Of the several significant deficiencies in the FAA, one of its greatest faults is its failure to anticipate fully the many forms of interim and partial awards that arbitral tribunals issue in ruling on the merits of the parties’ claims and defenses in contemporary arbitrations and, more significantly, to address under what circumstances, and with what consequences, federal law should permit courts to intervene during the pendency of the arbitration hearing for the purpose of either confirming and enforcing, or vacating, such awards. The absence of virtually any statutory guidelines in this respect has given rise to a fragmented and rapidly evolving body of decisional law in which, on a circuit-by-circuit basis, courts decide discrete, and often confusing, issues relating to the finality and enforceability of interim and partial awards that address the merits of the parties’ dispute. An analysis of these decisions and of their often unintended and undesirable consequences reflects with ever-increasing clarity that the FAA is not only deficient but also that actually it is working to defeat the predictability and efficiencies that arbitration, for all of its simplicity and informality, is meant to ensure.

The FAA’s failure to adequately address interim and partial awards gives rise to risks that counsel and arbitral tribunals cannot be expected to fully anticipate and appreciate. Indeed, the very nature of those risks can be more or less obscure depending on factors that are not likely to be foremost in the parties’ thoughts at the time the award is issued. For example, the subtleties of the underlying record regarding such matters as an informal agreement to bifurcate proceedings or the tribunal’s intent in characterizing an award in a particular manner can, unbeknownst to the parties, trigger a cascade of consequences. If the award is deemed to be final in nature, it might be subject to immediate confirmation or vacatur proceedings under the FAA. Moreover, and regardless of whether either party clearly realizes the implications of the finality of such an award, the issuance of an interim or partial award might actually commence the running of the time limits under the FAA within which a party may seek confirmation or vacatur of the award. Similarly, and due to the application of functus officio principles, by issuing an interim or partial award the tribunal not only might be rendering itself powerless to alter its determination on the merits of the issues covered by the award but also might trigger the deadlines within which the parties may request the tribunal to correct clerical or similar errors in the issued interim or partial award. Because state laws vary regarding the extent to which federal procedures and time limits apply in state court proceedings to confirm and vacate awards covered by the FAA, the nature and significance of these risks can be further confused depending on the forum in which a confirmation or vacatur proceeding is commenced.

That these and many other adverse potentialities are virtually unrecognized by the arbitration community is illustrated by recent developments relating to “class arbitration” and by the related promulgation of institutional class arbitration rules. An analysis of those rules in light of prevailing federal law relating to interim and partial final awards shows that at least some are likely to be entirely ineffective and that reliance on others is likely to lead to situations in which (a) arbitrators unknowingly issue awards that cannot be altered, (b) parties are forced to challenge partial awards prematurely, (c) parties will unknowingly waive their right to challenge such awards, and/or (d) unanticipated and undesirable delays are the norm.

These and other risks associated with the issuance of interim and partial awards can, in some ways, be similar with respect to both domestic and international arbitrations conducted in the United States. They can also differ, however, depending on whether the award is issued in an international arbitration proceeding conducted in the United States, in another nation, or under the laws of another nation. In light of the unpredictable and irreversible consequences that arise from the FAA’s failure to address the reviewability of interim and partial awards, parties and arbitrators therefore must exercise caution in electing to utilize otherwise effective procedural innovations, such as the early determination of certain threshold issues, bifurcated proceedings, and separate hearings on issues relating to costs and fees.

This exactly sums up the issue currently holding up my case at the moment. Can’t wait for this to be resolved by the Southern District of New York.

Source: James M. Gaitis, The Federal Arbitration Act: Risks and Incongruities Relating to the Issuance of Interim and Partial Awards in Domestic and International Arbitrations, 16 Am. Rev. Int’l Arb. 1, 4-6. 2006.