Tag Archives: Arbitration

ALR 2024-2025

Why the EFAA Has Failed to Protect Many #MeToo Victims

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By

Avery Israel*

Liliana Barrios-Contreras was a cast member on the show Black Ink Crew- Chicago from August 2017 until July 2020.1 The contract she signed to take part in the show included a clause that sent all disputes arising from the contract to arbitration.2 Barrios-Contreras alleged she was subject to sexual harassment throughout her time employed on the show, and that reporting the harassment contributed to her termination.3 On July 6, 2023, Barrios-Contreras filed a complaint with the court alleging discrimination and wrongful termination based on the sexual harassment.4 She argued that the arbitration clause in her contract was unenforceable under federal law as it was directly contrary to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (herein “the EFAA”). 5 The court disagreed with Barrios-Contreras, stating that the EFAA only applied to claims that arose after March 3, 2022, and the EFAA did not have any retroactive applications to claims accrued before the start date.6

The court’s decision about the retroactive application of the EFAA is found in the plain language of the act, “[t]his Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.”7 The reasoning for having no retroactive application is minimal at best. Congress did not publish its reasoning for making the act only proactive, nor have courts pointed to a reason behind it when striking down retroactive cases.8 The decision to not have some retroactive application to claims under the EFAA is counter to the reasoning for having the act in the first place, as well as counter to public policy reasons for having retroactive enforcement of acts.9

The EFAA came about in great part as a reaction to the #MeToo movement, which showed just how ubiquitous sexual harassment has been in modern society, especially in the workplace.10 #MeToo shed light on years of sexual abuse that had been implicitly and explicitly allowed in the workplace in order to hold the abusers accountable for their past behaviors as well as stop sexual harassment from being pervasive in the future.11 Since the EFAA was inspired by a movement to hold people accountable for their past abuses, it is counterintuitive for the act to not hold those accused abusers still within the statute of limitations accountable for actions accrued before the act was signed. If a case is still able to be civilly litigated, intuitively, the EFAA should apply.

The EFAA should also apply retroactively to claims accrued before its signing under public policy reasons. One public policy reason for the retroactive application of laws is efficiency, as retroactive application maximizes the benefits the law was passed to have.12 By only accruing on the date it was signed, the EFAA is not maximizing the benefit it intended of stopping sexual abusers from avoiding a civil courtroom. Further, retroactive law reformers advocate providing relief for disproven policies from the past.13 The policy of allowing sexual abusers to force their victims into arbitration has been disproven by virtue of the EFAA being passed, and victims within the statute of limitations deserve the relief retroactive application would afford them. Also, since sexual harassment and assault were never allowed, the risk of undue punishment for the accused is extremely low.14

Many people like Liliana Barrios-Contreras are still being forced to arbitrate their abuse claims across the table from their abusers. If Congress had allowed the retroactive application of the EFAA to claims still within the statute of limitations, it would have better furthered the purpose of the act and given much-needed relief to those downtrodden by past policy.

* Avery Israel is a Senior Editor of the Arbitration Law Review and a 2025 Juris Doctor Candidate at Penn State Law.

  1. Barrios-Contreras v. Big Fish Ent. LLC, 2024 U.S. Dist. LEXIS 125802, 2024 WL 3435854 (S.D.N.Y., July 17, 2024) at *2. ↩
  2. Id. ↩
  3. Id. at *3. ↩
  4. Id. ↩
  5. Barrios-Contreras, 2024 U.S. Dist. LEXIS 125802 at *13. ↩
  6. Id. (citing Pub. Law 117-90 § 3). ↩
  7. 117 P.L. 90; 2022 Enacted H.R. 4445; 117 Enacted H.R. 4445; 136 Stat. 26. ↩
  8. H.R.4445 — 117th Congress (2021-2022); Zuluaga v. Altice USA, 2022 N.J. Super. Unpub. LEXIS 2356 (N.J. App. Div. Nov. 29, 2022). ↩
  9. Bryce Covert, One of #MeToo’s Biggest Wins Is About to Be Tested in Court, The Nation (June 13, 2023), https://www.thenation.com/article/society/sexual-harassment-me-too-arbitration/. ↩
  10. Deborah A. Widiss, New Law Limits Mandatory Arbitration in Cases Involving Sexual Assault or Sexual Harassment, at 50, ABA, LAB. & EMP. L. Newsletter (Fall 2022). ↩
  11. Holly Corbett, #MeToo Five Years Later: How The Movement Started And What Needs To Change, Forbes (Oct. 27, 2022), https://www.forbes.com/sites/hollycorbett/2022/10/27/metoo-five-years-later-how-the-movement-started-and-what-needs-to-change/. ↩
  12. Daniel E. Troy, Retroactive Legislation, at 22 (1998). ↩
  13. Retroactivity, Restore Justice, https://www.restorejustice.org/legal-explainer/explainer-retroactivity/#:~:text=Retroactive%20reforms%20today%20are%20designed,disproven%20policies%20of%20the%20past (last visited Oct. 10, 2024). ↩
  14. exual Harassment, Equal Employment Opportunity Commission, https://www.eeoc.gov/sexual-harassment. ↩
ALR 2024-2025

