s decision. The difficulty arose because the
ground for a court to vacate an award for arbitrator bias was evidence of
partiality. This was a result courts were not generally likely to reach.4 Also, an
arbitrator may have simply failed to perform a conflicts check and may have
proceeded on a case when there was in fact a conflict. In such an instance, a
motion to vacate has been denied because the arbitrator was unaware of the
conflict.5
Section 12 of the UAA addresses arbitrator disclosure issues. Under the
UAA, the arbitrator is required to make a reasonable effort to ascertain possible
conflicts. Thus, failure to make such reasonable effort could by itself be grounds
for vacatur. This is not new,6 but §12 makes such results more likely.
In particular, the matters that must be disclosed under the UAA are
“known facts that a reasonable person would consider likely to affect the
impartiality of the arbitrator in the arbitration proceeding.” Section 12 goes on to
specify two particular matters that must be disclosed: 1) a personal or financial
outcome in the proceeding; or 2) an existing or past relationship with any of the
parties, counsel, witnesses, and other arbitrators. Failure to disclose either of
these creates a presumption that the arbitrator acted with evident partiality and is
thus grounds for vacatur. This presumption of evident partiality in the face of
failure to disclose these two items does not exist in federal court. Hence, a party
seeking vacatur would be well-advised to file in state court, under the UAA once
it is adopted by the relevant state.