ULC

Arbitration Act (2000) Summary

The National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated the original Uniform Arbitration Act in 1955.  It is the law in 49 jurisdictions, and the Federal Arbitration Act contains many similar provisions.  In short, the Uniform Act is the fundamental substance of the law governing agreements to arbitrate in the law of the United States, currently.

The 1955 Uniform Arbitration Act does two fundamental things.  First, it reverses the common law rule that denied enforcement of a contract provision requiring arbitration of disputes before there is an actual dispute.  After a real dispute arises, the parties have always been able to agree to arbitrate.  It is agreeing to arbitrate in anticipation of any possible disputes that the common law prohibited.  Second, the 1955 Uniform Arbitration Act provides some basic procedures for the conduct of an arbitration.  The Uniform Act does not mandate arbitration of any dispute.  Its function is to let persons determine whether or not they want to use arbitration by agreement.

Arbitration is the original “alternative dispute resolution” or “ADR” mechanism made legitimate under American law.  It is alternative to a judicial proceeding to resolve a dispute.  Arbitration has traditionally been a means of resolving disputes when issues are specialized and technical.  These kinds of disputes require specialist resolution and there is no desire for damage awards like those awarded by a court of law.  A typical example is an arbitration that allocates costs of defects in a building project between architects, contractors and property owners.  Arbitrators are chosen by the parties with construction expertise to determine responsibility for defects.  The arbitration is conducted quickly.  It is free of the constraints of court-room procedure, and may be tailored to adducing evidence for the specific kind of dispute.  The parties all have a strong desire to avoid litigation and are normally satisfied with the results of arbitration.  Construction disputes have been regularly resolved by arbitration for a long period of time.

However, provisions calling for arbitration occur in all kinds of contracts as the burgeoning caseload has slowed the civil justice process in the courts and as the costs of lawsuits have risen dramatically.  As the arbitration process has been more utilized for resolving disputes that have traditionally been resolved by litigation, it has become clear that the limited procedural provisions of the Uniform Arbitration Act are no longer adequate.  For that reason, NCCUSL has now promulgated a next generation state arbitration act, the 2000 Revised Uniform Arbitration Act (RUAA).

The 2000 RUAA continues to authorize agreements to arbitrate disputes before they arise.  However, the procedural side of arbitration is greatly augmented to meet modern needs.  It deals with procedural issues not addressed in the 1955 Act.  The effect should be more efficient and fair arbitrations as an alternative to litigation than is the case under the 1955 Act.  The 1955 Act was a great advance in American law.  The objective of the 2000 RUAA is to make the contribution of the 1955 Act even greater.

The 2000 RUAA has been drafted, also, against the significant and preemptive presence of the Federal Arbitration Act.  The federal act applies to arbitration provisions in private contracts.   The Federal Arbitration Act encourages arbitration as an alternative to litigation.  Therefore, any state law that limits the availability of arbitration risks failure as a matter of federal preemption.  Although there is not complete agreement about the relationship between federal and state law on certain specific issues, the 2000 RUAA is drafted to avoid preemption.

It is impossible to cover all the provisions in this important revision of a seminal uniform act.  Suffice it to say that the revisions are an effort to provide more certainty in arbitration proceedings, to deal with preemption problems and to answer issues raised in the case law since 1955.  There are many new provisions.

The 2000 Revised Uniform Arbitration Act expressly provides that it is a default act.  Most of its provisions may be varied or waived by contract.  There are certain provisions that may not be waived or varied.  These include the basic rule that an agreement to submit a dispute to arbitration is valid; the rules that govern disclosure of facts by a neutral arbitrator; the rules guaranteeing enforcement or appeal of the act, an arbitration agreement or an arbitration decision in a court; or, the standards for vacating an award.  Declaring the default nature of the act is important because parties to an agreement may choose between federal or state law to govern their arbitration, notwithstanding the preemptive effect of federal law.  Also, restrictions on waiving or varying certain statutory requirements are important to protect parties to these agreements.

The 2000 RUAA specifically allows a court to order provisional remedies during the course of an arbitration before an arbitrator is selected.  The 1955 Uniform Act has no such provision.  This prevents parties from delaying the selection of an arbitrator in order to delay proceedings and dissipate the effect of an arbitration award.  An arbitrator, when selected, also has an express power to order provisional remedies, a power not expressly given in the 1955 Uniform Act.  An arbitrator has the same powers as a court has in a judicial proceeding.

The 2000 RUAA allows consolidation of separate arbitration proceedings, a matter that was never contemplated in the 1955 Uniform Act.  The existence of multiple parties, multiple agreements and complex litigation has made the issue of consolidation of arbitration actions very important.  Courts have varied over consolidation.  The 2000 RUAA expressly allows and governs consolidation.

The 1955 Uniform Act allows an award to be vacated because of an arbitrator’s partiality - lack of neutrality.  It does not specifically require disclosure of any interest that may give rise to a question of neutrality.  The 2000 RUAA specifically addresses disclosure of known facts that give rise to questions of neutrality.  Such facts include a financial or personal interest in the outcome of the arbitration proceeding or an existing or past relationship with a party.  The lack of disclosure, itself, may be a ground for vacating an award, and there is a presumption of partiality when non-disclosure occurs.  Upon disclosure, a party has the opportunity to object to the appointment of an arbitrator intended to be neutral.  If there is no objection, that may affect the ability to raise partiality as a ground for vacating an award.  These provisions provide substantial express protection to parties to an arbitration proceeding that simply are not a part of the 1955 Uniform Act.

A crucial issue in arbitrations is the express immunity of arbitrators from civil liability.  It is not an issue addressed in the 1955 Uniform Act, but is important to impartial and fair proceedings.  An arbitrator who expects or fears a lawsuit simply because of a decision, cannot be counted upon to act fairly or competently.  The 2000 RUAA provides arbitrators with immunity from civil liability “to the same extent as a judge of a court of this State acting in a judicial capacity.” 

An arbitrator under the 2000 RUAA may conduct the arbitration in such manner as the arbitrator considers appropriate to the fair and expeditious disposition of the proceeding.  This express authority does not appear in the 1955 Uniform Act.  The 1955 Uniform Act provides for subpoena of witnesses, and for depositions.  Under the 2000 RUAA, an arbitrator also has the express power to make summary dispositions of claims or issues under appropriate procedures, to hold pre-arbitration proceeding meetings or to use any other discovery process (any process that adduces relevant evidence for the proceeding) applicable to resolution of the dispute.  These provisions put arbitrators on the same level as judges in a judicial proceeding with respect to discovery of evidence.

The 2000 RUAA expressly permits an arbitrator to give punitive damages or other exemplary relief, “if such an award is authorized by law in a civil action involving the same claim.”   Attorney’s fees may be awarded under the same standard.  The 1955 Uniform Act does not expressly address either issue, but the case law has established the power to award punitive damages in most jurisdictions.  The Federal Arbitration Act decisions, also, provide for punitive damages and some states have amended the 1955 Uniform Act to include attorney’s fees.   These new provisions put arbitrators on the same footing as judges in a court of law, and reflect the expansion of arbitration into disputes traditionally resolved in courts of law.

These are some highlights of the revision to the Uniform Arbitration Act in 2000.  The number of disputes in arbitration grows yearly.  The 2000 Revised Uniform Arbitration Act responds to this growth with better and more complete arbitration procedures.  It aligns state law with federal law, which decreases the potential for litigation on preemption grounds.  This important advance in the law of arbitration should be enacted in all states as soon as feasible.