Go For Bronze: Court of Arbitration for Sport’s Case of the 2024 Women’s Olympic Floor Finals

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By

Morgan Elmore*

Following the conclusion of the women’s gymnastics floor exercise final of the 2024 Paris Olympic Games, it was not the gold medal recipient people were interested in but the bronze.1 All eyes were on Jordan Chiles, the recipient of the bronze after The Federation of Romanian Gymnastics contested the timeliness of a score inquiry brought by Chiles’ coach contesting her difficulty score.2 The Fédération Internationale de Gymnastique (herein “FIG”), the international governing body for gymnastics, accepted the score inquiry, and the resulting change in score dropped Ana Marie Bărbosu from third to fourth. Chiles improved from fifth to third.3 The Romanians brought a claim against FIG to the Court of Arbitration for Sport (herein “CAS”) that “the inquiry submitted by Ms. Chiles should be dismissed as it was submitted after the end of the 1-minute deadline provided by Article 8.5 of FIG Technical Regulations 2024.”4 Chiles, her coach, and USA Gymnastics participated in the case through counsel.5 Interestingly, the International Olympic Committee (herein “IOC”) chose to participate but almost solely as an observer, offering little testimony.6

CAS is governed by the Code of Sport, which outlines rules and procedures for various international sports.7 The Code establishes procedures for arbitration, appeals, mediation, as well as procedures for receiving advisement on disputes prior to any formal procedure.8 The CAS does not question scoring or decisions of referees and officials, only technical or procedural issues.9 CAS was established by the International Olympic Committee (herein “IOC”) in 1983.10 Organizations including the IOC and Federation Internationale de Football Association (herein “FIFA”), often see disputes resolved in the CAS.11 Here, neither party challenged the jurisdiction or applicable law used by CAS.12

The issue before the Court here was whether the score inquiry was made soon enough after Chiles’ posted score.13All associated parties stipulated that the inquiry was submitted after one minute and four seconds.14 This issue hinged on the interpretation of Article 8.5 of FIG Technical Regulations and whether it allowed for discretion in the timeliness of inquiries.15 Article 8.5 reads “[f]or the last gymnast or group of a rotation, this limit is one (1) minute after the score is shown on the scoreboard.”16 It adds that “[l]ate verbal inquiries will be rejected.”17USA Gymnastics contended that using other Articles in FIG rules in other facets like length of routine, there was some flexibility in timeliness and therefore rule 8.5 could also be understood as flexible.18The Court noted that in other FIG rules prescribing timeliness, the rule explicitly notes conditions for exceptions while the FIG rule addressing scores inquiries does not.19The Court interpreted this absence as an intention to keep the time limit strictly to one minute.20

Issues regarding who took the inquiry and the inquiry electronic system were raised however, they did not affect the Court’s decision.21 The court concluded that the one-minute time limit was absolute.22 Therefore, the scores were ordered to be reverted to the pre-inquiry results.23 As a result, Chiles returned to fifth place with Bărbosu returning to third place and awarded the bronze medal.24 Chiles has filed multiple appeals.25

Ultimately, CAS proved to be the best, most widely recognized forum for resolving this dispute in an unbiased manner. CAS fulfilled its aim of interpreting the FIG rules and their application while not straying into the official scoring awarded by the judges for the performance. While the results of the Court have been internationally scrutinized, largely raising political biases, CAS properly adjudicated the issue.26

* Morgan Elmore is a Senior Editor of Arbitration Law Review and a 2025 Juris Doctor Candidate at Penn State Law.

