arbitration

BG Group, PLC v. Republic of Argentina

Issues: 
  1. Does an arbitrator or a court decide whether a precondition to arbitration has been satisfied?
  2. To what extent can federal courts review such decisions?

The United Kingdom and Argentina signed the Bilateral Investment Treaty in 1990 to promote international investment in Argentina. The Treaty requires that disputes first be submitted to Argentine courts for a certain period before being arbitrated. After the Argentine economic crisis in 2001 and 2002, Argentina enacted several measures that restrained investors from litigating effectively. BG Group filed for arbitration in the United States against Argentina without first submitting the dispute to Argentine courts. After the arbitral tribunal issued an award, Argentina argued that the tribunal had no jurisdiction over the parties. The issue here is whether the arbitrators or the courts should determine whether a precondition for arbitration has been satisfied. BG Group argues that the purpose of international arbitration is to allow experienced arbitrators to decide issues in a neutral forum, not governed by a particular country. Argentina argues that the purpose of arbitration is to give the parties what they agreed to and that judicial review is necessary for securing international treaties. The Supreme Court will determine whether courts or arbitrators decide these threshold questions of arbitrability. This decision will impact the substance of international arbitration agreements and how the United States is perceived as a seat for international arbitration.

Questions as Framed for the Court by the Parties: 
  1. In disputes involving a multi-staged dispute resolution process, does a court or instead the arbitrator determine whether a precondition to arbitration has been satisfied?
  2.  Whether a federal court with jurisdiction over an application to vacate an arbitral award may independently decide whether a valid and binding agreement to arbitrate has been created under the terms of a bilateral investment treaty?

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Facts

On December 11, 1990, the United Kingdom and Respondent Argentina signed the Bilateral Investment Treaty (“BIT”). See Republic of Arg. v. BG Group PLC, 665 F.3d 1363, 1366 (D.C. Cir.

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Oxford Health Plans, LLC v. Sutter

Over a decade ago, Petitioner Oxford Health Plans, LLC (Oxford) agreed to pay Respondent Dr. Ivan Sutter for providing medical services to members of Oxford’s managed care network. Their contract contains a broad arbitration clause which prohibits litigation of their disputes in court and instead requires that they arbitrate their disputes. In 2002, Sutter complained that Oxford failed to pay him and other primary health care providers for medical services. After an arbitrator decided that their contract clause allowed “class arbitration,” or the consideration of an arbitration claim on behalf of a group of similar claims, Oxford went to federal court to vacate the arbitration award, arguing that the arbitrator exceeded his power to arbitrate. Both the District Court and the United States Court of Appeals for the Third Circuit denied Oxford’s motion to vacate and instead upheld the arbitrator’s decision to hear Sutter’s claim in class arbitration. Oxford argues that the arbitrator’s decision for class arbitration must be vacated because Oxford and Sutter never agreed to class arbitration in their contract exchanging medical services for compensation. In contrast, Sutter argues that the Court should uphold the award because the arbitrator acted within his powers and based his decision on the terms of the agreement between the parties. Oxford warns that a holding for Sutter would discourage parties from agreeing to arbitration to avoid the risk of being saddled with the costs of class arbitration. In contrast, Sutter argues that a holding for Oxford would encourage parties to challenge arbitration decisions in court, undermining the purpose of arbitration to avoid the costs of litigation, and effectively prevent individuals from pursuing their small claims by robbing them of the opportunity to present their claims as a group rather than individually.

Questions as Framed for the Court by the Parties: 

In Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1776 (2010), this Court made clear that "class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to arbitration." In this case, an arbitrator concluded that the parties affirmatively consented to class arbitration on the basis of a contract provision stating: "No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration."

The question presented is:

Whether an arbitrator acts within his powers under the Federal Arbitration Act (as the Second and Third Circuits have held) or exceeds those powers (as the Fifth Circuit has held) by determining that parties affirmatively "agreed to authorize class arbitration," Stolt-Nielsen, 130 S. Ct. at 1776, based solely on their use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract.

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Issue

Can an arbitrator decide that a contract broadly requiring arbitration of disputes also allows for "class arbitration" or the hearing of a claim on behalf of an entire group of similar claims?

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American Express Company, et al. v. Italian Colors Restaurant, et al.

Italian Colors Restaurant, along with other merchants, sued American Express in a class action lawsuit for alleged antitrust violations for compelling merchants to accept American Express credit cards and pay exorbitant rates. In the agreements those merchants signed with American Express, they agreed to use bilateral arbitration rather than class actions in resolving any disputes. Italian Colors argues that this bilateral arbitration clause would create prohibitive costs for any pursuit of their legal rights. This effectively immunizes American Express from any liability under the Sherman Antitrust Act. Therefore, courts must not enforce the arbitration agreement in this context. American Express contends that courts should adhere to the terms of arbitration agreements unless the terms would violate substantive United States law. From a policy standpoint, Italian Colors claims that arbitration is a poor vehicle to vindicate antitrust claims because the length of time an arbitral proceeding would take would create problems for potential claimants, creating difficulty in pursuing a claim before the statute of limitation expires and removing a disincentive for corporate abuse. American Express notes the myriad benefits of arbitration over litigation, specifically arguing that arbitration is more beneficial to lower income plaintiffs and less subject to abuse by frivolous or vengeful lawsuits.

Questions as Framed for the Court by the Parties: 

Whether federal arbitration law recognizes an “effective vindication” exception to class-arbitration waivers that allows courts to ignore arbitration agreements and permit class-action lawsuits where individual plaintiffs’ claims are so small that no single plaintiff would rationally bring a bilateral, one-on-one arbitration to vindicate federal rights.

Issue

Can courts refuse to enforce class-arbitration waivers and permit class-action lawsuits where a plaintiff’s individual claim is worth much less than the cost of bringing that claim? 

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