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April 24, 2024

On Professional Practice: Obligation to Advance the Practice

Sharon Press

Standard IX of the Model Standards of Conduct for Mediators is titled Advancement of Mediation Practice. The standard suggests that a mediator “promotes this Standard” by “participating in outreach and education efforts to assist the public in developing an improved understanding of, and appreciation for, mediation.” While the Code of Ethics for Arbitrators in Commercial Disputes lacks a similar provision, the concept is familiar to lawyers. The Preamble to the Model Rules of Professional Conduct includes a whole section on a lawyer’s obligation to seek improvements in the law and access to the legal system.

It is in this spirit that I devote this column to two major initiatives which may impact our field – one on international commercial mediation and the other on arbitration of disputes about consumer financial products and services.

Singapore Convention on Mediated Settlement Agreements

The United Nations Convention on International Settlement Agreements Resulting from Mediation, more commonly known as the Singapore Convention, was adopted by the UN General Assembly in December 2018. Similar to what the New York Convention has meant to arbitration awards, the Singapore Convention is intended to make enforcement of mediated international commercial settlements easier. Nations that are parties to the treaty would be obligated to enforce an international, commercial, mediated settlement agreement (subject to specific defenses, such as contract defenses) without the necessity of litigation, arbitration, or meeting idiosyncratic domestic requirements. To be enforced, the settlement must be in writing, signed by the parties, and accompanied by evidence of mediation.

Since this adoption took place nearly six years ago, why is it the subject of a column now?

Although the United States is one of the 57 signatories to the Convention, it has not yet ratified the treaty. As of February 2024, only thirteen countries have ratified the Convention. The U.S. State Department is currently considering its approach to ratification, which involves presenting an explanatory package to the White House and then to the Senate Foreign Relations Committee. In addition, other bodies, such as the Uniform Law Commission, are studying the effect of the Convention. If ratified, it would become federal law and preempt conflicting state law.

Notably, the ABA, including the Section of Dispute Resolution, is actively supporting the ratification. In fact, in February of 2020, a resolution was passed by the House of Delegates urging “all nations, including the Unites States, to become party to and implement” the Singapore Convention. The stated reasons for supporting ratification include:

  • expanding the use of mediation in international commercial disputes; and
  • increasing parties’ confidence that their settlement agreements can be easily enforced thereby facilitating international trade.

Readers can access information on the Singapore Convention here.

Petition for Rulemaking: To require Meaningful Consumer Consent Regarding the Use of Arbitration to Resolve Disputes Involving Consumer Financial Products and Services

Concern surrounding mandatory arbitration in consumer contracts has been swirling for years and there are many thoughtful articles discussing the pros and cons, including in this magazine. In September of 2023, a petition was filed with the Consumer Financial Protection Bureau (CFPB or Bureau) to request that the Bureau conduct “a rulemaking … regarding the use of terms and conditions requiring arbitration of any future dispute in connection with the offering or providing of consumer financial products or services.”

The primary rationale for the request is that consumers are not aware of and therefore not meaningfully consenting to pre-dispute arbitration or, as the petitioners refer to them, “forced arbitration provisions.” These are provisions in contracts over which consumers are not bargaining. Consumers are oftentimes not aware that they have signed away their rights to a jury trial or class action. The petition cites several examples of Congressional limitations on pre-dispute arbitration clauses, including contracts for residential mortgages and related lines of credit and those involving high-cost loans for military members and their dependents. Other areas include auto dealers with auto manufacturers, livestock and poultry growers and agribusiness, and cases involving sexual harassment or sexual assault.

In 2017, the Bureau promulgated a rule that required the reporting of arbitration records and certain court records, and rendered class action waivers in arbitration clauses unenforceable. Congress rejected the rule under the Congressional Review Act of 1996, and it was not signed into law. Thus, the rule did not go into effect. The petitioners contend that the 2017 disapproval does not prohibit the Bureau from revisiting the issue in that the petitioners are requesting a different approach in the current rule making. Instead of focusing on class actions, the current request is to ensure that consumers can make informed, meaningful choices about dispute resolution after a dispute arises.

Not surprisingly, those in opposition to the Petition cite the 2017 Congressional Review Act resolution of disapproval as rendering the Bureau devoid of legal authority to promulgate a rule in this situation. They also claim that making a rule in this circumstance would require the Bureau to exceed its authority under Section 1028 of the Dodd-Frank Act and would also violate the Federal Arbitration Act as “discriminatory and impermissibly hostile” towards arbitration. The opponents dispute the premise that arbitration harms consumers. Finally, the opponents raise a timing issue. Specifically, the U.S. Court of Appeals for the Fifth Circuit has held that the Bureau’s funding structure is unconstitutional, and that question is now before the Supreme Court.

Readers can read the petition here, and the responses here.

As members of a field that continues to evolve, it is incumbent on all of us to closely monitor legislation, rules, and regulations that will impact the use of dispute resolution processes. We should lend our voices in support of those efforts which are consistent with the core values of these processes and be prepared to stand in opposition to those that are detrimental to our field when necessary.

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