A Handbook for Federal Agencies
Prepared
by:
Phyllis
Hanfling, Department of Energy
Martha
McClellan, Federal Deposit Insurance Corporation
This
document creates no legal rights or remedies and is intended solely for
guidance.
INTRODUCTION
ADRA of 1996
The
Administrative Dispute Resolution Act of 1996 ("ADRA"), 5 U.S.C.
Sections 571-583, made substantial changes in the arbitration provisions found
in the ADRA of 1990. Specifically, the
ADRA of 1996 authorizes the voluntary use of binding arbitration, without the
1990 Act's qualifying proviso that allowed heads of agencies to vacate an
arbitrator's award. Before an agency
can exercise this new power, it must issue guidance, in consultation with the
Attorney General, on the appropriate use of binding arbitration. See 5 U.S.C. Sec. 575(c).
Handbook Purpose
This
Handbook is designed to do several things:
(1) serve as a practical introduction to binding arbitration; (2) set
out the ADRA requirements for federal agencies' use of binding arbitration; (3)
introduce the issues which an agency should consider before drafting its
arbitration guidance or participating in binding arbitration; and (4) outline
Department of Justice requirements for an agency's arbitration guidance.
Form of Guidance
Because
of the vast differences among federal entities and their use of ADR, this
Handbook does not include model language or recommended guidance. However,
agencies may wish to issue their guidance in the form of a rulemaking, to
provide constructive notice of policies that may affect members of the public.
SECTION I - ARBITRATION PROVISIONS OF THE ADR
ACT
Specific
provisions for the use of binding arbitration are contained in 5 U.S.C.
Sections 575-581 and must be reviewed carefully before an agency begins
developing binding arbitration guidance.
Although the ADRA authorizes agencies to use binding arbitration at
their discretion in appropriate cases, the Act contains a number of
requirements limiting that use. These
limitations reflect Congressional intent to ensure that the government's
interests in maintaining control over policymaking and protecting the federal
budget are not compromised by federal agencies' use of arbitration. Thus, the Act is permissive -- it authorizes
agencies to use binding arbitration, but does not require them to do so; it
allows arbitration to be invoked only with the prior, knowing agreement of
responsible agency officials; it allows the parties to choose the issues to be
submitted to arbitration and requires them to agree in advance on a maximum
award. The Act also contains directions
regarding the role and authority of the arbitrator, conduct of the arbitration,
arbitration awards and judicial review.
This
section provides an outline of the ADRA binding arbitration provisions and
identifies the requirements that must be met before binding arbitration can be
used. It also contains requirements on the use, conduct, or enforcement of the
arbitration process. In the
section-by-section analysis that follows, requirements appear in bold type.
SECTION-BY-SECTION ANALYSIS
Section 575 Authorization of Arbitration
1.
The decision to arbitrate must be voluntary on the part of all parties to the
arbitration. (See: 5 U.S.C. Sec.
575(a)(1)).
2. A
party may limit the issues it agrees to submit to arbitration. A party may agree to arbitrate on the
condition that the award is limited to a range of possible outcomes. (See: 5
U.S.C. Sec. 575(a)(1)(A) and (B)). Note
that this provision does not contradict the requirement (set out in 3., below)
that the parties agree on a maximum amount that the arbitrator can award.
3. An
agreement to arbitrate must be in writing.
It must set forth the subject matter submitted to the arbitrator, and
must specify the maximum award or "cap" that may be granted by the
arbitrator. (See: 5 U.S.C. Sec. 575(a)(2)).
4. An
agency may not require anyone to consent to arbitration as a condition of
entering into a contract or obtaining a benefit. (See: 5 U.S.C. Sec.
575(a)(3)).
5. An
officer or employee of the agency who offers to use arbitration must otherwise
have the authority to enter into a settlement concerning the matter or must be
specifically authorized by the agency to consent to the use of arbitration. (See:
5 U.S.C. Sec. 575 (b)(1) and (2)).
6.
Prior to using binding arbitration under this subchapter, the head of an
agency, in consultation with the Attorney General, must issue guidance on the
use of binding arbitration and when an agency officer or employee has the
authority to settle a dispute using binding arbitration. (See: 5 U.S.C. Sec. 575(c)).
Section 576 Enforcement of Arbitration Agreements
Agreements
to arbitrate that are governed by the ADRA are enforceable pursuant to section
4 of title 9 of the United States Code.
(See: 5 U.S.C. Sec. 576).
Section 577 Arbitrators
1.
The parties to an arbitration are entitled to participate in selecting
an
arbitrator. (See: 5 U.S.C. Sec.
577(a)).
2.
The arbitrator must meet the definition of a neutral contained in Sec. 573. [A
neutral may be a Federal employee or anyone else acceptable to all
parties. He or she may have no
official, financial or personal conflict of interest with the respect to the
issue in controversy, unless that interest is fully disclosed in writing and
all parties agree that he may serve.]
(See: 5 U.S.C. Sec. 577(b)).
Section 578 Authority of the Arbitrator
1. An arbitrator may regulate the course and
conduct of the arbitration hearing.
(See: 5 U.S.C. Sec. 578(1)).
2. An arbitrator may administer oaths and
affirmations. (See: 5 U.S.C. Sec. 578(2)).
3. An arbitrator may compel the attendance of
witnesses and the production of documents.
(See: 5 U.S.C. Sec. 578(3)).
4. An arbitrator may make awards. (See:
5 U.S.C. Sec. 578(4)).
Section 579 Authority of the Arbitrator
1. The arbitrator shall set the time and place
for the arbitration hearing and notify the parties at least five days before
the hearing.
2. Parties are entitled to a record of the
arbitration hearing. Any party wishing a record shall make the arrangements for
it, notify the arbitrator and other parties that a record is being prepared,
supply copies to the arbitrator and other parties, and pay all costs unless the
parties have agreed to share the costs.
(See: 5 U.S.C. Sec. 579(b)(1)
thru (4)).
3. Parties are entitled to be heard and present
evidence. (See: 5 U.S.C. Sec. 579(c)(1)
and (2)).
4. The arbitrator may hear any oral and documentary
evidence that is not irrelevant, immaterial, unduly repetitious, or
privileged. (See: 5 U.S.C. Sec. 579(4)).
5. The arbitrator shall interpret and apply any
relevant statutes, regulations, legal precedents and policy directives. (See:
5 U.S.C. Sec. 579(5)).
6. No interested party shall have any
unauthorized ex parte communication with the arbitrator. If an interested party violates this
provision, the arbitrator may require that party to show cause why its claim
should not be resolved against it for the improper conduct. (See:
5 U.S.C. Sec. 579(d)).
7. The arbitration award shall be made within
30 days after the close of the hearing unless the parties agree to another time
limit or the agency rules provide for another time limit. (See:
5 U.S.C. Sec. 579(e)(1) and (2)).
Section 580 Arbitration Awards
1. Unless an agency provides otherwise by rule,
an arbitration award shall include a brief informal discussion of the factual
and legal basis for the award. Formal
findings of fact and law are not required.
