Jarred Pinkston, Toward a Uniform Interpretation of the Federal Arbitration Act: the Role of 9 U.s.c. Sec. 208 in the Arbitral Statutory Scheme

• Publication year: 2008

TOWARD A UNIFORM INTERPRETATION OF THE FEDERAL ARBITRATION ACT: THE ROLE OF 9 U.S.C. Sec. 208

IN THE ARBITRAL STATUTORY SCHEME†

Jarred Pinkston^*

INTRODUCTION .............................................................................................. 641

I. FAA-SPECIFIC VS. N.Y. ACT-SPECIFIC CLASS OF CONFLICTS ........... 649

A. Section 4 vs. Section 206-Extent of District Court Authority to Compel Arbitration ................................................................ 649

B. Section 9 vs. Section 207-Venue and Statute of Limitations .... 654

II. FAA-GENERAL VS. N.Y. ACT-SPECIFIC CLASS OF CONFLICTS .......... 656

A. Section 4 vs. Section 202-Federal Subject Matter

Jurisdiction ................................................................................. 656

B. Section 9 vs. Section 207-Consent to Confirmation

Requirement ................................................................................ 660

C. Sections 9, 10, and 12 vs. Section 207 and Article V of the New York Convention-Defenses to Confirmation of an Arbitral Award ........................................................................... 667

III. FAA-SPECIFIC VS. N.Y. ACT-GENERAL CLASS OF CONFLICTS .......... 676

A. Section 1 vs. Section 202-Exclusions to Subject Matter

Arbitrability ................................................................................ 676

B. Section 2 vs. Section 202 and Article II(3) of the New York

Convention-Revoking an Agreement to Arbitrate .................... 678

C. Section 3 vs. N.Y. Act's Silence-Stay of Court Proceedings ..... 680

D. Section 4 vs. Section 206-Extent of District Court's Authority to Compel Arbitration when the Arbitration Agreement Fails to Name a Situs ............................................... 682

E. Section 4 vs. N.Y. Act's Silence-Offensive Petition to Compel

Arbitration .................................................................................. 685

F. Section 4 vs. N.Y. Act's Silence-Standing Requirement ........... 685

G. Section 4 vs. N.Y. Act's Silence-Right to a Jury Trial on Issue of Existence of a Binding Arbitration Agreement and Breach Thereof ........................................................................... 686

H. Section 5 vs. Section 206-District Court's Authority to Name

Arbitrators .................................................................................. 688

I. Section 6 vs. N.Y. Act's Silence-Application by Motion ........... 689

J. Section 7 vs. N.Y. Act's Silence-Arbitrator's Power to

Compel a Witness to Appear ...................................................... 690

K. Section 8 vs. N.Y. Act's Silence-Seizure of Vessel or Property in Cases that Would Also Fall Under Admiralty Jurisdiction ................................................................................. 691

L. Section 9 vs. N.Y. Act's Silence-Service of Process in an

Action to Confirm an Award ....................................................... 692

M. Section 10 vs. Section 207 and Article V of the New York

Convention-Motion to Vacate an Award .................................. 694

1. Section 10(a)(1)-Fraud Generally ..................................... 697

2. Section 10(a)(2)-Arbitrator Corruption ............................. 698

3. Section 10(a)(3)-Arbitrator Misconduct ............................ 698

4. Section 10(a)(4)-Arbitrators Exceeded Authority .............. 699

N. Section 10 vs. N.Y. Act's Silence-Standing to Challenge an

Award ......................................................................................... 699

O. Section 11 vs. N.Y. Act's Silence-Judicial Modification of an

Award ......................................................................................... 700

P. Section 12 vs. N.Y. Act's Silence-Procedure to Vacate an

Award ......................................................................................... 701

Q. Section 13 vs. N.Y. Act's Silence-Procedure to Enforce a

Confirmed Award ....................................................................... 701

R. Section 14 vs. N.Y. Act's Silence-Contracts ............................. 702

S. Section 15 vs. N.Y. Act's Silence-Act of State Doctrine ........... 702

T. Section 16 vs. N.Y. Act's Silence-Appellate Jurisdiction .......... 703

CONCLUSION .................................................................................................. 704

INTRODUCTION

Arbitration, as an independent process and institution, has matured from the unwanted stepchild of the American judiciary to a reliable colleague in the resolution of disputes.¹They are, however, not equals. For all of arbitration's perceived independence, it still relies upon judicial (sovereign) support and encouragement because arbitration requires an enforcement mechanism lurking in the background to ensure good faith participation in the arbitral process and to give arbitration potency beyond other forms of dispute resolution.²With the enactment of the Federal Arbitration Act (FAA) in 1925,³arbitration gained the judicial support without which it would never have gained the vitality it now enjoys.⁴In enacting the FAA, Congress removed historical judicial hostility towards the arbitral process⁵and provided arbitration with a statutory legal structure upon which it could rely.