  1. See Alice Park, Why Jordan Chiles Lost Her Bronze Medal, Time Magazine (August 12, 2024 6:48 PM) https://time.com/7009822/jordan-chiles-olympic-bronze-in-jeopardy/. ↩
  2. See Id. ↩
  3. Fed’n Rom. Gymnastics & Ana Maria Bărbosu v. Donatella Sacchi & Fed’n Int’l de Gymnastique, CAS OG 24-15, Judgment, (Aug. 14, 2024) https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_OG_15-16__for_publication_.pdf. ↩
  4. Id. ↩
  5. Id. ↩
  6. Id. ↩
  7. Origins, History of the CAS, Tribunal Arbitral Du Sport/Court of Arbitration for Sport (Oct. 6, 2024 2:36 PM) https://www.tas-cas.org/en/general-information/history-of-the-cas.html. ↩
  8. Id. ↩
  9. Fed’n Rom. Gymnastics & Ana Maria Barbosu v. Donatella Sacchi & Fed’n Int’l de Gymnastique, CAS OG 24-15, Judgment, at ¶ 141, (Aug. 14, 2024) https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_OG_15-16__for_publication.pdf. ↩
  10. Tribunal Arbitral Du Sport/Court of Arbitration for Sport, supra note 7. ↩
  11. Id. ↩
  12. See Donatella Sacchi & Fed’n Int’l de Gymnastique, CAS OG 24-15. ↩
  13. Id. ↩
  14. Id. ↩
  15. Id. ↩
  16. Fed’n Rom. Gymnastics & Ana Maria Barbosu v. Donatella Sacchi & Fed’n Int’l de Gymnastique, CAS OG 24-15, Judgment, at ¶ 117, (Aug. 14, 2024) https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_OG_15-16__for_publication.pdf. ↩
  17. Id. ↩
  18. Id. ↩
  19. Id. ↩
  20. Id. ↩
  21. See Federation Romanian Gymnastics and Ana Maria Bărbosu v. Donatella Sacchi and Fédération Internationale de Gymnastique; Caroline Simson, New Guidelines Put the “How” in Arbitrator Disclosures, Law360 (August 30, 2024, 6:40 PM) https://www.law360.com/articles/1874048/new-guidelines-put-the-how-in-arbitrator-disclosures. ↩
  22. Fed’n Rom. Gymnastics & Ana Maria Barbosu v. Donatella Sacchi & Fed’n Int’l de Gymnastique, CAS OG 24-15, Judgment, at ¶ 117, (Aug. 14, 2024) https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_OG_15-16__for_publication.pdf. ↩
  23. Id. ↩
  24. See Becky Sullivan, Court says it won’t reconsider case that took away Jordan Chiles’ bronze medal, NPR (August 11, 2024 4:35 PM)  https://www.npr.org/2024/08/11/g-s1-16509/us-gymnast-jordan-chiles-bronze-medal-return. ↩
  25. See James Pratt, Jordan Chiles Submits Appeal Over Paris 2024 Bronze Medal Ruling to Swiss Federal Supreme Court, Olympics (Sept. 17, 2024) https://olympics.com/en/news/jordan-chiles-submits-appeal-paris-2024-bronze-medal-ruling-swiss-federal-supreme-court. ↩
  26. See Caroline Simson, Gharavi Threatens Defamation Suit In Chiles Controversy, Law360 (August 27, 2024 7:54 PM) https://www.law360.com/internationalarbitration/articles/1873900/gharavi-threatens-defamation-suit-in-chiles-controversy ; Caroline Simson, Conflict Questions Haunt Chiles’ Bronze Medal Case, Law360 (August 15, 2024, 10:26 PM) https://www.law360.com/internationalarbitration/articles/1870183/conflict-questions-haunt-chiles-bronze-medal-case. ↩
ALR 2024-2025

Breaking the Silence: How the Ending Forced Arbitration Act is Reshaping Contract Disputes in Reality Television

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By

Sakina Bhatti*

While reality TV captivates audiences with its on-screen drama, the true tensions between cast members and producers have long remained behind the scenes, kept quiet by non-disclosure agreements and arbitration clauses buried in contracts.1 These clauses have allowed disputes—whether over contract terms, wages, or personal grievances—to be resolved in private, away from public scrutiny and knowledge.2 Cast members, as a result, have been forced into arbitration.3 However, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act4 (herein “EFAA”), marks a significant change in the resolution of disputes. The Act invalidates arbitration agreements in cases involving allegations of sexual harassment or assault, freeing claimants from the constraints of mandatory arbitration when making such claims.5 This shift is particularly relevant in the entertainment industry, where contracts are standard, but the stakes are exceptionally high due to the public nature of the work.

As a new season of the Netflix’s Love is Blind garners the public’s attention, a dispute from the fifth season demonstrates the potential impact of the EFAA.6 Tran Dang, a contestant on the dating show, sued Delirum TV, the production company behind the series, in Texas, alleging she was sexually assaulted by a fellow cast member.7 Delirum TV responded with a motion to compel arbitration, arguing that Dang’s claims were governed by the arbitration clause in her contract, but the state trial court denied the motion.8 On appeal, the Texas Court of Appeals affirmed the lower court, reasoning that the EFAA applies in any scenario where there are allegations of sexual assault, regardless of who the perpetrator is, or their relation to the entity seeking enforcement of the arbitration clause.9

Though this ruling might seem insignificant to those outside the world of reality TV, it is a pivotal development for the future of arbitration. Traditionally, the Federal Arbitration Act has created a strong presumption in favor of enforcing arbitration agreements, even when serious allegations were involved.10 The Dang case illustrates how the EFAA challenges the enforceability of such agreements, a core principle of arbitration.11

In reality TV, where contracts are designed to protect producers and networks from public disputes, the Dang ruling sets a precedent that could allow more participants to bring their claims into public courtrooms—and thereby into the public eye.12 This could draw attention to previously hidden dynamics and power imbalances in the industry. Though for viewers this may just mean an increase in the drama-levels of the shows, for arbitration practitioners, it presents a significant shift. Entities that have previously relied on arbitration agreements to manage disputes quietly may now be forced to reconsider their dispute resolution strategies. For industries like reality TV where public perception and confidentiality are paramount,13 this shift is potentially seismic.

Although the EFAA doesn’t completely remove arbitration from the picture in reality TV contract disputes, it opens the door for some claims that are important for the public’s knowledge to bypass the previously ironclad arbitration agreements. What remains to be seen, however, is the extent of the EFAA’s reach and its broader impact on the entertainment industry. As more cases test the boundaries of the EFAA, the field of arbitration will have to grapple with the evolving landscape and consider how these changes will shape contract enforcement and dispute resolution in the years to come.

* Sakina Bhatti is Senior Editor of Arbitration Law Review and a 2025 Juris Doctor Candidate at Penn State Law.