(See: 5 U.S.C. Sec. 580 (a)(1)).
2. A final award is binding on the parties and
may be enforced pursuant to sections 9 through 13 of title 9. (See: 5 U.S.C. Sec. 580(c)).
3. An arbitration award entered pursuant to
this subchapter may not serve as an estoppel in any other proceeding and may
not be used as precedent in any factually unrelated proceeding. (See:
5 U.S.C. Sec. 580(d)).
Section 581 Judicial Review
1. Any action for review of an arbitration
award must be made pursuant to sections 9 through 13 of title 9. (See: 5 U.S.C. Sec. 581(a)).
2. An agency's decision to use or not use ADR
shall not be subject to judicial review, except that arbitration shall be
subject to judicial review under section 10(b) of title 9 for evident
partiality or corruption of the arbitrator(s).
(See: 5 U.S.C. Sec. 581(b)).
SECTION II - BINDING ARBITRATION GUIDANCE: SUGGESTED COMPONENTS
In
developing its arbitration guidance an agency must address, at a minimum, the
requirements of 5 U.S.C. Sections 575(a) and (b) which are discussed in Section
I, supra. We believe there are many other issues an agency also should consider
to ensure its guidance is accurate, comprehensive and useful in those
situations where the agency chooses to participate in arbitration. We suggest that complete binding arbitration
guidance should include the following three components:
Component
1: A description of the various types
of ADR, a statement of the preference by the agency for consensual forms of
ADR, especially mediation, and a statement that binding arbitration is appropriate
in some cases,
Component
2: A definition of binding
arbitration and a description of the various forms of arbitration which the
agency will consider using and the circumstances under which they might be
used, and
Component
3: Substantive arbitration issues.
Each
component will be addressed in detail below.
COMPONENT 1 - A DESCRIPTION OF THE VARIOUS TYPES
OF ADR STATEMENTS ABOUT CONSENSUAL FORMS OF ADR AND BINDING ARBITRATION
ADR Spectrum
ADR
includes all forms of dispute resolution other than court adjudication. ADR processes, as defined in 5 U.S.C. Sec.
571(3) include, but are not limited to, conciliation, facilitation, mediation,
fact-finding, ombuds, mini-trials, and arbitration. ADR processes are generally designed to reduce costs, avoid the
delays of judicial proceedings, protect the privacy of the parties and increase
the level of compliance by involving decision makers in the process.
Agencies
should be committed to the use of ADR to resolve appropriate disputes in more
timely, less costly manner than litigation or administrative adjudication. The use of ADR should not be viewed as an
end in itself, but as an additional tool to accomplish the agency's mission
efficiently, economically and productively.
If an agency has published its ADR Policy, it should be referenced in
the statement of support. If an agency
has not published an ADR Policy, it can use the Declaration of Policy on Use of
Alternative Means of Dispute Resolution in Appendix A. The agency's statement of support should
emphasize its preference for consensual forms of ADR, especially mediation.
COMPONENT 2 - A DEFINITION OF ARBITRATION AND
DESCRIPTION OF THE VARIOUS FORMS THAT THE AGENCY WILL USE.
Arbitration,
especially binding arbitration, is the dispute resolution process most like
adjudication. In arbitration, the
parties agree to use a mutually selected decision-maker to hear their dispute
and resolve it by rendering a final and binding decision or award. The decision to arbitrate may be made after
a dispute has arisen between the parties or because an arbitration provision
has been included in a contract or agreement that already exists between the
parties. Like litigation, arbitration
is an adversarial, adjudicative process designed to resolve the specific issues
submitted by the parties. Arbitration
differs significantly from litigation in that it does not require conformity
with the legal rules of evidence and the proceeding is conducted in a private
rather than a public forum. Binding
arbitration awards typically are enforceable by courts, absent defects in the
arbitration procedure. Appeal from
arbitration decisions rendered in disputes covered by the ADRA is generally
limited to fraud or misconduct in the proceedings, pursuant to the Federal
Arbitration Act, 9 U.S.C. Sec. 10.
Forms of Arbitration
Parties
may decide in advance whether an arbitration will be binding (the parties must
accept the award), or non-binding (the arbitrator's award is advisory
only). If the award is non-binding, the
parties may decide to accept the non-binding opinion, use it as the basis for
further settlement negotiations, or reject it and proceed to litigation. [Note
that non-binding arbitration is not subject to the arbitration
restrictions of the ADRA.] Agencies may
wish to consider whether they might find non-binding arbitration useful; they
lose the value of finality but gain more of the flexibility inherent in
traditional ADR techniques. [An agency should consider neutral evaluation if it
wants the opinion of an expert, but would prefer a less formal process than arbitration.]
Arbitration Terms - A Description of the Various
Arbitration Forms
Mediation/Arbitration
Arbitration
may be part of a mediation/ arbitration (med/arb), where the parties attempt to
mediate the dispute first. Failing
resolution, the same neutral (or another) arbitrates and issues a binding or
non-binding award. Using the same
person as both mediator and arbitrator may have a chilling effect on full
participation in mediation, as a party may not believe that the arbitrator will
be able to discount unfavorable information learned during the mediation.
In
co-mediation/arbitration, two neutrals preside over the initial joint
session. After that, the neutral
designated as the mediator works with the parties. Failing settlement, the case, or any resolved issues, may be
submitted to the neutral designated the "arbitrator", for a binding
decision.
Arbitration/mediation
is another way to avoid the problem of one neutral serving as both mediator and
arbitrator. The arbitrator hears the
case and makes a determination that is not disclosed to the parties. He or she then attempts to mediate, with the
understanding that if the parties reach no settlement, his determination will
become the award.
Incentive Arbitration
Parties
agree, in advance, to a penalty if one of them rejects an arbitrator's
non-binding award, resorts to litigation, and fails to improve its position by
some specified percentage or formula.
Penalties may include payment of expenses and attorney fees. Use of this
form of arbitration by Federal agencies may present significant questions of
sovereign immunity.
Party Arbitration
Each
side selects an arbitrator. Each of
these "party" arbitrators then selects a third person and the panel,
usually of three, hears the case and issues the award. Although favored in cases where there are
highly technical issues, party arbitration generally increases the cost and
time of the arbitration significantly.
Scheduling
with multiple arbitrators and multiple parties is extremely difficult. A single
arbitrator is more likely to manage the case expeditiously. In addition, it is important to remember
that party-appointed arbitrators are likely to lack, or to appear to lack,
neutrality and impartiality. This can
be overcome if the parties use a mechanism to jointly appoint both arbitrators
who then choose a "neutral" tiebreaker.
