[Federal Register: April 10, 2001 (Volume 66, Number 69)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
FEDERAL DEPOSIT INSURANCE CORPORATION
Statement of Policy Regarding Binding Arbitration
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final statement of policy.
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
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
This Policy Statement applies to disputes arising with the FDIC in
all its capacities and complies with the
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.
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
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
Involves a significant question of government policy;
Significantly impacts persons who are not parties to the
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.
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
Circumstances where the Corporation will not use binding
Considerations relating to the nature and extent of
Responsibility for costs associated with arbitration;
Arbitrator selection criteria; and
Arbitration case preparation, processing and review
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,
[FR Doc. 01-8752 Filed 4-9-01; 8:45 am]
BILLING CODE 6714-01-P