‘e’
© Geoffrey Hartwell, July 2013
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The title of this occasional essay may seem a little cryptic, but once it came into my mind, I couldn't shake it off.  It occurred to me as I was reading a report of the U.S. Supreme Court in the case of American Express Co. Et Al. v. Italian Colors Restaurant Et Al.[1]  The primary finding was that “The FAA [Federal Arbitration Act]does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.”.  You will see that it was a fairly recondite affair, likely to be peculiar to the United States of America.  (Why do they refer to themselves as “the U.S.”, as if there were no other such groupings around the world – In Mexico, for example, or Malaysia, or Canada, even arguably in the British Isles[2]?).

Anyway. once I stopped reflecting on the colours of an Italian Restaurant – the white spaghetti, the taglatelli verde, the red plum tomatoes, they are the Italian colours; Neapolitan ice cream has all three[3] – I thought about that Supreme Court decision.  It's about the primacy of the arbitration agreement, of course, but it serves as a reminder that an arbitral panel (yes, I know that the Scots Arbitration Act and that of England and Wales call them a tribunal but that's part of the problem – the man in the street thinks there's something 'official' about a tribunal) does not have the powers and facilities of the State Courts.

And the reason for that is simple: it isn't a Court.  There are many differences between the two; many distinctions.  But there is – or may be - a superficial similarity.  And there's the rub.  Comparison is difficult because it is difficult to compare processes which, however similar they may seem superficially, are different things, created in a different way, and for a different purpose.  How does one compare ice cream with polenta, or mashed potato?  Creamy colour, served with a scoop perhaps, each tasty enough in context, but not the same at all!

And there's where 'e' comes to mind.  It's the 'e' in 'judgement'.  The OED online[4] says

“In British English the normal spelling in general contexts is judgement. However, the spelling judgment is conventional in legal contexts, and in North American English.”

Leaving to one side to provocative question of whether or not “North American English” is or is not an oxymoron, the word 'judgement', in the English of England itself has one meaning; the word 'judgment' has another and is a legal term of art.

I could play with the words and say that judges write their judgments with judgement – or that we all hope they do!  Arbitrators don't write any judgments but they do use judgement in writing an award and, we hope, in conducting the arbitration.

An Award isn't a judgment.  A judgment is a public document; an Award isn't.  A judgment lays down the law; an Award doesn't.  A judgment is effective against everyone (erga omnes); an Award isn't (inter partes).  A judge is a high officer of the State, exercising the powers of the State; an arbitrator isn't.  A judgment is restricted to national boundaries[5]; an Award isn't[6].  A judgement may be a precedent for future decisions; an Award can't.

Now, the American Express v Italian Colours case (doesn't the title sound romantic?) talks about “class arbitration” and we should be clear about what that is.  As I understand it, it is arbitration effectively on behalf of an entire class.  For the avoidance of doubt, that is not merely consolidated arbitration in which a number of claimants or a number of respondents agree to conduct their cases as one and the counterparty agrees to the arrangement.  'String' contracts and the like also may be the subject of consolidated arbitration but that s not what I want to discuss here.

Class arbitration is arbitration which is precisely analogous with what is called “class action” in the Courts. 

Class Action: A lawsuit that allows a large number of people with a common interest in a matter to sue or be sued as a group.

The class action suit began in the Equity courts of seventeenth-century England as a bill of peace. English courts would allow a bill of peace to be heard if the number of litigants was so large that joining their claims in a lawsuit was not possible or practical; the members of the group possessed a joint interest in the question to be adjudicated; and the parties named in the suit could adequately represent the interests of persons who were absent from the action but whose rights would be affected by the outcome. If a court allowed a bill of peace to proceed, the judgment that resulted would bind all members of the group.[7]

Because a judgment (no 'e', remember!) is operative erga omnes, It is clear why the judgement would bind all members of the group, whether or not they subscribed to the action or, indeed, whether they were aware of it.  It is a part of the process that some form of public announcement is made.

Class actions are not universally admired.  The same article that provided the definition goes on to say:

Class action lawsuits have become a controversial topic in the 1990s. Once seen as a way of empowering individuals with small claims to have their day in court, class actions are viewed by many lawyers, legislators, and government officials as a vehicle for plaintiffs' lawyers to make millions of dollars on issues of dubious merit. Other critics charge that class actions have been used by defendants in mass tort cases, such as asbestos litigation, to frustrate the large and legitimate claims of individual victims.

On the other hand, a little later:

Defenders note that the class action format has most often been used to aggregate small claims that were not worth litigating separately. A class action is an effective means for holding defendants accountable for widespread harm that would otherwise go unchecked. There is public value in allowing this type of class action to go forward, even if the amount payable to each member of the class is small. The deterrent effect of a class action can be substantial, forcing the defendant to change its product or procedures.

This little essay isn't about the Law, whatever that may mean to you[8].  I record those propositions without comment.  My subject here is arbitration, which, however legitimate it may be (and colleagues who know me will know that I stand by arbitration's universal legitimacy) cannot substitute for the total authority of the Sovereign Power of the State within its jurisdiction.