Administered Arbitration
In
administered arbitration, a private ADR provider organization manages the
arbitration process. [National and
local ADR providers can be found through telephone directories, local bar
associations, and court programs.
Before choosing any organization, references should be checked as
quality can vary widely. Agency Dispute
Resolution Specialists and/or the Senior Counsel for ADR at the Department of
Justice can assist.] Among other
things, the provider may set procedural rules, select or assist the parties in
selecting arbitrators, schedule the arbitration, provide a conference room,
transfer documents, mail the award and collect any fees. Providers charge varying administrative fees
to perform these services.
Government
parties must take great care when using administered arbitration to tailor
existing rules to meet their specific needs.
For example, the ADRA requires that parties are entitled to select the
arbitrator(s); thus, an agency may not be able to enter into an agreement for
administered arbitration where the arbitrator is selected by the administering
organization. There are other
limitations on agencies' use of arbitration that must be considered in
administered arbitration. For example,
federal agencies cannot agree to escrow fees or potential award amounts or to
compel attendance by a specific agency official. Nor can an agency agree to keep an arbitration award
confidential.
Just
as the decision to use arbitration must be voluntary and agreed to by the
parties, the operative rules should be negotiated and agreed to by the
parties. Any reputable ADR provider
that administers arbitration will work with the parties in making necessary
changes to the providers' arbitration rules.
It is expected that the major ADR providers will adjust their generic
rules to accommodate Federal agencies.
Ad Hoc Arbitration
In
contrast to administered arbitration, the parties in an ad hoc arbitration
manage the process themselves. The
parties jointly select the arbitrator(s) and either craft their own rules or
use those from a private ADR organization.
The same care as discussed above must be taken to tailor the rules to
ensure compliance with both the ADRA and an agency's arbitration guidance. The
agency Dispute Resolution Specialist or an agency attorney should be designated
to review all agreements to arbitrate.
ARBITRATION TECHNIQUES
The
following are arbitration techniques designed to limit the amount an arbitrator
may award. Any of these will meet the
ADRA requirement of setting a cap on the award.
Baseball Final Offer or Last Best Offer
Each
party, prior to the arbitration, submits a proposed award amount to the
arbitrator, who must choose one as the final award. This approach gives the parties a strong incentive to offer a
reasonable proposal and is especially useful following mediation where the
parties reached impasse. The two
numbers selected would be the parties' last offers. Note that because the ADRA requires the parties to agree on a
cap, BOTH parties would have to agree to the higher number.
Night Baseball
Related
to baseball arbitration, this requires the arbitrator to make a determination
without knowledge of the parties' proposals. The actual award would then be the
party's figure that was closest to the arbitrator's determination. This type of binding arbitration must be
preceded by an agreement between the parties to establish maximum exposure, as
required by the ADRA.
High-Low
The
parties agree privately without informing the arbitrator that the final award
will be within certain parameters. At
the conclusion of the hearing, if the arbitrator's award is within the agreed
upon range, the parties are bound by that figure. If, however, the award is outside the parameters, it is adjusted
accordingly. For example, if the
high-low figures were $50,000 and $100,000 and the award was $25,000, it would
be adjusted to $50,000. Similarly, if
the award were $250,000, it would be adjusted to $100,000.
COMPONENT 3 CHECKLIST OF SUBSTANTIVE ISSUES TO
CONSIDER
The
following checklist of questions includes not only the ADRA requirements, but
also related issues that agencies are encourged to consider in order to avoid
the problems and pitfalls of choosing and participating in binding
arbitration. Section III, which
follows, contains a discussion of each issue on the checklist.
Issue
1 - For what type of cases will
the agency be willing to use binding arbitration?
Issue
2 - Will the agency agree to
arbitrate issues other than money, e.g., specific performance, punitive
damages, injunctive relief, apportionment of fees?
Issue
3 - How and by whom will the
agency’s decision to arbitrate be made?
a. Who will have authority to recommend
arbitration?
b. Who has the authority to enter into
settlement? Can this authority be
delegated?
c. Who will negotiate the cap on the award?
d. Who will negotiate the rules and selection
of the arbitrator?
e. Who will draft the Agreement to Arbitrate?
Issue
4 - What will the process be
for entering into arbitration?
Issue
5 - What should the Request to
Arbitrate memo include?
Issue
6 - How can an agency encourage
the efficiency of the arbitration process?
Issue
7 - How and by whom will
requests for binding arbitration from people outside the agency be accepted?
Issue
8 - Will the agency allow
arbitration clauses to be written into contracts?
Issue
9 - If the agency allows
arbitration clauses in contracts, what should be included in the clause?
Issue
10 - What is the arbitrator's
role under the ADRA?
Issue
11- Will the agency agree to a
panel of arbitrators in some circumstances?
Issue
12 - What selection criteria
will be considered in choosing an arbitrator?
Issue
13 - Will the agency agree to
allow non-attorneys to represent a party, or for a party to appear pro se, at
the arbitration?
Issue
14 - What should an Agreement
to Arbitrate include?
Issue
15- How will the agency pay the
arbitrator(s)?
Issue
16- Is the agency willing to
use administered arbitration?
Issue
17- What must the arbitration
award include?
Issue
18- Will the agency allow
arbitration on the documents only, without a hearing, and if so, in what
circumstances?
Issue
19- What selection criteria
will be considered in choosing or amending arbitration rules and what must
those rules include?
SECTION III - DISCUSSION OF SUBSTANTIVE ISSUES
The
following discussion is intended to raise many of the most important and
difficult issues concerning the use of binding arbitration in federal agencies.
It is not intended or expected that any agency guidance will address all of
them; they are listed for information and consideration.
ISSUE 1 - FOR WHAT TYPE OF CASES WILL THE AGENCY
BE WILLING TO USE BINDING ARBITRATION?
The
Alternative Dispute Resolution Act explicitly includes binding arbitration
among the ADR processes available to federal agencies. However, most federal agencies encourage the
use of consensual forms of ADR such as mediation in contrast to binding
arbitration. Even those agencies that
actively discourage the use of arbitration may find that there are situations
where binding arbitration may be the most appropriate alternative to
litigation. In other cases, agencies
may find that binding arbitration is required under a contract the agency has
"inherited" by one means or another.
Each agency must consider when, and under what conditions, it will agree
to use binding arbitration. To do this,
it is important to consider both the benefits and the risks of choosing to
arbitrate.
BENEFITS
The
BENEFITS of binding arbitration may include: savings of time and money;
finality, and a knowledgeable decision-maker.
RISKS
The
RISKS of binding arbitration may include: an award that may be arbitrary and
without basis in fact or law; severely limited grounds for appeal [Under the
Federal Arbitration Act, 9 U.S.C. Sect 10, an award may be vacated only if
procured by corruption, fraud, or undue means; or if an arbitrator exhibits
“evident partiality”, when misconduct by the arbitrator prejudices the rights
of a party or if the arbitrator exceeded his power.]; parties' loss of control
over the process and outcome; a long, expensive proceeding, if not structured
properly by the parties, and continued hostility between parties who may have
an ongoing relationship.
