American Law Institute publishes Restatement of U.S. Law on International Arbitration

An ALI Restatement is a comprehensive and authoritative summary of the current state of the law on a given topic, based on extensive research and analysis by the ALI. The ALI is a prestigious and independent organization of legal scholars, judges, and lawyers. Restatements are not binding precedent, but they are influential sources of law often used as a guide by courts and practitioners.

The Restatement of the U.S. Law of International Commercial and Investor-State Arbitration is significant because it provides a compendium and analysis of the statutes and jurisprudence relevant to the subject. It provides courts and corporations with a one-stop-shop clarifying the state of international arbitration law in the U.S.

Background and Context of the Restatement

U.S. federal statutory law covering international arbitration is limited, derived mainly from the Federal Arbitration Act (FAA), the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), and the Inter-American Convention on International Commercial Arbitration (Panama Convention). The latter two are international treaties that the U.S. has ratified and implemented through the FAA.

While nations like the U.K. have modernized their arbitration statutes, the FAA was enacted in 1925, and its only major amendments have been for the purpose of incorporating the two international conventions. States may also have some laws pertaining to international arbitration, but they are often preempted by federal law or inconsistent with the international treaties.

The sparse statutory landscape has resulted in a complicated patchwork of judicially created law, which varies depending on the type, stage, and location of the arbitration. The Restatement seeks to elucidate this body of law, and to identify and resolve some of the ambiguities and controversies that arise from it.

Structure and Content of the Restatement

The Restatement covers topics including:

• arbitration agreements
• arbitral awards
• the American judiciary’s role in international arbitration proceedings in the U.S. and those abroad
• enforcement of awards rendered in the U.S. and those abroad
• the preclusion of international arbitral awards
• arbitration governed by the International Centre for Settlement of Investment Disputes (ICSID) Convention.

The Restatement’s structure mirrors the lifespan of an arbitration dispute: it first discusses the law applicable in the pre-arbitral stage of a dispute, then sets forth the law that applies during an arbitration, and concludes with a discussion of post-award proceedings.

The Restatement consists of five chapters, each of which contains several sections and subsections. The main topics and issues covered in each chapter are as follows:

• Chapter 1: defines key terms and concepts used in the Restatement. It also sets out the basic principles that govern international arbitration law in the U.S., such as the separability of arbitration agreements, the competence-competence of arbitral tribunals, and the federal preemption of state law.
• Chapter 2: addresses the issues that arise when a party seeks to enforce or resist an arbitration agreement. These include the validity, interpretation, and scope of the agreement, the defenses to enforcement, and the role of courts in determining arbitrability.
• Chapter 3: examines the extent and limits of U.S. court involvement in international arbitration proceedings seated both in the U.S. and abroad. It covers topics such as the interim and provisional measures available to parties and tribunals, the discovery and evidence issues that may arise, and the multiparty and multi-contract situations that may complicate the arbitration process.
• Chapter 4: considers the issues that arise after an arbitral award is rendered, such as the confirmation, enforcement, and vacatur of the award, and the grounds for its correction, modification, and remand.
• Chapter 5: examines the specific features and challenges of arbitration between foreign investors and host States, which is governed by a different legal framework than commercial arbitration and entails issues of foreign sovereign immunity. It sets forth the law governing the judicial role in investor-State arbitration, including the enforcement of the obligation to arbitrate, court involvement in investor-State arbitral proceedings, and the post-award relief in investor-state arbitration. It also discusses the special regime of arbitration under the ICSID Convention.

Commentary

A notable feature of the Restatement is the positions it takes on several unsettled issues. The positions the Restatement takes on these issues will undoubtedly influence the development of U.S. arbitration law going forwards.

To take one example, a persisting issue in U.S. arbitration law concerns the circumstances in which an arbitral tribunal has kompetenz-kompetenz to rule on its own jurisdiction. The Supreme Court held in First Options of Chicago v. Kaplan that a party challenging a tribunal’s jurisdiction may present the issue before a court unless the parties “clearly and unmistakably” reserved the issue for the arbitral tribunal. Following that decision, lower courts have disagreed over whether adopting institutional rules that state that the tribunal may decide its own jurisdiction is a “clear and unmistakable” choice. The Restatement takes a debatably controversial stance on this issue (or at least one that is at odds with the view expressed by most courts): it interprets First Options to state that incorporation by reference to institutional rules does not satisfy the “clear and unmistakable” test.

The Restatement’s publication benefits not only practitioners who may take advantage of its thorough legal analysis, but also businesses operating globally. Indeed, the publication may lead courts to apply the relevant legal principles more uniformly, thus enhancing the predictability of international arbitration agreements that require engagement with U.S. courts. With that said, the Restatement’s influence should not be overstated, as the publication ultimately lacks statutory or precedential authority, and only time will tell how widely it will be relied upon in proceedings having a U.S. nexus.