Arbitration is a creature of contract, and an arbitrator’s powers are in effect defined by the parties’ arbitration agreement. Paradoxically, although an arbitration agreement can be written (double-spaced) on one side of a cocktail napkin, in some cases it may grant greater authority to an arbitrator than a judge has.
Narges Kakalia is a Member in the firm’s New York office. Narges’s practice focuses on resolving on complex business disputes, including issues concerning securities, contracts, corporate governance, executive protection, insurance coverage and risk management. She has represented clients at the administrative, trial, and appellate levels, as well as in domestic and international arbitration. Narges also advises clients on insurance and risk management issues, employment matters and non-compete provisions, legal ethics, attorney-client privilege, and the risks, security and management of big data.
Arbitration is a creature of contract. So is the law concerning contracts with an arbitration clause the same as the law concerning any other contract? Almost. One must always bear in mind the “separability” or “independence” of the arbitration agreement — the autonomy principle.
Forum non conveniens is one of several judicial abstention doctrines, applied from time to time by U.S. courts, that permit a court to dismiss (without prejudice) a plenary action in its discretion. In a forum non conveniens case, the court’s jurisdiction is not in question, but the relative legal “inconvenience” of having the matter heard in that court, as opposed to another court of competent jurisdiction, is deemed sufficient for the U.S. court to abstain from exercising its authority. A defendant seeking abstention on forum non conveniens grounds typically is required to establish that an adequate alternative forum is available, and that a balancing of interests strongly favors dismissal by the U.S. court in favor of that other forum.
But can – or should – such a court-made doctrine properly be a defense in a non-plenary proceeding brought by an arbitration awardee seeking enforcement vis-à-vis assets in the United States? Could a court outside the U.S. grant that remedy instead? And in any case, do the applicable international conventions afford U.S. courts the latitude to enforce arbitral awards in their discretion?
In an earlier post we provided advice on how to interpret the words “may” and “must” when they appear in arbitration clauses that are to be interpreted under U.S. law. Among other things, we explained that an arbitration clause that says that a party “may” submit a dispute to binding arbitration will be viewed as mandatory in U.S. courts if any party chooses to arbitrate.
That post led us to question whether those “may” and “must” words are interpreted consistently in other English-speaking common law countries. In typical litigator fashion, and for the reasons set forth below, we conclude that it depends. The relevant laws of Canada, England, and Singapore are apparently consistent with that in the United States, while those of India and Australia are not.
Is an arbitration clause mandatory or permissive when it provides that either party to the contract may elect to submit a dispute to binding arbitration? What if the contract also provides that the right to arbitrate is not exclusive of any other rights that a party has to pursue legal action in an appropriate forum? Such an arbitration clause certainly sounds permissive. But courts have invested a lot of ink addressing the question, and (spoiler alert!) they have more or less consistently come to the conclusion that such a clause makes arbitration mandatory if any party chooses it.
At its core, a mandatory arbitration clause makes arbitration the exclusive dispute resolution method available to either party by contract, while a permissive clause requires arbitration only if a party elects it and no other party objects to it. This leads many litigants and their attorneys to assume that the use of the word “may” and/or a non-exclusivity statement in an arbitration clause makes it permissive, not mandatory.