In
addition, a party cannot unilaterally withdraw from binding arbitration once an
arbitration agreement has been signed.
For these reasons, careful consideration by senior agency officials and
legal consultation should precede any decision to arbitrate.
Determining Appropriateness of ADR
When
considering whether arbitration is appropriate, agencies should first look to
the ADRA which contains guidance for considering whether arbitration or any ADR
process is appropriate for a particular dispute. Section 572 (b) of the Act suggests that agencies should consider
NOT USING ANY ADR process if: there is
a need for precedent on the issue; the matter involves significant matters of
policy and ADR cannot help develop policy on the issue; an established,
consistent policy on an issue is necessary and the possibility of inconsistent
results in individual cases would not be helpful; the case involves issues
which affect persons or organizations not a party to the ADR; a public record
is needed; or the agency must retain control over disposition of the matter in
the event that circumstances change.
Determining Appropriateness of Arbitration
In
deciding which type of ADR to use, arbitration can be most useful in disputes
which are highly fact specific, and in which the decision is likely to be
single issue and quantitative. For example, arbitration may be appropriate
where the parties are only concerned with monetary remedies such as "the
machine was to perform at ABC level and the contractor was to be paid XYZ
amount". Arbitration may also be
attractive when the dispute is highly technical and the parties can pick an
arbitrator with mutually accepted expertise, thus obviating the need to educate
him and to reduce technical arguments.
Arbitration is also highly useful when finality is a desired result and
there is little concern over the risks or costs of remedies (for example,
resolving a small dollar figure dispute that has been ongoing for a long
period), or where the parties need a decision made for them by a third party,
but wish to avoid the cost and delay of a trial.
Other factors to consider are:
1. Will the parties both agree to arbitrate? (Pursuant to the ADRA, arbitration must be
voluntary).
2. Have consensual forms of ADR, such as
mediation, been tried first?
3. Will the parties be able to find an
arbitrator with appropriate subject matter expertise?
4. Are the issues narrowly defined?
5. Will the parties be able to negotiate a
maximum award "cap" in advance of the hearing? (This is mandatory under the ADRA).
6. Are the parties concerned about maintaining
an ongoing relationship?
7. Can the parties agree on governing rules for
the arbitration, including negotiating time limits so that costs do not
escalate?
8. Are the parties concerned about limited
appeal rights?
9. Are the parties interested in more
confidentiality than a trial affords?
(Note, however, that the final award is not confidential under ADRA.)
10. Do the parties (need) want a decision made
for them by a third party but want to avoid the delay of trial?
Agencies
may decide to limit arbitration to certain categories of cases, issues, or
dollar amounts.
ISSUE 2 - WILL THE AGENCY AGREE TO ARBITRATE
ISSUES OTHER THAN MONEY, E.G. SPECIFIC PERFORMANCE, PUNITIVE DAMAGES,
INJUNCTIVE RELIEF, AND APPORTIONMENT OF FEES?
An
arbitrator may not award punitive damages against the government as the
Department of Justice views them as a violation of sovereign immunity. In general, given the express legislative
command to cap agency monetary exposure, great care and precision is necessary
in drafting the outer limits of an arbitrator's ability to award non-monetary
relief.
ISSUE 3 - HOW AND BY WHOM WILL THE DECISION TO
ARBITRATE BE MADE?
There
are generally three ways in which parties may enter the arbitration process: at
the request of one of the parties, through a pre-existing arbitration clause in
a contract, or by court direction.
Agencies
are given absolute discretion in the ADRA to decide whether or not to
participate in any ADR process, including binding arbitration. One of the decisions an agency must make in
deciding to participate in arbitration is whether or not to entertain requests
for binding arbitration from parties outside the agency. (See Issue No. 7). This decision may depend in large part on the approach an agency
takes to using binding arbitration generally.
If an agency wants to limit the use of binding arbitration, one way it
could do that is by refusing to accept requests from outside parties. Likewise, agencies must determine if they
will allow arbitration language governing future disputes to be written into
contracts. (See Issue No. 8.)
Authority to Recommend
A. Who will have authority to recommend
arbitration?
The
agency should require, or at least encourage, that the recommending official,
whether it be a contracting officer, staff attorney, or program official,
consult with the Dispute Resolution Specialist. This should ensure that, at an
early stage, the parties consider or attempt the preferred consensual forms of
ADR when appropriate. Such consultation should also ensure that disputes which
are inappropriate for arbitration, whether based on the ADRA specifications,
practical considerations or agency requirements and policy, do not go forward
to formal submission.
Authority to Settle
B. Who has the authority to enter into
settlement?
The
ADRA requires that a person entering into binding arbitration on behalf of the
agency must have the authority to otherwise enter into a settlement concerning
the matter, or be specifically authorized by the agency to consent to
arbitration.
Most
agencies already have procedures in place for settling disputes, especially for
resolution of disputes arising out of contracts with outside parties. One approach is to delegate the authority to
consent to arbitration to the person (or position) that currently has authority
to resolve the dispute, such as a contracting officer, subject to his warrant
and internal agency review procedures.
This approach takes advantage of the existing procedures while providing
an additional means of resolving the dispute.
It also has the benefit of simplicity; any new procedures are added to
the existing structure rather than creating an entirely separate system.
However,
the decision to use binding arbitration involves so many important and complex
issues that agencies should consider delegating the authority to use binding
arbitration to a high-level decision-maker like the General Counsel. Agency procedure should alert the designee
to the fact that the agency is considering entering into a process that is, in
many ways, more binding than litigation.
The person authorizing arbitration should be made aware of what the capped
amount of the award will be.
Negotiate Award Cap
C. Who will negotiate the cap on the award?
This
may be the contracting officer, an attorney, or other person making the
recommendation to arbitrate.
Rules and Arbitrator Selection
D. Who will negotiate rules and selection of
the arbitrator?
After approval to arbitrate has been granted by the
authorized official, negotiating rules and selection of the arbitrator can be
done by the recommending official, in conjunction with the Dispute Resolution
Specialist.
Agreement to Arbitrate
E. Who will draft the Agreement to
Arbitrate?
The
Agreement must be in writing, setting forth the subject matter of the
arbitration and the maximum award or "cap." It must be agreed to by the parties and should be drafted by an
attorney, in consultation with the Dispute Resolution Specialist. (See Issue No. 14).
ISSUE 4 - WHAT WILL BE THE PROCESS FOR ENTERING
ARBITRATION?
A
request to use binding arbitration may come from an outside party or may
originate from agency personnel. In
either case, the procedures for requesting and obtaining authority to arbitrate
need to be clear and readily available.