  1. David Arditi, The Voice: Non-Disclosure Agreements and the Hidden Political Economy of Reality TV, 18 Popular Communication 138 (2020). ↩
  2. See, e.g., Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018). ↩
  3. Hillel Aron, Judge Orders ‘Love Is Blind’ Cast Member Back to Arbitration, Courthouse News Service (Mar. 22, 2024), https://www.courthousenews.com/judge-orders-love-is-blind-cast-member-back-to-arbitration/. ↩
  4. Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), Pub. L. No. 117-90, 136 Stat. 26 (2022) (codified at 9 U.S.C. § 402(a)). ↩
  5. Id. ↩
  6. Ginger Christ, ‘Love is Blind’ Producer Can’t Force Arbitration in Sexual Assault Case, HR Dive (Apr. 10, 2024), https://www.hrdive.com/news/love-is-blind-arbitration-tran-dang-sexual-assault-lawsuit/712836/. ↩
  7. Dang v. Delirium TV, LLC, No. 2022-50674, 2023 Tex. Dist. LEXIS 4521 (Tex. Dist. Ct. May 10, 2023); see also Libby Torres, It’s Not Just ‘Love Is Blind’—Reality TV Has a Sexual Misconduct Problem, Business Insider (Oct. 12, 2023, 12:48 PM EDT), https://www.businessinsider.com/reality-tv-sexual-misconduct-problem-love-is-blind-2023-10. ↩
  8. Dang, 2023 Tex. Dist. LEXIS 4521. ↩
  9. Delirium TV, LLC v. Dang, No. 01-23-00383-CV, 2024 Tex. App. LEXIS 2451 at *17-18 (Tex. App. Apr. 9, 2024). ↩
  10. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (“The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”) ↩
  11. 9 U.S.C. § 2 (2022) (“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy . . . shall be valid, irrevocable, and enforceable. . . .”) ↩
  12. See Amanda Cort, Get Real: The Tension Between Stardom and Justice for Reality Television Participants, 13 N.Y.U. J. Intell. Prop. & Ent. L. 245 (2024), https://jipel.law.nyu.edu/get-real-the-tension-between-stardom-and-justice-for-reality-television-participants/. ↩
  13. Souvik Das, et al., Perception Analysis of TV Reality Shows: Perspective of Viewers’ and Entertainment Industry Professionals, 7 Int’l J. Media, Journalism & Mass Commc’ns 22 (2021). ↩
ALR 2023 - 2024

The Dangers of Intellectual Property Carveouts in Arbitration

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By

Austin Robinson

Intellectual property disputes present a unique challenge for arbitrators and litigators due to the intangibility of these property rights. These rights’ scope varies by jurisdiction.1 This leads to unpredictability in resolving any disputes. To combat this, many parties add carve-outs for IP disputes when entering into arbitration agreements.2 Despite this common practice, the negative policy implications of utilizing IP carveouts far outweigh the benefits. Instead of IP carveouts, submitting these disputes to arbitration will result in increased efficiency and decreased monetary burden.

Generally, carve-outs within an arbitration clause/agreement reserve a specific subject matter or type of relief for litigation in a specified jurisdiction.3 A typical carve-out clause reads as follows:

“Any dispute arising out of or related to this Agreement shall be submitted to binding arbitration under the [specified rules (the ‘Rules’)] to be heard by a sole arbitrator appointed in accordance with the Rules, except for those causes of action brought in connection with the ownership or right to use [specified intellectual property] which shall be submitted to the exclusive jurisdiction of the courts of [specified jurisdiction].”4

Parties elect to use carve-outs because IP protection varies by jurisdiction.5 Even in jurisdictions that allow IP litigation, some limit the binding effect of the award.6 People tend to opt to litigate these disputes because it offers greater discovery and a formal appellate review process.7 The fear of the unknown, likely lengthy appellate proceedings alongside unfamiliar, jurisdiction-specific legal actions, like, for example, the U.S.’s claim construction hearings, may prompt the parties to include such carve-out language for security reasons.8

Despite these valid concerns, these clauses have backfired in recent court decisions.9 For example, in LAVVAN v. Amyris a similar carve-out formed the core of the dispute.10 The Second Circuit upheld the IP carve-out, but supervening contractual deficiencies forced the parties into two separate proceedings: one litigated, one arbitrated.11 Concurrently litigating the patent infringement claim and arbitrating the breach of contract claim likely imposed greater costs and delays on than litigating both disputes, let alone arbitrating them.12 Even if drafted meticulously, these carve-outs can create additional burdens for the parties to the arbitration agreement.13

The aforementioned burdens are reinforced by the benefits that arbitrating IP disputes offers. Unlike litigation, arbitration offers parties control over who adjudicates their dispute, allowing them to select those with relevant training, education, and expertise.14 Decision-makers with some degree of knowledge and/or background in the area of the dispute are more equipped to handle arguments centering on patent validity and infringement. Specifically in patent disputes, relevant expertise in the invention’s field eliminates the need for extensive (and often expensive) expert testimony and background information – a common feature of litigation – and may allow the arbitrator(s) to reach a decision faster. Finally, an arbitrator who understands how an invention works and its monetary value is more likely to reach a just decision and enforceable arbitral award.

