[Federal Register Volume 66, Number 69 (Tuesday, April 10, 2001)]
[Notices]
[Pages 18632-18633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8752]


=======================================================================
-----------------------------------------------------------------------

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 
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