The initial consideration of a request to arbitrate may be informal and
should involve consultation with agency or subdivision ADR specialists. If an agency designates a specific office or
position to initiate the arbitration approval process, it will be necessary to
identify the office and the steps required for requesting that approval.
Therefore,
the agency should identify the official who will have authority to determine,
on a case-by-case basis, whether to agree to submit a dispute to binding
arbitration. This will ensure that an agency official will only agree to submit
a dispute to binding arbitration if (1) there are sufficient funds committed to
cover the maximum possible award against the agency, and (2) prior written
approval has been obtained from the authorized agency official to enter into
the arbitration proceeding.
Since
it is likely that the final decision-maker will have little knowledge of the
specific issues or risks involved in the dispute, a written justification (the
Request to Arbitrate Memorandum) should be prepared.
ISSUE 5 - WHAT SHOULD THE REQUEST TO ARBITRATE
MEMORANDUM INCLUDE?
Request to Arbitrate Memo
This
is an internal document intended for the agency decision making and approval
process. The following information
should be included.
Facts
A
presentation of the factual bases, legal reasons, and policy considerations
supporting the use of binding arbitration to resolve the particular dispute,
including:
A
detailed description of the analysis that resulted in the recommendation of
whether to arbitrate. If the
recommendation is to arbitrate, this should compare the benefits of arbitrating
the matter with the benefits of litigating the matter, including potential
appellate litigation as well as the ability to withdraw from litigation, to
pursue settlement, to establish precedent, etc.
A
detailed cost/benefit analysis of arbitrating the matter, including the
estimated costs of the arbitrator, agency personnel costs, outside counsel
costs (if applicable).
An
estimate of the timeline for the arbitration process, including time to
negotiate the arbitration agreement, compared to a timeline for litigation.
A
litigation risk analysis.
Maximum Award
The
proposed maximum award, as a dollar figure, should be specifically addressed in
the memorandum.
ADR Use Justified
An
explanation supporting a determination that none of the following factors
exists, or if one or more does exist, binding arbitration is nevertheless the
most appropriate method to resolve the dispute:
- A
definitive or authoritative resolution of the matter is required for
precedential value, and a binding arbitration proceeding is not likely to be
accepted generally as an authoritative precedent;
-The
matter involves or may bear upon significant questions of Government policy
that require additional procedures before a final resolution may be made, and a
binding arbitration proceeding would not likely serve to develop a recommended
policy for the agency;
- Maintaining established policies is of
special importance, so that variations among individual decisions are not
increased, and a binding arbitration proceeding would not likely reach
consistent results among individual decisions;
- The matter significantly affects persons or
organizations who are not parties to the proceeding;
- A full public record of the proceeding is
important, and a binding arbitration proceeding cannot provide such a record;
or
- The agency must maintain continuing
jurisdiction over the matter with authority to alter the disposition of the
matter in the light of changed circumstances, and a binding arbitration
proceeding would interfere with the agency's fulfilling that requirement.
Source of Request
Whether
the initial request is from an outside party, a joint request of the agency and
an outside party or from specified agency personnel.
Recommendation
Whether
the initiating agency official recommends accepting or denying the request to
arbitrate.
Disputed Issues
A
brief description of the disputed issues, or if in litigation, the status of
the litigation.
Failure of Consensual Forms of ADR
A
description of the consensual forms of ADR that have been offered or attempted
and the outcome. This should include a
statement of why further attempts with consensual approaches are inappropriate
or impractical.
Parties
A
list of the parties' representatives for the arbitration. [Under the ADRA,
federal agencies must have policies regarding outside parties use of non-attorneys
to represent them in alternative dispute proceedings. (See Issue No. 13.)]
Draft Agreement to Arbitrate
A
draft arbitration agreement agreed to by both parties as an attachment to the
memorandum.
ISSUE 6 - HOW CAN AN AGENCY ENCOURAGE THE
EFFICIENCY OF THE ARBITRATION PROCESS?
A. Limit the scope of discovery.
B.
Establish reasonable deadlines for discovery, the hearing, and rendering the
award. Concerning the hearing, the ADRA
states only that it shall be conducted expeditiously. See section 579(c)(3).
Therefore, it may be useful to include specifics about timing in the agreement
to arbitrate.
The
issuance of the award, an area in which delay frequently occurs, has been dealt
with more specifically in the ADRA.
Section 579(d)(1) requires that an award be issued within 30 days after
the close of the hearing or filing of post-hearing briefs authorized by the
arbitrator, unless otherwise agreed to by the parties or so stated in an agency
rulemaking. Finally, the ADRA states
that awards can only be enforced 30 days after service on both parties, when
they are considered as "final".
See section 580(b).
C.
Limit the number of witnesses.
D.
Use one arbitrator and give that person the authority to tightly control the
proceeding.
E.
Agree to arbitrate by document review or by phone in appropriate cases.
ISSUE 7 - HOW AND BY WHOM WILL OUTSIDE REQUESTS
FOR BINDING ARBITRATION BE ACCEPTED?
Forms of Request
If an
agency decides to entertain requests for binding arbitration from outside
parties, it should consider having both an informal and a formal process for
receiving them. The informal process
might be nothing more than a party asking the designated agency representative
if the agency would consider using binding arbitration, or might include a
short request form to be filled out by the outside party and delivered to the
agency representative. The request form
will ensure that the agency can track arbitration requests efficiently and will
be an easy way to obtain the opposing party information that may be needed to
complete the agency's arbitration recommendation process.
The
agency should determine who will respond and whether to suggest that a formal
request should be made.
Formal Request Process
A
formal request process should require the outside party or its representative
to submit a written request to a specific agency office for initial processing
and tracking purposes and might include a checklist provided by the agency to
ensure that all the information necessary to process the request is obtained. A
formal request for arbitration would require the agency to conduct a formal
review and prepare a written response approving or rejecting the request.
It is
recommended that all arbitration requests be screened by the agency's Dispute
Resolution Specialist.
ISSUE 8 - WILL THE AGENCY ALLOW ARBITRATION CLAUSES
TO BE WRITTEN INTO CONTRACTS?
Normally,
parties enter arbitration at the request of either party to a dispute, although
both must agree to arbitrate. As
detailed below, parties may also use a pre-existing arbitration clause they
have negotiated in a contract.
Regardless of how arbitration is begun, it is critical that the ground
rules are carefully negotiated to meet the requirements of the ADRA and the
goals of the agency. For agencies which
allow binding arbitration clauses to resolve future disputes, i.e., in
contracts, it is important to draft the provision carefully, since the agency
must comply whenever the other party requests arbitration pursuant to the
contract. It is imperative for agencies
to balance their statutory duty to limit agency exposure with a desire to
include provisions calling for the use of arbitration in pre-existing
contracts. Despite the most careful
drafting, it is unlikely that the original drafters can foresee the exact nature
of a future dispute. Therefore, it is useful to include a statement to this
effect:
If
there is a dispute under this contract that is subject to arbitration, the
parties will meet and negotiate in good faith any necessary procedural changes
from the original requirements, in an effort to reasonably expedite the process
and otherwise to fit the process to the dispute and the value at risk.