Cost is a critical consideration parties must make when deciding whether to arbitrate or litigate IP disputes.15 Parties using carve-outs run the risk of concurrent litigation and arbitration, as seen in LAVVAN v. Amyris, something more time-consuming and costly than a single proceeding.16 Prosecuting a patent is a time and cost-intensive process with filing fees, attorney costs, and an average of one-to-two years spent prosecuting.17 Arbitrating subsequent disputes could save the holder money by limiting their exposure to litigation expenses and locking in a speedier resolution method. Further, patent litigation usually has a multi-jurisdictional impact, forcing patent holders to litigate in each respective court.18 Arbitration, on the other hand, allows for a single proceeding, saving the parties time and money.19

In arbitration, IP carve-outs carry significant risks. Generally, they hinge on perfect interpretation and when they go wrong they can force parties into a bifurcated dispute. The reasoning behind this trend of including IP carve outs stems from the desire for a predictable judicial process, from the discovery stage to appellate review. But the effect of these carve outs is far from predictable and tend to result in side-by-side litigation and arbitration in addition to an increased amount of time and money spent on the dispute(s). Rather than take the risk and miss out on the benefits of arbitrating their IP disputes, patent holders should focus on choosing a favorable governing law and seat of arbitration when concerned about potential IP-related disputes. Carve-outs should be avoided in IP arbitration to ensure efficiency and lower costs for the parties to the dispute.

  1. Rachel Thorn, Drafting Arbitration Clauses in IP Agreements, GLOBAL ARBITRATION REVIEW, (Dec. 21, 2022), https://globalarbitrationreview.com/guide/the-guide-ip-arbitration/second-edition/article/drafting-arbitration-clauses-in-ip-agreements. ↩
  2. See id. ↩
  3. Nathan O’Malley, Mastering the Litigation Carve-Out, USC GOULD SCHOOL OF LAW, (Sep. 24, 2020), https://gould.usc.edu/news/mastering-the-litigation-carve-out/. ↩
  4. See id. ↩
  5. See Rachel Thorn, supra note 1. ↩
  6. See id. ↩
  7. Marc Labgold & Megan Labgold, Should I Arbitrate My Patent Dispute?, KLUWER ARBITRATION BLOG, WOLTERS KLUWER, (Nov. 29, 2022), https://arbitrationblog.kluwerarbitration.com/2022/11/29/should-i-arbitrate-my-patent-dispute/. ↩
  8. See id. ↩
  9. See id. ↩
  10. LAVVAN, Inc. v. Amyris, Inc., No. 21-1819, 2022 WL 4241192 (2d Cir. Sept. 15, 2022). ↩
  11. See id. at 3. ↩
  12. See Marc Labgold & Megan Labgold, supra note 7. ↩
  13. See LAVVAN, Inc. v. Amyris, Inc., supra note 10. ↩
  14. See Marc Labgold & Megan Labgold, supra note 7. ↩
  15. See id. ↩
  16. See LAVVAN, Inc. v. Amyris, Inc., supra note 10. ↩
  17. What Happens After a Patent Application Is Filed in the U.S.?, NUTTER MCCLENNEN & FISH LLP, (May 20, 2021), https://www.nutter.com/ip-law-bulletin/nutter-patent-basics-part-1-what-happens. ↩
  18. See Marc Labgold & Megan Labgold, supra note 7. ↩
  19. See id. ↩
ALR 2023 - 2024

In Payne? Can’t Pay? The Eleventh Circuit’s Paradoxical Standard for Loser-pays Arbitration Provisions

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By

Ava McCartin

Under the Federal Arbitration Act (“FAA”), United States courts will uphold and enforce arbitration agreements unless they are voidable under contract law.1 While not specifically stated in the FAA, the doctrine of “effective vindication” empowers courts to void what would otherwise be facially valid arbitration agreements when the agreement would preclude a party from effectively vindicating their legal claims.2 When bringing an effective vindication claim, claimants primarily argue that the cost associated with arbitration bars effective vindication of legal rights.

In 2013, the Supreme Court addressed this judicially crafted doctrine directly in American Express Co. v. Italian Colors.3 In Italian Colors, the court recognized the doctrine as a valid exception to the general mandate of the FAA but declined to apply it in that particular instance.4 However, the court explained that a party could “certainly” rely on effective vindication to escape an arbitration provision where the agreement forbade asserting a statutory right in any forum, and possibly where filing and administrative fees were high enough to preclude a party from accessing the forum.5 But what if the administrative fees are uncertain or premised on losing on the merits?

In Payne v. Savanah College of Art and Design, the Eleventh Circuit was faced with those very issues.6 Payne concerned an arbitration provision in an employment contract, which Payne—the employee—sought to avoid under the doctrine of effective vindication.7 In Payne, the would-be-litigant argued that the agreement’s “loser pays” provision was unconscionable because if he were to lose at arbitration he would not be able to pay the arbitrator’s bill.8 To support this claim, Payne provided expert testimony that predicted the cost of arbitration could be up to $39,000 or more, declarations about his inability to pay, and testimony from another former SCAD employee who explained that “the risk of paying significant arbitration costs discouraged him from continuing [to pursue] his discrimination case against SCAD.”9 The risk of financial ruin, Payne argued, prevented him from effectively vindicating his statutory right to be free from racial discrimination.10 The Eleventh Circuit disagreed.

