I ‘m afraid I just can’t understand all this talk about “silence,” and I could use some help here.
Contracts very often expressly address a problem—in which case courts have the task of “interpreting” just what they said. But often there will be no express provision—perhaps through oversight, perhaps because the parties preferred to let sleeping dogs lie. But if party intention is nevertheless relevant—if we care about what the parties intended—then whoever is construing the contract will have to tease out what was implicitly intended, even if nothing was actually said. And party intention should be critical on any question of arbitral procedure.
It is often hard to tease out intention when the parties give us no guidance. That’s why courts have to devise “default rules,” which are presumptions of probable intent in the absence of some expression to the contrary.
The usual “default rule” in consolidation or class arbitration cases, was that no consolidation should be allowed unless the parties expressly provided for it—this is the “UK v. Boeing case.” [In other words, “they said nothing” was equivalent to an intention, “no consolidation.”] Of course, the contrary “default rule” would be perfectly possible—that is, one could presume that consolidation should be permitted unless the parties expressly negated any such procedure.[In other words, “they said nothing” was equivalent to an intention, “sure, consolidation is fine.”] Some state and national laws in fact have such a default rule, and I argued for one in an earlier article, “Tradition and Innovation in International Arbitration Procedure,” 30 Tex. Int’l L.J. 89 (1995).
Now the Supreme Court in Bazzle came up with its own, quite different default rule: “leave it to the arbitrators.” That is, if nothing is said one way or another, it is presumed that the arbitrators have the power to decide whether consolidation or classwide proceedings are permitted. If they don’t want the arbitrators to have that power, they have to expressly negate arbitral power. Justice Stevens agreed with that—that the interpretation of the agreement is for the arbitrator—and that is what Bazzle held. And this is Stolt Nielsen.
Of course, if the contract contains an explicit provision that says, “no classwide arbitration,” and the arbitrators somehow “construe” this to mean that classwide arbitration is permitted, their “construction” will be challenged—and may be reversed for an “excess of powers” if not “manifest disregard of the contract.” That would be unlikely, given the extraordinary deference given to arbitral awards—but in any event, that is simply not Stolt Nielsen, where the arbitrators’ decision did not run afoul of any express provision.
So what is all the kerfuffle about? I’m not being coy here, I’m really puzzled.
Alan Scott Rau
Burg Family Professor of Law
University of Texas at Austin School of Law