ISSUE 9 - IF THE AGENCY ALLOWS ARBITRATION
CLAUSES IN CONTRACTS, WHAT SHOULD BE INCLUDED IN THE CLAUSE?
An
agency might want to include the necessity for negotiation by senior officials
and/or mediation before arbitration may be invoked. See Appendix B for Sample Dispute Resolution Contract language. Agencies must also devise a means to satisfy
the statutorily required cap on government exposure when including arbitration
clauses in contracts.
ISSUE 10 - WHAT IS THE ARBITRATOR'S ROLE UNDER
THE ADRA?
Under
the ADRA, arbitrators may: Regulate the
course and conduct of hearings; Administer oaths; Compel attendance of
witnesses and production of evidence, to the extent that the agency is
authorized to do so by law; and Issue awards.
In a
complex arbitration, it is useful to have a case management approach,
negotiated by the parties, for the arbitrator to follow. This will save time and money without
diminishing the results. It is also
recommended that the parties choose an arbitrator who will respect the time
limits established in the agreement and move the process along.
ISSUE 11 - WILL THE AGENCY AGREE TO A PANEL OF
ARBITRATORS IN SOME CIRCUMSTANCES?
Generally,
a single arbitrator is sufficient and saves time and money. Exceptions might be technical cases where a
person with relevant expertise is deemed necessary. Traditionally, when more than one arbitrator is desired, each
party picks one and they agree on the third.
However, since the costs in time and money increase exponentially as the
number of arbitrators increases, it may be wise to try to find one person with
the necessary expertise.
ISSUE 12 - WHAT SELECTION CRITERIA WILL BE
CONSIDERED IN CHOOSING AN ARBITRATOR?
The
ADRA allows an agency to use, with or without reimbursement, the services and
facilities of other Federal agencies, State, local, and tribal governments,
public and private organizations and agencies, and individuals, with the
consent of such agencies, organizations, and individuals, and without regard to
the provisions of 31 U.S.C. Section 1342.
A judge from a Federal Board of Contract Appeals may also be used if the
parties agree.
As
with any other neutral, an arbitrator who is agreed upon by the parties may be
selected non-competitively. The
contract must be in place before any work begins. See Appendix C for a checklist for selection of arbitrators.
ISSUE 13 - WILL THE AGENCY AGREE TO ALLOW
NON-ATTORNEYS TO REPRESENT A PARTY, OR FOR A PARTY TO APPEAR PRO SE, AT THE
ARBITRATION?
Federal
agencies should have policies regarding the use of non-attorneys by outside
parties in arbitration. Agencies may
decide that it will not allow non-attorneys, or parties appearing pro se in all
cases, or that it will require attorneys only in highly complex or specialized
proceedings.
Both
in choosing to arbitrate and in engaging in the actual arbitration, parties
irrevocably impact their rights and potential legal remedies, far more so than
in consensual decision-making ADR processes.
Because the arbitration decision rests in the hands of a third party
neutral, the ability of the parties to present and argue evidence adequately is
far more essential than in other, non-binding forms of ADR. If an agency chooses to allow representation
by non-attorneys (or by the parties acting pro se), it should consider
requiring the parties to sign an acknowledgment of the risks and limitations of
arbitration before agreeing to arbitrate the dispute.
ISSUE 14 - WHAT SHOULD AN AGREEMENT TO ARBITRATE
INCLUDE?
The agreement to arbitrate must be in writing and
should include:
1. The names of the parties.
2. The issues
being submitted to binding arbitration.
The parties can submit all or only certain issues in controversy to
binding arbitration.
3. The maximum award (cap) that the arbitrator
may direct. (This must be negotiated by
the parties prior to signing the Agreement.)
4. Any other conditions limiting the range of
possible outcomes.
5. The scope of the arbitration. This will limit time and cost and give the
arbitrator power to be a "case manager".
A
sample case management provision might read, "The Arbitrator is expected
to assume control of the process and to schedule all events as expeditiously as
possible, to insure that an award is issued no later than ___ days from the
date of this agreement. Failure of the
arbitrator to assume such responsibility shall be deemed a breach of this
contract." This lets the
arbitrator know he has the support of the parties to manage them and the
arbitration.
6. A reference to which procedural rules will
apply. This must be designed to comply
with the ADRA, including the amount and nature of the discovery to be allowed,
and the deadlines to be imposed for discovery, the hearing, and the
arbitrator's award. Agencies should not
enter into pre-dispute binding arbitration clauses or post-dispute agreements
to arbitrate without careful consideration of any other local, state or federal
substantive, procedural, and arbitration statutes. Without a well-drafted choice of law provision, an arbitrator may
be free to disregard any applicable statute of limitations, may be free to
disregard either the substantive or procedural law the agency intended to be
applied in the arbitration, and may be free to disregard the arbitration law
the agency expected to be applied.
Including
an explicit limitation period in the agreement to arbitrate or arbitration
clause will avoid most statute of limitations disputes. Questions of which
substantive or procedural law should apply can be limited by avoiding the
common "this contract shall be construed under the law of ..." language
and using a more generic clause like "all disputes referred to arbitration
and the statute of limitations and the remedies for any wrongs that may be
found, shall be governed by the law of ...". Similar care should be given to the designation of the ADRA or
Federal Arbitration Act as the applicable arbitration statute.
7. The name of the arbitrator, the amount of
compensation and how it will be paid.
(Avoid any agreement or rule that provides for deposits in an escrow
account to pay for expenses of the proceeding, that is, in advance of incurring
such expenses.)
8. The date when the arbitration will commence.
9. The type of remedy available.
A
sample Agreement to Submit to Binding Arbitration is at Appendix D.
ISSUE 15 - HOW WILL THE AGENCY PAY THE
ARBITRATOR(S)?
Generally,
the parties agree in advance to share administrative fees and arbitrator fees
and costs, which will be paid after issuance of the award. The government may not escrow funds or pay
in advance for arbitrator or administrative fees.
ISSUE 16 - IS THE AGENCY WILLING TO USE
ADMINISTERED ARBITRATION?
Agencies
may use an ADR organization to administer an arbitration. The organization could assist in the
following tasks: narrowing the issues, negotiating the cap, selecting the
arbitrator (with the parties' participation), providing rules, scheduling the
hearings, mailing the awards and billing for services. Organizations charge a fee which should be
paid equally by the parties.
