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Enforcement of Arbitration Agreements

Arbitration is a consensual process.  A party cannot be forced to arbitrate a dispute unless s/he agrees to do so.  In practice, however, many arbitration agreements are inserted in situations in which one of the parties has no bargaining power.  Moreover, arbitration clauses are frequently placed within sealed users’ manuals within products, within lengthy click-through agreements on websites, and in other contexts in which meaningful consent is not realistic.  Such agreements are generally divided into two types:

•        agreements which provide that, if a dispute should arise, it will be resolved by arbitration. These will generally be normal contracts, but they contain an arbitration clause

•        agreements which are signed after a dispute has arisen, agreeing that the dispute should be resolved by arbitration (sometimes called a “submission agreement”)

The former is the far more prevalent type of arbitration agreement.

The Administrative Dispute Resolution Act provides that arbitration may be used as an alternative means of dispute resolution whenever all parties consent. Consent may be obtained either before or after an issue in controversy has arisen and may be conditioned on an agreement to submit only certain issues to arbitration or that the award must be within a range of possible outcomes. However, an agency may not require any person to consent to arbitration as a condition of entering into a contract or obtaining a benefit.

An arbitration agreement that sets forth the subject matter submitted to the arbitrator must be in writing. The written agreement must specify a maximum award that may be issued by the arbitrator and may specify other conditions limiting the range of possible outcomes.

An agency officer or employee may not offer to use arbitration for the resolution of issues in controversy unless the officer or employee has authority to enter into a settlement concerning the matter or is otherwise specifically authorized by the agency to consent to the use of arbitration.  Each agency will determine the appropriate use of binding arbitration[i].

The parties to an arbitration proceeding are entitled to participate in the selection of an arbitrator, who must be a neutral.  An arbitrator to whom a dispute is referred under the Act may regulate the course and conduct of arbitral hearings; administer oaths and affirmations; compel the attendance of witnesses and production of evidence at the hearing pursuant to the provisions of the Federal Arbitration Act, to the extent the agency involved is otherwise authorized by law to do so; and make awards.

An agreement to arbitrate a matter to which the Administrative Dispute Resolution Act applies is enforceable pursuant to the Federal Arbitration Act.[ii] No action brought to enforce an arbitration agreement will be dismissed and relief will not be denied on the grounds that it is against the United States or that the United States is an indispensable party.

[i] 5 USCS § 575

[ii] 5 USCS § 576

Inside Enforcement of Arbitration Agreements