USA Law and Practice Contributed by: Matthew Kirtland, Timothy Tyler, Katie Connolly and Taylor LeMay, Norton Rose Fulbright US LLP
3.3 National Courts’ Approach Recent US court rulings are mixed on the law govern - ing an arbitration agreement where no such law has been specified by the parties. The law applicable to the existence or validity of an arbitration agreement depends on the type of alleged defect in the agree - ment. Some US courts have held that where an agreement contains a general choice-of-law clause and the arbi - tration agreement does not contain a choice-of-law provision but provides for a foreign-seated arbitration, the arbitration agreement creates a strong presump - tion that the law of the seat of the arbitration governs the arbitration agreement. Some courts have recog - nised that an arbitration agreement is governed by the contract law of the state whose laws otherwise apply to it. Some US courts have held that if a challenge is based on a party’s alleged lack of capacity, the appli - cable law is determined by the law “applicable to the party”, not the law governing the parties’ agreement or the law of the seat of the arbitration agreement. Other US courts have held that the parties’ agree - ment’s general choice-of-law clause will generally govern the dispute. 3.4 Validity While the FAA is silent on the question of severability, the US Supreme Court has consistently held that an arbitration provision is severable from the remainder of the contract. 4. The Arbitral Tribunal 4.1 Limits on Selection The FAA does not limit the parties’ autonomy to select arbitrators. 4.2 Default Procedures The FAA provides a default procedure for appointing arbitrators if: • no method is provided; • a method is provided for and any party fails to avail itself of the method; or • there is a lapse or breakdown in the naming of an arbitrator for any reason.
of a valid contract. However, the arbitration agree - ment need not necessarily be signed, and it can be incorporated by reference. Arbitration agreements can be invalidated by “generally applicable contract defenses” such as fraud, duress or unconscionability. 3.2 Arbitrability The FAA provides that it does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (9 USC Section 1). The Supreme Court has also ruled that the FAA does not allow a court to compel class arbitration when the agreement does not explicitly provide for such. In addition, arbitration has recently faced pushback in the United States from some legislators, and several states have enacted laws designed to limit mandatory arbitration; these usually affect only domestic arbitration. Finally, as discussed in 2.1 Governing Law , Chapter 4 prohibits employers from requiring employees or contractors to arbitrate claims of sexual harassment or sexual assault. The Supreme Court has held that, under the FAA, the question as to which forum – court or arbitrator – has the primary power to decide arbitrability depends upon whether the parties agreed to submit the arbitra - bility issue to the arbitrator. If arbitrability is delegated to an arbitrator, courts will defer to the arbitrator. How - ever, if there is no clear delegation of authority, courts will determine the arbitrability of the dispute. In other words, courts presume that parties intend courts (not arbitrators) to decide questions of “arbitrability” unless clearly and unmistakably agreed otherwise. Questions of arbitrability include whether the parties are bound by an arbitration clause, and whether a concededly binding arbitration clause applies to a certain type of controversy. US courts often find delegation when parties incor - porate arbitration rules that delegate the question of arbitrability to the arbitrators. However, in some courts (2nd, 9th and DC Circuits), this delegation depends on the surrounding circumstances. Express carve-outs from a delegation clause have been held to impair otherwise clear and unmistakable delegations of arbi - trability to arbitrators.
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