Because the employer would pay the cost up-front, the court distinguished this situation from the hypotheticals in Italian Colors, where fees were required as a threshold matter to initiate arbitration.11 Unlike threshold costs, which will certainly be incurred, the costs in Payne were “speculative.” The court reasoned that the only way Payne could prevail with his effective vindication argument would be if he could show that he would be “likely” to pay.12 But the only way that Payne would be likely to pay would be if he were “likely” to lose on the merits of his case. “The ‘problem,’” the court explained “is that [Payne] might win.”13 This standard is unworkable.

When costs are assigned only to a losing party, the Eleventh Circuit’s standard essentially forces a party to admit that their case lacks merit as a prerequisite to bringing forth the effective vindication doctrine. But even if a party believes that they have a sound case, as they should to initiate litigation, the fear of losing at arbitration and subsequently going bankrupt could still deter that party from arbitration. And in fact, that scenario is exactly what happened to Darnell Holcomb, another former SCAD employee whose testimony Payne introduced in his case.

Like Payne, Holcomb was fired from his position at SCAD, attempted to sue, but “the risk of paying significant arbitration costs discouraged him from continuing his discrimination case against SCAD.”14 By creating a loser-pays cost shifting agreement, SCAD effectively forces employees to gamble on their legal claims: the employee must either proceed with arbitration and risk footing tens of thousands of dollars in fees, or drop the claim entirely. But how much money are litigants forced to gamble with? Could an arbitration agreement impose a one-million-dollar fee on the losing party? Under Eleventh Circuit precedent, unless a party could show they would be likely to lose that case, the answer seems to be “yes.”

To remedy this paradoxical standard, legislative intervention is required. Congress should codify a clear effective vindication doctrine in the FAA itself that considers both front and back-end costs of arbitration. A workable standard should ask whether the certain and uncertain costs of arbitration would deter a reasonable person in the plaintiff’s position from pursuing claims in the arbitral forum. In doing so, Congress could end the judicial interpretation of the doctrine of effective vindication, close this cost shifting contract loophole, and better serve the pursuit of justice for Payne and other plaintiffs like him.

  1. 9 U.S.C.A. § 2. ↩
  2. Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 235 (2013). ↩
  3. Id. ↩
  4. Id. ↩
  5. Id. at 236. ↩
  6. Payne v. Savannah Coll. of Art & Design, Inc., 81 F.4th 1187, 1190 (11th Cir. 2023). The relevant facts of Payne are as follows: Payne was a fishing coach for SCAD. SCAD fired Payne from his job and he subsequently brought suit for racial discrimination and retaliation. SCAD moved to dismiss and settle the case in arbitration and Payne opposed. ↩
  7. Id. ↩
  8. Id. at 1192. (“In making his/her award, the arbitrator shall require the non-prevailing party to bear the cost of the arbitrator’s fees, provided however, that SCAD will advance the cost of the arbitrator’s fees at the initiation of the arbitration, subject to reimbursement by the employee following arbitration if the employee does not prevail.”) ↩
  9. Id. ↩
  10. Id. ↩
  11. Id. at 1195. ↩
  12. Id. at 1196-97. ↩
  13. Id. at 1197. ↩
  14. Id. at 1191. ↩
ALR 2023 - 2024

Crystallizing Jurisprudence: Analyzing the Remedies Available to ICSID Tribunals in Arbitrator-Counsel Conflicts

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By

Ishita Wargaht

The principal responsibility of any counsel in a dispute lies in the orchestration and administration of any procedural mechanisms aimed at resolving the conflict. The importance of such a representation is highlighted in many conventions. The International Covenant on Civil and Political Rights1 and the European Convention on Human Rights2 are two preeminent examples. Such a legal representation is equally important in an arbitration proceeding. However, there is always a probability of the existence of a conflict of interest with respect to the individuals involved in an arbitration proceeding. This conflict mainly arises between the arbitrators and the counsels representing the parties. This post analyses the remedies available to ICSID tribunals in case of an arbitrator-counsel conflict of interest while referencing the London Court of International Arbitration (“LIAC”),3 ICC International Court of Arbitration (“ICC”),4 and International Bar Association (“IBA”)5 for a comparative analysis.

The International Centre for Settlement of Investment Disputes (“ICSID”) has long been regarded as the cornerstone of investor-state dispute resolution, providing a specialized forum for the resolution of investment disputes and is governed by the ICSID Convention, Regulations, and Rules (“ICSID Rules”).6 These rules, among others, demarcate the powers and remedies available to the tribunals in case of any arbitrator-counsel conflict of interest contention, for example, where a counsel has some connection with one of the arbitrators which can result in bias and lack of impartiality in the proceedings. Procedurally, in case any such contention is raised by the parties, the only remedy available at hand is to remove the conflicted arbitrator. However, in recent times, tribunals have taken a different stance and have begun removing the conflicted counsel.

