New AAA/ICDR Optional Appellate Arbitration Rules – Questions Abound

On November 1, 2013, the American Arbitration Association (AAA) and its international branch, the International Centre for Dispute Resolution (ICDR), introduced new Optional Appellate Arbitration Rules. As the title indicates, the new "Optional" Appellate Rules only apply where the parties have agreed to use them. Where that is the case, the new rules permit a dissatisfied party to obtain private appellate review of alleged "material and prejudicial" errors of law and/or "clearly erroneous" determinations of fact made by an arbitration panel. The new AAA/ICDR Appellate Rules are available here.

Private appellate review of arbitration awards is not new. Other arbitral bodies - most notably, CPR and JAMS - have offered similar rules for more than a decade.1 Alternatively, parties sometimes insert ad hoc appeal procedures in contracts. Under either approach, the goal is to balance perceived arbitration advantages (efficiency, lower costs, speed and finality), against the risk of aberrant awards. Without private appellate review, a party convinced that an arbitration "fell off the rails" faces daunting odds in court. The Federal Arbitration Act (FAA) and its state counterparts authorize courts to step in and "fix" arbitration awards only in narrow circumstances.2

Features of the Rules

The new AAA/ICDR Appellate Rules differ in significant ways from the existing CPR and JAMS approaches (which already differ from one another). The following are among the most important features of the new AAA/ICDR Appellate Rules:

Agreement is Required. Parties must agree to using the AAA/ICDR Appellate Rules, either "by stipulation or in their contract." In other words, as their name suggests, applicability of the rules is "opt in," not automatic. Exclusion of Consumer Contracts. An explanatory comment to Rule A-1 states that the Appellate Rules "do not apply to disputes where the arbitration clause is contained in an agreement between individual consumers and businesses," i.e., to "primarily non-negotiable" consumer contracts involving the purchase of goods and services. Neither the CPR nor JAMS procedures include that limitation. Appeal Timetable. The AAA/ICDR predicts that appeals under its "streamlined" rules will be completed in about three months. However, steps in the process include thirty days to file an initiating Notice of Appeal, potential cross-appeals, record assembly, panel selection and organization, procedural conference call(s), briefing (including replies), potential oral argument, and time for the appellate panel to issue a written decision. Several of those deadlines can be...