Outside
organizations are more likely to be needed where the dispute has been
longstanding and there is a great deal of animosity between the parties. In addition, when agencies use arbitration
clauses in contracts, it is important that they NOT merely incorporate the
rules of an ADR organization and assume they will apply when and if a dispute
later arises. There will likely be provisions in these rules which are
inconsistent with the ADRA. Thus, any
arbitration rules must be jointly reviewed before adoption or inclusion in a
contract.
If an
agency prefers ad hoc, or "do it yourself" arbitration, it should
have clear guidance and well-trained personnel, who consult with the agency
Dispute Resolution Specialist.
ISSUE 17 -WHAT MUST THE ARBITRATION AWARD
INCLUDE?
Form of Award
An
arbitrator's decision is called an "award" and the opinion, or
findings and conclusions, are known as "reasons". Under the ADRA, an arbitration award must be
in the form of a document that can be filed with the parties, including the
relevant Federal agency.
Confidentiality
Although
it is often the practice in the private sector to keep arbitration awards
confidential, FEDERAL AGENCIES CANNOT KEEP ARBITRATION AWARDS
CONFIDENTIAL. In addition, such awards
will be agency records for the purposes of FOIA and subject to disclosure. Protected proprietary or Privacy Act
information can be redacted and is subject to reverse FOIA actions. Under the requirements of the
"Electronic FOIA" amendments, agencies must provide electronic access
to material that is subject to repeated request, which may include arbitration
awards.
Cap on Award
An
arbitration award under the ADRA cannot exceed the monetary cap negotiated by
the parties and specified in the arbitration agreement. A well-drafted arbitration agreement should
also have limited the type and form of remedy that an arbitrator can
award. In most (though not all)
jurisdictions, an arbitrator can utilize any form of remedy a court in that
jurisdiction may provide; in some jurisdictions, an arbitrator may order any
remedy that is not specifically forbidden by the arbitration agreement. The
ADRA provides that an arbitration award cannot be used to estop a party on an
issue in another proceeding, and that arbitration awards cannot be used as
precedent, or "otherwise be considered in any factually unrelated
proceeding." We note, however,
that arbitration decisions are given precedential weight in some fields and, as
an agency's (and the federal sector's) experience with arbitration grows, its
arbitration decisions may come to have informal, if not formal, persuasive
power.
"Naked Award"
An
agency might want to consider permitting a "naked award" which
provides only a monetary amount. This
has the advantage of reduced time and cost and may be all the parties require. The parties may be able to request to have
this award issued immediately post-hearing.
Many arbitrators prefer this type of award as well, as it limits grounds
for appeal. [Arbitration awards under
the ADRA are subject to enforcement under the Federal Arbitration Act (FAA),
Title 9, United States Code. The FAA
and the relevant case law provide very limited grounds on which a court may
vacate an arbitration award, beyond fraud in the arbitration process. Unlike judicial opinions, clear or even
egregious error of fact or law may not sufficient to overturn an arbitration
award. Courts tend to require a very
strong showing on the available appeal grounds before declining to enforce
arbitration awards. To vacate an
arbitration award, it will probably be necessary to show manifest disregard of
the law (which some jurisdictions limit to cases in which a party can show that
an arbitrator knowingly misapplied the relevant law; even gross error
may not be sufficient if it cannot be shown to be intentional) or that an
arbitrator acted outside of the scope of arbitral authority defined in the
underlying arbitration agreement. The
simpler and more limited form of award the agency requires, the less likely it
is that any party will be able to sustain an appeal to an arbitration award in
court. Similarly, an arbitration award
which requires more than basic information into the arbitrator’s reasoning
provides greater opportunity for successful appeal of a poorly reasoned
arbitration decision. In considering
requirements for arbitration awards, agencies must weigh the value of finality
against the ability to seek correction of significant error by
arbitrators. Other factors will affect
this decision. For instance, if the
agency will use arbitration only in certain areas or when there is only a low
monetary exposure, the value of finality is likely to outweigh the concern for
appeal. If, however, the parties
believe they need more than a "naked award," they may set a page
limit for the arbitrator or request that the award state only those reasons
necessary to support it, rather than address all issues presented in
evidence. Or, they can request a more
complex award form, including formal findings of fact and law and articulated
reasoning.
Flexible Format
An
agency that wishes to provide flexibility for parties to mutually agree to an
award format other than a "discussion of the factual and legal basis for
the award" is required by the ADRA to publish a rule in the Federal
Register authorizing that procedure.
See: 5 U.S.C. Section 580
(a)(1). As it would be a procedural
rule and would have no significant effect or impact on the substantive rights
or obligations of non-agency persons, prior notice and opportunity for public
comment is not required.
ISSUE 18 - WILL THE AGENCY ALLOW ARBITRATION ON
THE DOCUMENTS ONLY, WITHOUT A HEARING, AND IF SO, IN WHAT CIRCUMSTANCES?
In
simpler cases, the parties may agree to have the arbitrator issue an award
after only a document review. This has
the advantage of saving time, money and avoiding scheduling conflicts. It may not, however, be the best choice
where credibility of a party or witnesses is an issue, as there will be no
opportunity to argue or cross-examine.
The
arbitrator may also conduct all or part of a hearing by telephone, video
conferencing or computer, as long as each party has an equal opportunity to
participate.
ISSUE 19 - WHAT SELECTION CRITERIA WILL BE
CONSIDERED IN CHOOSING OR AMENDING ARBITRATION RULES AND WHAT MUST THOSE RULES
INCLUDE?
Many
ADR providers, or large international organizations, have rules which will
require some changes to conform to the ADRA.
In time, they will most likely develop special rules for Federal
agencies.
In
addition, most providers have expedited rules which agencies should
consider. Simple cases require less
rigorous rules than do complicated, expensive ones.
SECTION IV - PROCEDURES FOR OBTAINING DEPARTMENT
OF JUSTICE APPROVAL FOR AGENCY BINDING ARBITRATION GUIDANCE
This
portion of the Handbook addresses the procedures for obtaining Department of
Justice approval of agency guidance on the subject of binding arbitration. Pursuant to Section 575(c) of the
Administrative Dispute Resolution Act of 1996, 5 U.S.C. Sect.575, agencies that
wish to use binding arbitration must issue guidance on the appropriate use of
this dispute resolution process. Such
guidance must take into account the factors identified by Congress in Section
572(b) of the Act, and should identify when an officer or employee of the
agency has authority to settle an issue in controversy through binding
arbitration. Congress also provided
that agency guidance on this subject be issued in consultation with the
Attorney General.
As a
general rule, the Department of Justice will defer to the judgment and
expertise of other agencies in the use of binding arbitration to resolve issues
in controversy pending before those agencies.
The Department interprets its statutory obligation under Section 575(c)
as a duty to insure that those agencies seeking to use binding arbitration will
be able to make appropriately informed judgments, mindful of the concerns of
Congress that led it to authorize this process in a limited and carefully
circumscribed manner.
