American Arbitration Association Creates Right to Appeal

A recent and historic breakthrough is represented by the inclusion of an appellate process in the arbitration work of the American Arbitration Association. This development points to an important change in arbitration whereby the swift and nimble nature of the process a hallmark of arbitration itself — is working in tandem with mechanisms to rectify any mistakes that may have crept in. MFAA: Introducing Appellate Rights in Arbitration In response to increased concerns regarding the fairness and accuracy of arbitration, MFAA believes appellate rights will restore confidence in arbitration decisions


Background: Why An Appeal Process?

Finality has traditionally been one of the principal attractions of arbitration. Parties who select for arbitration prefer the speediness and economic benefits of arbitration over litigation in general. But the quid pro quo for this expedition was the very circumscribed route to challenging arbitration awards. In a traditional framework, arbitral awards can be challenged only in very limited circumstances (e. g. when the arbitrators show evident signs of bias or actual fraud).


But while this sturdiness has been their blessing, it has also been called into question. In some cases, parties believed that if arbitrators made substantial errors when interpreting the law or evaluating the evidence, they have no remedy. In light of these valid concerns, the introduction of an appellate process is a necessary and logical safety net to ensure that such errors are rectified in the interest of the integrity of the arbitration system.


AAA Appellate Arbitration Rules: Key Takeaways

The new AAA rules for appellate arbitration are specifically crafted to serve the interests of both providing an expedited process for arbitration and an effective, review oriented, appellate system. Key features of the new rules are given below,


Grounds of Appeal Errors in law which are both material and prejudicial Clearly erroneous factual determination This broader scope, as it then builds, exceeds the narrow grounds previously available under the Federal Arbitration Act.


Appellate Tribunal: Appeals shall be taken to a panel of arbitrators with appropriate specialization with regard to the subject matter of such appeal. This helps maintain the integrity of the review process and draws directly on the AAA’s deep bench of experienced arbitrators.


Timeline: The appeal process is designed to be expedited. The appeals must be filed within a timeframe after the initial award, and the appellate tribunal must issue a decision quickly, typically within three months.


Nature of the Decision: The decision is final as well as other characteristics as the decision is already set by the appellate tribunal. La presente medida garantiza que la facultad de recurrir no tenga el efecto de dilatar en exceso el proceso de arreglo de diferencias. This arbitral judgment may be enforced as any other final and unappealable interparties award.


Consensual Appeal: this is when the parties, either when the arbitration clause is being drafted, or after the dispute arises, agree to an appellate process. This optionality allows the autonomy and flexibility of the stakeholders to be intact.


What It Means for Arbitration Practice

Careful how you draft this clause as the due process to the arbitrating party might change the arbitration landscape going forward with the right to appeal now a possibility. For companies, it provides additional certainty that if legal or factual misunderstandings arise, they can be put right without having to go to court in the first place. This latter point may broaden the appeal of arbitration in disputes, particularly in the realm of commercial activity where there is high stakes and the minutiae is labyrinthine.


Also, for legal practitioners, the appellate process offers the opportunity to tweak their approach to arbitration with this higher level of scrutiny in place. It might lead to harsher initial arbitration hearings, given they may be fighting a likely appeal later.


Rather, it was an important step in the development of arbitration to have the American Arbitration Association assert a right to appeal. Creating an appellate process within the AAA is a double win; it mitigates fairness and quality concerns and reinforces the trust in and reach of arbitration as a viable adjunct to litigation. Such a judicious inclusion of an appellate process will hopefully build and enhance trust and satisfaction in the arbitration system for the contributors.

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