Those who arbitrate are well aware that an award issued by an arbitrator is all but final.
Avoidance of a lengthy and expensive appeal process is the reason many choose to arbitrate. An inability to have unfavorable awards reviewed for errors of law is the reason many wish to avoid arbitration. The grounds for vacating or modifying an arbitration award are severely limited. A jurist once commented that such awards, whether good, bad or ugly, will likely be confirmed. Although creative lawyers, often with good reason, will seek to expand the areas where appeals may prove successful, courts remain steadfast in holding that in arbitration, it is done when it is done. That is what the parties bargained for.
For many years, and until recently, it had been even harder to obtain a modification of an award from the arbitrator who rendered it as opposed to a court. Former Rule 50 of the Commercial Arbitration Rules of the American Arbitration Association limited requests to modify to clerical, typographical or computational errors apparent on the face of the award. Parties had but twenty days to raise such an issue and, typically, because of the irrefutability of any such error, it was quickly granted when warranted. And any request that did not neatly fit one of the permissible categories was swiftly denied. With a recent amendment to the Commercial Arbitration Rules, the door to modification has creaked open – at least a crack.
In the 2022 amendments to the Commercial Rules, a party may now request that the arbitrator “interpret the award.” The phrase suggests more of a substantive review than previously permitted. The AAA has stated that the rule was amended because of the significant increase in reasoned awards requested by the parties or required by the parties’ arbitration agreement. With more detailed explanations of the basis for awards now being set forth, and a movement away from the standard award where only the result was stated, the prospect of ambiguities arising or clarification being necessary is more significant. The drafters were seeking to avoid circumstances where a second arbitration would be necessary to clarify what the initial award failed to clearly state.
The drafters, however, did take immediate steps to make sure this creaky door was not a wide open one. The new Rule 52 retained the prior rules’ statement that “the arbitrator is not empowered to re-determine the merits of any claim already decided.” Nonetheless, should an arbitrator opt to “interpret” an award where parties offer differing interpretations, one party will be happy and the other will not. The interpretation may give rise to other recognized bases for a court to vacate or modify the award, and the limits and elasticity of the phrase will be tested in many future arbitrations. Indeed, an arbitrator’s decision not to interpret an award may be relevant to a reviewing court.
The Pennsylvania legislature has also spoken on the subject. The Pennsylvania Revised Uniform Arbitration Act, effective in 2019, expanded the permissible modification requests to include a modification necessary “to clarify an award.” Without doubt, those involved in arbitrations, in whatever Pennsylvania forum, will have to wait for courts to “interpret” or “clarify” (to coin some words) just what these new rules will mean for those who arbitrate.
To learn more about the Alternative Dispute Resolution Group, please click here.
This post was written by Steven Petrikis