These
are the standards that the Department of Justice will apply in reviewing agency
guidance for use of binding arbitration.
Does
the agency's guidance facilitate a thorough application of the statutory
criteria in Section 572(b) for when dispute resolution proceedings are
inappropriate to the issues in controversy for which binding arbitration might
be considered.
Does
the agency's guidance contain sufficient information to permit users of that
document to make informed decisions about the use of binding arbitration,
including an assessment of the benefits of binding arbitration as measured
against the costs or risks associated with that process for resolving specific
issues in controversy.
Does
the agency's guidance demonstrate that it was prepared with specific reference
to the types of issues in controversy that arise in the course of fulfilling
that agency's statutory missions.
Agencies
seeking Department of Justice review of binding arbitration guidance should
send such documents to the Office of Dispute Resolution, U.S. Department of
Justice, Washington, D.C. 20530. Where appropriate, the Office of Dispute
Resolution may consult with other components of the Department of Justice as
part of the review process. Questions
concerning this process can be presented by calling the Office at 202-616-9471.
APPENDIX A
Declaration of Policy on Use of Alternative Means of
Dispute Resolution
Pursuant
to the provisions of the Administrative Dispute Resolution Act of 1996 and the
Presidential Memorandum of May 1, 1998, implementing that act, the
_________________ Department/Agency recognizes that in appropriate
circumstances, there may be more effective methods to resolve issues in
controversy that arise involving the Department/agency than through reliance
upon more adversarial administrative processes. The voluntary use of alternative means of dispute resolution,
such as mediation, fact-finding, ombuds, neutral evaluation, and arbitration,
often can provide faster, less expensive, and more effective resolution of
disputes that arise with employees, contractors, the regulated community and
others with whom the Department/agency does business. In recognition of this, the ___________________ Department/agency
declares that: (1) its managers and attorneys will be knowledgeable about
alternative means of dispute resolution, (2) its managers and attorneys will
examine the suitability of using alternative means of dispute resolution when
issues in controversy arise involving the Department/agency, and (3) in
appropriate disputes, its managers and attorneys will use alternative means of
dispute resolution in a good faith effort to achieve consensual resolutions of
issues in controversy involving the Department/Agency.
APPENDIX B
Dispute Resolution Contract Clause
1. NEGOTIATION
The
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement by negotiating between executives and/or officials
who have authority to settle the controversy and who are at a higher level of
management than the persons with direct responsibility for administration of
this contract. Any party may give the
other party written notice of any dispute not resolved in the normal course of
business. Within 15 days after delivery
of the notice, the receiving party shall submit to the other a written
response. The notice and the response
shall include: (a) a statement of each
party's position and a summary of arguments supporting that position, and (b)
the name and title of the executive or official who will represent that party
and of any other person(s) who will accompany the executive or official. Within 30 days after delivery of the
disputing party's notice, the representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one party to the
other will be honored.
If
the matter has not been resolved within 60 days of the disputing party's
notice, or if the parties fail to meet within 30 days, either party shall/may
initiate mediation of the controversy or claim as provided hereafter.
2. MEDIATION
In
the event the dispute has not been resolved by negotiation as provided herein,
the parties agree to participate in mediation, using a mutually agreed upon
mediator. The mediator will not render
a decision, but will assist the parties in reaching a mutually satisfactory
agreement. The parties agree to share
equally the costs of the mediation. The first mediation session shall commence
within 30 days from agreement. If the
matter has not been resolved within 60 days of the first mediation session,
either party may/shall initiate arbitration as provided hereafter.
3. ARBITRATION
Any
dispute not otherwise satisfactorily resolved (shall, may) be submitted to
arbitration. (Details for specific
arbitration procedures to be added; for example, the name of an ADR provider,
the rules under which the arbitration will be conducted, the method the parties
will use to select an arbitrator, etc.
APPENDIX C
CHECKLIST FOR THE SELECTION OF ARBITRATOR
1. Determine the number of arbitrators to
conduct the proceeding. (See Issue No.
11).
2. Design the selection procedure so the agency
may place names on the proposed list of arbitrators along with the other
parties.
3. Provide an opportunity for the agency to
strike any of the proposed arbitrators.
4. Establish time limits so the selection
process moves expeditiously to completion.
5. Consult with your agency's Dispute
Resolution Specialist, Senior Counsel for Dispute Resolution at DOJ, local bar
organizations, and ADR entities for lists/rosters of arbitrators suitable for
governmental use.
6. Determine if the parties will agree on
selection of the arbitrator themselves or if they will use an organization to
assist them.
7. Research carefully the experience and
ability of all proposed arbitrators. In
addition, consider the following factors:
Does
the arbitrator have a reputation for integrity? (Check references)
Does
the arbitrator have extensive arbitration experience?
What
kind of specific subject matter expertise, if any, is needed?
Does
the arbitrator's background show any leaning or predilections?
If
the arbitrator is a practicing attorney, does he specialize in plaintiffs'
and/or defendants' work?
Has
the arbitrator worked with big companies, small companies and/or governmental
agencies?
Where
is the arbitrator located geographically?
Does
the arbitrator's background indicate a preference for more formal proceedings
as opposed to less formal ones?
Is
the arbitrator available when necessary, and is the arbitrator’s calendar free
enough to expeditiously handle your case?
Does
the arbitrator have a record of being reasonably prompt in scheduling hearings
and issuing decisions?
Is
the arbitrator's rate for services consistent with the rates that the agency
ordinarily would pay for similar services?
(Check to see if a government rate is available.)
8. Establish disclosure requirements that
comply with agency conflict of interest regulations to ensure that an
arbitrator has no official, financial, or personal conflict of interest with
any of the involved entities, unless such interest is fully disclosed in
writing to all parties, and all parties agree that the arbitrator may serve.
9. Provide procedures to replace the arbitrator
if the position becomes vacant by disqualification or disability.
Note: You may hire an ADR provider to administer
the arbitration and perform all these functions for you. (See Issue No. 16.)
APPENDIX D
Agreement to Submit to Binding Arbitration
We, the undersigned parties, hereby voluntarily agree to submit the following controversy to binding arbitration: (briefly describe the controversy). We agree upon ________________ as the arbitrator, to be paid at the rate of $___________, which will be jointly shared by the parties. We further agree that the arbitration shall be conducted under the (identify the applicable procedural rules). We further agree that we shall faithfully observe this agreement and the (applicable procedural rules), that we will abide by and perform any award rendered by the arbitrator, and that a judgment of a court with appropriate jurisdiction may be entered on the award. Finally, we agree that the maximum award that the arbitrator can issue in this binding arbitration shall not exceed (insert here the maximum award that may be issued by the arbitrator and specify other conditions limiting the range of possible outcomes).