This stand was first taken in the Hrvatska Tribunal,7 where, in order to avoid bias due to the acquaintance of one of the counsels with the arbitrators, the counsel was disqualified from representing the concerned party. When questioned as to where the tribunal got the authority to order such a removal, the tribunal opined that it was authorized under Article 44 of the ICSID Convention to make such a decision. Citing the aforementioned case, the same was held in the Rompetrol Tribunal8 wherein it was also added that such a power could only be used in exceptional circumstances when the integrity of the proceedings could be compromised. A similar understanding was reflected in the Edmond Khudyan Tribunal9 and Fraport Tribunal10 decisions. In the Theodore David Einarsson Tribunal decision,11 (Feb. 24, 2022).] during deliberations regarding the removal of counsel, it was asserted that ICSID Tribunals lack the authority to monitor a counsels’ adherence to ethical obligations imposed by local codes. These ethical constraints, stemming from codes governing lawyers’ professional conduct, encompass responsibilities such as not discontinuing representation without just cause and maintaining confidentiality. The Tribunal argued that as the removal of counsel directly impacts the fundamental fairness of proceedings, it falls within the jurisdiction of the ICSID Tribunal.

These above-referenced decisions indicate that ICSID tribunals have the authority to disqualify the representation by a counsel in a particular case. However, such a disqualification is based on exceptional circumstances, and the recourse should be availed only when the integrity of the proceedings would be compromised should the counsel not be removed.

Arbitration is a self-contained, party-centric dispute resolution mechanism existing outside the realm of stare decisis. For example, ICSID tribunals render non-precedential awards that subsequent tribunals are free to follow or ignore. It can be argued that it is an unnecessary practice recognized only in a handful of cases, is not a customary norm, and does not hold any precedential value. Therefore, it can be claimed that when arbitrator-counsel disputes arise, the arbitrator should be disqualified, not the counsel.

However, such a contention does not hold water, and to understand the need for such an alternate remedy, the concept of fungibility is relevant. Fungibility means the quality of being interchangeable or substituted.12 In the context of arbitration, it refers to the parties that can be replaced. In an arbitration proceeding, the level of fungibility of each participant is not equal and depends on the relevance of the parties. In the case of arbitrator-counsel disputes, the fungibility level of arbitrators is lower than that of the counsels as arbitrators are appointed by a common consensus between the parties themselves, which forms the foundation of any arbitration agreement. This is also recognized in the ICSID convention as the principle of immutability. It means that a properly constituted arbitral tribunal cannot be changed as it may imperil the legitimacy of the whole process, thereby also attributing procedural sanctity to such an aspect. The ICSID Convention explicitly states, “[a]fter a Commission or a Tribunal has been constituted and proceedings have begun, its composition shall remain unchanged.”13 Additionally, while removing an appointed arbitrator, the principal consequences, both for the parties and the arbitration system, are the increased cost of the dispute and the length of the proceedings.14 A counsel, on the other hand, is appointed by the express choice of the respective parties, thereby having a higher fungibility level than that of an arbitrator, and therefore, in most cases, the counsel should be removed. However, this should not be construed as a hard-and-fast rule. Before resorting to any alternative, the concept of fungibility should be analyzed according to the facts of each case. The circumstances of a particular case might mandate the removal of an otherwise less fungible participant, for example, an arbitrator, especially when the counsel has been involved extensively in the case for a long period of time. Removing the counsel in such a case shall just prolong the process and not be in the best interests of all the participants in the proceeding.

The concept of fungibility therefore explains why is there a need for an alternate remedy in the case of an arbitrator-counsel dispute. The author in the current piece is proposing to attribute procedural sanctity to the removal of a counsel as against the customary and procedural mandate of removing the arbitrator after assessing the fungibility of the concerned actors in the proceedings and analyzing the facts and circumstances of each case.

The primary problem in ICSID decisions is their non-precedential nature. As noted above, while there are only a handful of decisions available for an arbitrator-counsel dispute wherein the counsel is disqualified from participating in the proceedings, these are of a non-precedential nature.15 This gap was also observed by a commentator who stated:

At any rate, there is no rule of binding precedent in investment treaty arbitration. There is nothing in the ICSID Convention itself or in its travaux préparatoires to indicate the existence of such a doctrine. The decentralized structure of investment treaty arbitration is not well suited to the application of stare decisis. There are over 3000 distinct investment treaties currently in force. There is no hierarchy as between ICSID tribunals, and no mechanism of appeal. There are limited grounds for annulment and the annulment mechanism is not designed to provide consistency or predictability. And the publication of investment arbitration awards is subject to party consent. These factors have occasionally led to divergent and even conflicting awards on the same points of law or similar facts.16

This empowers the arbitral tribunal to exercise its powers in a wider import than necessary thereby necessitating the consolidation of such an alternate remedy within the framework of ICSID to impart procedural legitimacy to the same.
Secondly, for the cases that necessitate the removal of an arbitrator instead of a counsel in case of an arbitrator-counsel conflict of interest, the power to decide upon such a removal is given to the arbitral tribunal (including the conflicted arbitrator). Such an inclusion of the conflicted arbitrator is also observed in LIAC,17 ICC,18 and IBA19 processes. However, logical gaps can be observed in such a process. By including the conflicted arbitrator in an issue that involves himself as a party to the conflict of interest, gives rise to a secondary conflict of interest. The first and the primary one being between the arbitrator and the counsel and the secondary one being the constitution of the tribunal in deciding such an issue. In such a case, only the non-conflicted arbitrators (i.e., the ones not a party to the conflict of interest) should determine the secondary issue.

