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.
Under 28 U.S.C. § 1782, “[t]he district court of the district in which a person resides or is found may order him to . . . produce a document for use in a proceeding in a foreign or international tribunal . . . .” Courts in the Second Circuit appear to be coming around to accepting that a commercial arbitration can be “a foreign or international tribunal” for these purposes. Swell. But there is one more thing: they are also likely to treat a subpoena under that statute like a subpoena under Fed. R. Civ. P. 45, and therefore require that the court have personal jurisdiction — general, preferably — over the subpoena target. See, Australia and New Zealand Banking Group Ltd. v. APR Energy Holding Ltd., 2017 U.S. Dist. LEXIS 142404 (S.D.N.Y. Sept. 1, 2017) (“ANZ Bank”).
Typically, the issue of whether a party is bound by an arbitration agreement is raised in a judicial motion to compel under Section 4 of the Federal Arbitration Act (9 U.S.C. § 4). The issue also may be raised in a judicial application to stay an arbitration, as to which the Section 4 procedure applies as well. Occasionally, however, the issue is decided by an arbitrator in the first instance. When the matter eventually reaches a court — e.g., in the context of a post-arbitration motion to confirm or to vacate an award (FAA §§ 9, 10) — and the arbitrator’s decision regarding party arbitrability is to be reviewed, that facet of the judicial proceeding is likely to resemble one for an application under FAA § 4. That is, the judicial review will be de novo, the Section 4 procedure will likely be adopted, and the court will not be restricted to the record before the arbitrator — additional evidence will be permitted.
You presented your case, and the arbitration tribunal came back with a reasoned decision and an award in your favor. You even had the award confirmed here in the United States. You want to enforce it. But you find that the award-debtor’s assets are all held in or have been moved to a country that is not a party to the New York Convention. Now what?
Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., if a District Court compels arbitration of all of the claims that are before it, and thereupon dismisses the suit, its order compelling arbitration is final and appealable; but if the District Court stays the suit, its order compelling arbitration is “non-final” and not immediately appealable. So what’s a right and proper court to do? The Federal Courts of Appeal are divided on the question of whether the FAA requires a stay or dismissal of judicial proceedings after a District Court sends all of the claims in suit before it to arbitration. Currently, some parts of the U.S. are in effect more “arbitration friendly” in this regard than others.
(Note that we are not considering here the case of an “independent” motion to compel or to stay arbitration. In that case, a petition under FAA § 4 commences a special proceeding, and no ordinary claim in suit is before the court.)
Published in Law 360 (Jan. 23, 2017)
A Federal court in New York recently opened the door there for U.S.-style discovery of evidence in aid of foreign or international commercial arbitrations, in accordance with a unique American statute – 28 United States Code (“U.S.C.”) § 1782.