FDIC Federal Register Citations

[Federal Register: April 10, 2001 (Volume 66, Number 69)]

[Notices]

[Page 18632-18633]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr10ap01-88]

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FEDERAL DEPOSIT INSURANCE CORPORATION

Statement of Policy Regarding Binding Arbitration

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final statement of policy.

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SUMMARY: This FDIC Statement of Policy addresses the Corporation's use

of binding arbitration and complies with the requirements of the

Administrative Dispute Resolution Act of 1996, Pub. L. 104-320. This

policy statement reaffirms and supplements the FDIC's existing policy

(62 FR 66370) to use all forms of Alternative Dispute Resolution for

resolving appropriate disputes in a timely and cost efficient manner.

EFFECTIVE DATE: March 26, 2001.

FOR FURTHER INFORMATION CONTACT: Mark G. Flanigan, Counsel (202) 898-

6865, Legal Division, Federal Deposit Insurance Corporation, 550 17th

Street, NW., Rm. 5082, Washington, DC 20429.

SUPPLEMENTARY INFORMATION: The Board of Directors of the FDIC has

adopted a Statement of Policy regarding binding arbitration. The text

of the Policy Statement follows:

Statement of Policy on the Use of Binding Arbitration

The Federal Deposit Insurance Corporation (FDIC) has long been and

continues to be a strong advocate for the use of various forms of

Alternative Dispute Resolution (ADR) for resolving appropriate disputes

in a more timely, less costly manner than litigation. The FDIC's ADR

program is an organization-wide effort implementing the spectrum of ADR

processes including negotiation, facilitation, mediation, evaluation

and advisory ADR in internal and external conflict management and

dispute resolution. This policy statement reiterates the FDIC's

commitment and full support for using ADR in appropriate instances and

sets forth a framework for the continuing and expanding use of ADR by

providing for the use of binding arbitration as a means of dispute

resolution.

Arbitration is a private, informal process by which parties agree,

in writing, to submit their disputes to one or more impartial persons

authorized to resolve the controversy by rendering a final and binding

decision or award with limited rights of appeal. The final and binding

nature of the decision distinguishes arbitration from mediation and

other non-binding forms of ADR. Potential benefits of arbitration are

its greater flexibility, potential for limited discovery and

streamlined hearing processes, use of panels of trained and subject-

area expert arbitrators, and restricted judicial review rights.

Although the FDIC encourages non-binding, consensual forms of ADR,

the Corporation views the use of binding arbitration in appropriate

circumstances as an additional ADR technique to accomplish its business

in an efficient, economical and productive manner. The Corporation will

consider using non-binding ADR to resolve disputes prior to engaging in

binding arbitration.

Scope

This Policy Statement applies to disputes arising with the FDIC in

all its capacities and complies with the

[[Page 18633]]

arbitration provisions of the Administrative Dispute Resolution Act of

1996. This Policy also applies to federal court-based arbitration

programs under the Alternative Dispute Resolution Act of 1998. Offices

and Divisions considering the use of binding arbitration should refer

to this Policy and the separate Directive on use of Binding

Arbitration. The use of binding arbitration in state court-based

arbitration programs, employment/labor arbitration, contracts or leases

entered into by a depository institution prior to the appointment of

the FDIC as conservator or receiver, or in connection with any other of

the FDIC's regulatory, compliance and enforcement activities, is not

the subject of this Policy Statement.

Background

The Administrative Dispute Resolution Act of 1990 (``ADRA''), 5

U.S.C. 571-583, was amended in 1996. The 1996 amendments made

significant changes in the provisions found in the ADRA of 1990, and

specifically authorized federal agencies to voluntarily use binding

arbitration without the former qualifying provisions that allowed the

head of an agency to vacate an arbitration award. The 1996 ADRA

amendments authorize an agency to use binding arbitration, in its

discretion, and in appropriate cases. However, the ADRA amendments

establish certain requirements an agency must meet before arbitrating

disputes.

ADRA Requirements

Before engaging in binding arbitration, an agency must:

Issue guidance, in consultation with the Attorney General,

on the appropriate use of binding arbitration (5 U.S.C. 575(c));

Require that all agreements to arbitrate disputes be in

writing and specify the subject matter to be submitted to the

arbitrator for decision (5 U.S.C. 575(a)(2));

Include in the arbitration agreement the maximum award

amount that may be granted by the arbitrator (5 U.S.C. 575(a)(2));

Require any officer or employee of the agency offering to

use arbitration in resolution of a dispute to have either the authority

to enter into a settlement concerning the matter, or the specific

authority to consent to arbitration on behalf of the agency (5 U.S.C.

575(b)(1) and (2)); and

Not require anyone to consent to binding arbitration as a

condition to contracting with the agency (5 U.S.C. 575(a)(3)).

Finally, the use of binding arbitration must be voluntary on the

part of all parties (5 U.S.C. 575(a)(1)).

Aside from the foregoing, the 1996 ADRA amendments provide that an

agency shall consider not using a dispute resolution proceeding such as

binding arbitration if the dispute:

Requires an authoritative determination as precedent for

other cases;

Involves a significant question of government policy;

Significantly impacts persons who are not parties to the

proceedings;

Requires a public record of the proceedings;

Must be monitored on an on-going basis by a court or an

administrative body to ensure compliance;

Must be adjudicated to establish a body of law.

Purpose and Intended Uses

The FDIC may use binding arbitration to resolve disputes in a

number of situations where it is more practical, cost-effective, or

efficient than litigation or other consensual methods of ADR such as

negotiation or mediation. The FDIC may agree to use binding arbitration

in Corporation contracts (before an actual dispute arises), subject to

the required approval and authority. Complex commercial/business

transactions, construction contracts, insurance agreements, asset

sales, real estate sales, leasing, and securities and securitizations

are examples of substantive areas where binding arbitration may be used

to resolve disputes. The FDIC may also agree to enter into binding

arbitration after a dispute has arisen, and where no previous

contractual dispute resolution mechanism exists.

Directive

The Legal Division is simultaneously issuing a directive providing

further guidance to employees on the Corporation's use of binding

arbitration. This directive will provide the following information:

Considerations in rendering a decision to use binding

arbitration;

Circumstances where the Corporation will not use binding

arbitration;

Considerations relating to the nature and extent of

damages;

Responsibility for costs associated with arbitration;

Arbitrator selection criteria; and

Arbitration case preparation, processing and review

procedures.

It is the responsibility of all FDIC employees to practice and

promote cost-effective dispute resolution in FDIC programs and in

corporate operations. All officers and employees of Divisions and

Offices of the FDIC considering the use of binding arbitration are

hereby directed to take the necessary steps to implement this policy to

promote effective and appropriate use of binding arbitration.

By order of the Board of Directors.

Dated at Washington, DC, this 26th day of March, 2001.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 01-8752 Filed 4-9-01; 8:45 am]

BILLING CODE 6714-01-P