To conclude, the remedies available to ICSID tribunals in arbitrator-counsel conflicts constitute a dynamic area within the landscape of investor-state dispute resolution. While traditionally the remedy involved removing the conflicted arbitrator, recent decisions, as exemplified by the Hrvatska Tribunal,20 demonstrate a shifting trend towards disqualifying the counsel. This evolution, grounded in the authority granted by Article 44 of the ICSID Convention, underscores the tribunal’s commitment to preserving the integrity of proceedings and addressing exceptional circumstances where the participation of a conflicted counsel could compromise the fairness of the proceedings.

However, challenges persist, notably the non-precedential nature of previous decisions and the logical gaps in the process, particularly while deciding on the removal of an arbitrator which also includes the conflicted arbitrator. These problems have a simple solution, codify a tribunal’s ability to remove conflicted counsel into the framework of the ICSID convention. Additionally, the conflicted arbitrator should not be allowed to participate in deliberations involving himself and the conflicted counsel. Overall, a balanced and comprehensive approach is essential to enhance the legitimacy and effectiveness of the ICSID dispute resolution mechanism.

  1. International Covenant on Civil and Political Rights, March 23, 1976. ↩
  2. European Convention on Human Rights, September 3, 1953. ↩
  3. London Court of International Arbitration Rules, October 1, 2020. ↩
  4. ICC International Court of Arbitration, Arbitration Rules, January 1, 2021. ↩
  5. IBA International Principles on Conduct for the Legal Profession, May 28, 2011. ↩
  6. ICSID Convention, Regulations, and Rules, July 01, 2022. ↩
  7. Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel 33 (May 6, 2008) ↩
  8. The Rompetrol Group N.V. v. Romania, ICSID Case No. Arb/06/3, Decision of the Tribunal on the Participation of a Counsel 15 (Jan. 14, 2010). ↩
  9. Mr. Edmond Khudyan and Arin Capital & Investment Corp. v. Republic of Armenia, ICSID Case No. ARB/17/36, Procedural Order No. 2 (Decision on Application to Remove Counsel) 50 (Dec. 5, 2018). ↩
  10. Fraport AG Frankfurt Airport Services Worldwide v. Republic of The Philippines ICSID Case No. Arb/03/25, Decision on Application for Disqualification of Counsel 36-39 (Dec. 23, 2010). ↩
  11. Theodore David Einarsson, Harold Paul Einarsson, Russell John Einarsson, and Geophysical Service Incorporated v. Government of Canada, ICSID Case No. UNCT/20/6, Decision on Claimants’ Motion to Disqualify Counsel [91 ↩
  12. See Fungible, MERRIAM-WEBSTER (11th ed. 2023), https://www.merriam-webster.com/dictionary/fungible. ↩
  13. ICSID Convention, Regulations, and Rules, supra note 6, at Art. 56. ↩
  14. Federica Cristani, Challenge and Disqualification of Arbitrators in International Investment Arbitration: An Overview, 13 LAW & PRAC. INTL. CTS. & TRIBUNALS 153, 175 (2014). ↩
  15. See, e.g., Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel (May 6, 2008); The Rompetrol Group N.V. v. Romania, ICSID Case No. Arb/06/3, Decision of the Tribunal on the Participation of a Counsel (Jan. 14, 2010); Mr. Edmond Khudyan and Arin Capital & Investment Corp. v. Republic of Armenia, ICSID Case No. ARB/17/36, Procedural Order No. 2 (Decision on Application to Remove Counsel) (Dec. 5, 2018); Fraport AG Frankfurt Airport Services Worldwide v. Republic of The Philippines ICSID Case No. Arb/03/25, Decision on Application for Disqualification of Counsel (Dec. 23, 2010); Theodore David Einarsson, Harold Paul Einarsson, Russell John Einarsson, and Geophysical Service Incorporated v. Government of Canada, ICSID Case No. UNCT/20/6, Decision on Claimants’ Motion to Disqualify Counsel (Feb. 24, 2022). ↩
  16. Abdulqawi Ahmed Yusuf & Guled Yusuf, Precedent & Jurisprudence Constante, in BUILDING INTERNATIONAL INVESTMENT LAW: THE FIRST 50 YEARS OF ICSID 72 (Meg Kinnear, Geraldine R. Fischer ed., 2015). ↩
  17. London Court of International Arbitration Rules, supra note 3, at Art. 5. ↩
  18. ICC International Court of Arbitration, supra note 4, at Art. 17.2. ↩
  19. IBA International Principles on Conduct for the Legal Profession, supra note 5, at Guideline 6. ↩
  20. Hrvatska Elektroprivreda, d.d. v. The Republic of Slovenia, ICSID Case No. ARBl05124, Order Concerning the Participation of Counsel (May 6, 2008). ↩