"[A]s a creature of contract,"⁶arbitration possesses a great deal of flexibility to morph itself to fit the needs of contracting parties, but it needs a reliable legal foundation to build upon and to ensure at the end of the day that an arbitration agreement or arbitral award will be enforceable. Therefore, a uniform and consistent (principled) interpretation of the federal statutory texts controlling arbitration is essential to nourish the arbitral process;⁷this is the ultimate goal of this Article. The twin goals of uniformity and consistency became harder to attain when the United States amended the FAA to codify the

1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 1970.⁸The New York Convention threw a potential wrench into the arbitral scheme as two different legal regimes came ostensibly to control international and domestic arbitration.⁹However, the superficial differences between the two legal regimes prove less stark than they appear because "[t]here is no reason to assume that Congress did not intend to provide overlapping coverage between the [New York] Convention and [the FAA]."¹⁰By and large courts have done an admirable job in melding the two into a uniform body of law.¹¹The ongoing convergence of the FAA and the New York Convention, and subsequent codification, however, lacks a principled, unifying interpretive paradigm.

This Article will set forth the case law addressing the interaction of U.S. domestic and international arbitral law and derive from that case law an interpretive approach to Title 9 (entirety of federal arbitral law) that promotes international arbitration by providing a principled and, therefore, uniform and predictable interpretation of the controlling statutory texts.¹²At the same time, this Article will draw attention to instances where courts have departed from the elicited interpretive paradigm.¹³When courts have done so, either they have reached questionable conclusions or unnecessarily distinguished between the foreign and domestic arbitral schemes, thereby resulting in an analytically less uniform arbitral scheme, which ultimately undermines the goal of developing a reliable and predictable legal foundation upon which arbitration may build.

Title 9 of the U.S. Code provides the framework of federal arbitral law and "confers an armamentarium of powers" upon a court to implement the title's directives.¹⁴Title 9 is divided into "three separate but inter-connected chapters."¹⁵The first chapter, which includes sections 1 through 16, constitutes the FAA (domestic arbitral law).¹⁶Chapter Two encompasses sections 201 through 208 and incorporates the New York Convention into Title

9 through section 201.¹⁷Therefore, in interpreting the interaction of Chapters

One and Two of Title 9, the New York Convention is a direct and substantive element of Chapter Two (the New York Convention and Chapter Two shall be referred to collectively as the "N.Y. Act"). The third chapter codifies and incorporates the Inter-American Convention on International Commercial

Arbitration,¹⁸also known as the Panama Convention, in sections 301 through

307.¹⁹The second and third chapters reference the FAA to form an

"interrelated, but . . . not a seamless whole."²⁰The FAA fills the gaps of the other two chapters and sets out the procedural framework that federal courts apply in implementing those chapters. All three chapters, or federal arbitral law in its entirety, will be referred to collectively as "Title 9," and the three individual chapters will be referred to as "FAA," "N.Y. Act," and "Panama Convention" respectively. In addition, hereinafter individual sections of Title

9 are simply referred to as "section" followed by the specific number.

Section 208 provides the statutory tool for harmonizing domestic and international arbitration:

Sec.208. Chapter 1; residual application

Chapter 1 applies to actions and proceedings brought under [Chapter Two] to the extent [Chapter One] is not in conflict with [Chapter Two] or the Convention as ratified by the United States.²¹

The hierarchical structure of the FAA as set forth in section 208, with the N.Y. Act taking precedence over the FAA in the international arena, supplies the first step in building a principled interpretive paradigm for Title 9. Section 208 provides the golden rule that when conflicts arise, the N.Y. Act trumps the

FAA.²²

Case law provides that in determining whether a conflict exists, the analysis should turn on three hierarchical considerations. The first and primary consideration is to determine which scheme, the FAA or N.Y. Act, most directly addresses a particular issue. This accords with a bedrock of...