June 01, 2011

ABA Suggests Changes to Arbitration Bill

The ABA urged key congressional leaders to make additional changes to this year’s version of the proposed Arbitration Fairness Act, maintaining that even though the bills include some of the association’s earlier suggestions, the legislation still would have certain profound and unintended negative consequences.

In a May 12 letter to Rep. Hank Johnson (D-Ga.) and Sens. Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.), ABA Governmental Affairs Director Thomas M. Susman explained that the ABA has not taken a position on the overall legislation, which has been introduced as H.R. 1873 and S. 987. The association believes, however, that language in the bills could inadvertently void many existing international commercial arbitration agreements, add significant costs and delays to the commercial arbitration process, and discourage international commercial parties from engaging in commerce with U.S. companies.

The association also maintains that some provisions would put the United States at risk of breaching the spirit – if not the letter – of longstanding treaty obligations.

H.R. 1873 and S. 987, which would establish a new Chapter 4 within Title 9 of the U.S. Code governing arbitration, would declare that no pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer or civil rights dispute.

Susman wrote that the legislation’s definition of “civil rights dispute” – and related language dealing with “collective bargaining agreements” – is overly broad and ambiguous and could lead to extensive litigation and significant costs and delays in the commercial arbitration process. The ABA therefore urged the bills’ sponsors to adopt several technical amendments to clarify these key terms.

In addition, the association is suggesting several other technical changes that would protect international commercial arbitration by clarifying that the legislation will not affect key provisions in Chapter 2 (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards) and Chapter 3 (the Inter-American Convention on International Commercial Arbitration) of Title 9.

The bills, introduced May 12, were referred to the House and Senate Judiciary Committees, and no further action is scheduled.

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