A class arbitration would be predicted on the members of the class all being party to contracts in the same terms.  A feature of the arbitration clause in the American v Italian case (did I abbreviate that too far?  It sounds like a battle from old Chicago – but there the Italians were Americans) was a provision that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.”  In the United States, that is known as a “class action waiver clause”.

If an arbitration were to be conducted on a class action basis that could be argued to mean one of two things.  One is that all those who were active or intending Claimants -or Respondents – agreed to pool their cases and proceed together.  But that is what is meant by consolidation.  Those who do not take part are not bound by the result (although, if they later initiate or seek to defend their own arbitration the chances may not be good.  One  should remember, however, that one arbitration doesn't bind another.  Indeed the second arbitrator may not think the first decision relevant!) 

The second meaning is that of the class action in the Court, that all potential Claimants – or Respondents – have agreed in advance to pool their interests so that all would be bound, whether participating in the arbitration or not.  Such an arrangement would involve, for those who do not participate, the surrender of a valuable right.  The Supreme Court, in American v Italian, may have thought that the right to one's own decision to arbitrate or not to arbitrate should not be surrendered without express words.

There has been debate on the Internet about American v Italian.  I discussed it here to illustrate one of the differences between arbitration and litigation.  There are things that arbitration can do, of which reaching beyond boundaries[9] and the use of expertise[10] are perhaps the most obvious.

There are things a Court can do that arbitration can't do, like bind a third party or admit applications ex parte that an arbitration cannot do without ceasing to be an arbitration which, I remind you, is The settlement of a dispute or question at issue by one to whom the conflicting parties agree to refer their claims in order to obtain an equitable decision[11] no more and certainly no less.

Eur Ing Professor Geoffrey M. Beresford Hartwell CEng
FIMechE FCIArb FICArb(India) MIEEE(USA)

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Footnotes:

[1]             http://www.supremecourt.gov/opinions/12pdf/12-133_19m1.pdf  accessed 21 June 2013.   Return

[2]    England and Wales now have separate Assemblies (well, Wales has an Assembly and England doesn't but that's enough of that!).  Scotland has a separate Parliament and legal system and may soon secede unilaterally but without civil war; how civilised!.  Northern Ireland has it's own Assembly and is a distinct legal district.  The status of the Isle of Man, the Channel Islands and the Dependencies qualifies for an essay of its own – but you get the idea.   Return

[3]    Chocolate as a substitute for strawberry or pistachio is, I am sure, inauthentic – and less subtly delicious.    Return

[5]            Strictly, a judgment is effective where the court has jurisdiction.  That may include citizens or persons (natural or legal) domiciled or commercially active in the State even when they travel outside.    Return

[6]    An arbitral award may be enforced by a court in a State even if it has been 'annulled' in the State where it was made. 
The classical examples are Hilmarton and Chromalloy [In Hilmarton, there were two arbitrations. The topic was commission payment in Algeria. The applicable law was eventually found to be Swiss. An arbitration was held under Swiss law and later set aside by the Federal Court.  In France the Cour de Cassation found that because the award once issued had become part of the international legal order, independent of any particular national system, any decision by a national court annulling the award only extinguished the award within that national system, even if the nationality of the court was that of the seat of arbitration.  The award continued therefore to exist and could still be enforced in France.  Société Hilmarton Ltd v Société OTV (Cour de cassation, 23 March 1994) Rev. Arb. 1994, p. 327 - JDI 1994, p. 701 - YB Comm Arb, Vol XX (1995) 663.23 March 1994) YB Comm Arb, Vol XX (1995) 663. 
Another arbitration was held in Switzerland however and the award of this arbitration was enforced in England. Omnium de Traitment et de Valorisation AA v Hilmarton Ltd High Court Queen’s Bench Division, May 24, 1999 [1999] 2 All E.R. (Comm) 146]
[The Chromalloy matter was: District Court for the District of Columbia in Matter of Arbitration Between Chromalloy Aeroservices, a Div. of Chromalloy Gas Turbine Corp. and Arab Republic of Egypt, 939 F.Supp. 907 (D.D.C.,1996) Chromalloy obtained an award in Egypt that was subsequently nullified by the Egyptian Court of Appeal. On the petition of Chromalloy to confirm the award despite the ruling of the Egyptian Court of Appeal, the District Court held that the award should be confirmed because to do otherwise would be to “violate” the U.S.’s “public policy in favour of final and binding arbitration of commercial disputes.”].
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[7]    I am obliged to the authors of the entry at http://legal-dictionary.thefreedictionary.com/Class+action+lawsuit for this useful extract. 
Accessed 22 June 2013.
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[8]    You, dear reader, may be in any jurisdiction.  You may be a lawyer for whom, of course, Law means your national Law.  You may be a lay person for whom the notion of Law is less precise.  You may be a lawyer with an international practice.  I don't profess Law; I merely speculate about it!    Return

[9]    Through the New York Convention 1958 q.v. - http://www.hartwell.pwp.blueyonder.co.uk/nyc_text.htm accessed 22 June 2013.    Return

[10]  See http://www.hartwell.pwp.blueyonder.co.uk/whoshall.htm accessed 22 June 2013.    Return

[11]  Oxford English Dictionary http://www.oed.com/view/Entry/10184 accessed 22 June 2013    Return