[Federal Register Volume 66, Number 98 (Monday, May 21, 2001)]
[Proposed Rules]
[Pages 27921-27927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12500]


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FEDERAL MARITIME COMMISSION

46 CFR Part 502

[Docket No. 01-05]


Alternative Dispute Resolution

AGENCY: Federal Maritime Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Maritime Commission proposes to issue new 
regulations implementing the Administrative Dispute Resolution Act. The 
new regulations would expand the Commission's Alternative Dispute 
Resolution (``ADR'') services, addressing guidelines and procedures for 
arbitration and providing for mediation and other ADR services. This 
proposed rule would replace current subpart U, Conciliation Service, 
with a new subpart U, Alternative Dispute Resolution, that would 
contain a new Commission ADR policy and provisions for various means of 
ADR. The proposal also would revise certain other regulations to 
conform to the Commission's new ADR policy.

DATES: Submit an original and 15 copies of comments (paper), or e-mail 
comments as an attachment in WordPerfect 8, Microsoft Word 97, or 
earlier versions of these applications, no later than June 20, 2001.

ADDRESSES: Address all comments concerning this proposed rule to: 
Bryant L. VanBrakle, Secretary, Federal Maritime Commission 800 North 
Capitol Street, NW., Room 1046, Washington, DC 20573-0001, E-mail: 
[email protected].

[[Page 27922]]


FOR FURTHER INFORMATION CONTACT: Ronald D. Murphy, Commission Dispute 
Resolution Specialist, Federal Maritime Commission 800 North Capitol 
Street, NW., Room 970, Washington, DC 20573-0001, 202-523-5787, E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION: Alternative Dispute Resolution (``ADR'') 
refers to a variety of means to resolve conflicts or disputes, 
generally using a neutral third party to help the parties communicate 
and resolve their dispute. Generally, ADR is voluntary, and is designed 
to enable and empower the parties to a dispute to seek solutions which 
they decide meet their needs. ADR does not take the place of 
traditional processes; rather, it provides alternatives to traditional 
processes.
    The Administrative Dispute Resolution Act (``ADRA'') was first 
promulgated in 1990 (Public Law No. 101-552), and subsequently amended 
in 1996 (Public Law No. 104-320). It defines ADR to mean any procedure 
that is used to resolve issues in controversy, including, but not 
limited to, conciliation, facilitation, mediation, fact-finding, 
minitrials, arbitration, and use of ombuds, or any combination thereof, 
5 U.S.C. 571(3).
    It is difficult to precisely define the various procedures used 
under the umbrella of ADR. There are a variety of definitions and the 
various procedures often overlap each other. The definitions of the 
various procedures are not as important, however, as is their focus on 
resolving disputes. Nevertheless, the following general descriptions 
may help explain the broad range of ADR procedures provided for by 
ADRA.
    Mediation is the most frequently used ADR procedure. It is a 
process in which a mediator facilitates communication and negotiation 
between or among parties to a controversy and assists them in reaching 
a mutually acceptable resolution of the controversy. Mediation is a 
voluntary procedure, the key aspect of which is that the parties 
control the terms of any agreement to resolve the dispute. Conciliation 
is similar, but is relatively informal and unstructured in comparison 
to mediation. It is often used as a ``cooling off'' device. 
Facilitation, on the other hand, is a group process that is usually 
goal-oriented. These procedures can be considered forms of assisted 
negotiation.
    Fact-finding, as used in the ADR context, involves the use of a 
neutral third party to investigate and determine a disputed fact. It is 
usually used for technical issues or significant factual issues which 
are part of a larger dispute. Sometimes, fact-finding is used in 
conjunction with mediation to resolve a fact which may be important to 
resolution of the controversy. The term mini-trials may be used to 
describe a procedure whereby the parties present a summary case before 
a panel of the parties' decision-makers. The panel then may negotiate 
and seek a consensus.
    Arbitration in the form provided for under the ADRA is perhaps 
familiar to most by the term ``binding arbitration.'' It is an 
adjudicatory process, the scope of which in a particular controversy is 
defined in an arbitration agreement. Awards in such proceedings are 
enforceable in federal District Court pursuant to title 9 of the U.S. 
Code.
    The use of ombuds was added to ADRA's definition of ADR in the 1996 
amendments. It involves the use of an employee or organization 
component to whom complaints or problems can be brought with the hopes 
of quick, informal resolution.
    Section 2 of ADRA spells out a number of congressional findings 
that led to passage of the statute. Among them are the increasingly 
formal, costly and lengthy administrative proceedings that were 
intended to offer a prompt, expert and inexpensive means of resolving 
disputes as an alternative to Federal court litigation. Also, ADR has 
been used in the private sector for many years, yielding quicker, less 
expensive and less contentious decisions.
    Section 3 of ADRA requires each agency to adopt a policy that 
addresses the use of ADR and case management. In developing the policy, 
agencies are required to examine ADR in connection with formal and 
informal adjudications, rulemakings, enforcement actions, issuing and 
revoking licenses or permits, contract administration, and litigation 
by or against the agency.
    On July 13, 1993, the Commission issued an Alternative Dispute 
Resolution Policy Statement. In it, the Commission stated its policy to 
encourage the use of ADR to the fullest extent compatible with the law 
and the agency's mission and resources. It noted that Commission 
employees and other persons involved in disputes before the Commission 
are required to consider at an early stage whether the use of ADR 
techniques would be appropriate and useful in a particular matter.
    The policy statement noted that several rules of the Commission's 
Rules of Practice and Procedure address the issue of ADR. Rule 1 refers 
to the mandatory consideration of the use of ADR in all proceedings. 
Rule 56 deals with negotiated rulemakings. Rule 61 requires orders 
instituting a formal investigation or noticing the filing of a 
complaint to contain language requiring that, prior to the commencement 
of oral hearing, consideration be given by the parties and presiding 
officer to the use of alternative means of dispute resolution. Rule 94 
authorizes presiding officers to direct parties to attend one or more 
prehearing conferences and requires that the use of alternative means 
of dispute resolution be considered at such conferences. Rule 147 
provides authority to the presiding officer to encourage the use of ADR 
and require consideration of ADR at an early stage in the proceeding. 
Rule 91(d) specifically authorizes the Chief Administrative Law Judge 
to appoint a mediator or settlement judge acceptable to all parties. In 
addition, nonattorneys may be admitted to practice before the 
Commission and persons may appear on their own behalf or on behalf of 
their employer without having been admitted to practice, 46 CFR 502.27.
    The policy statement also identifies other means of implementing 
ADR at the Commission. The informal procedure for adjudication of 
claims of $10,000 or less in Subpart S, in effect, involves a form of 
arbitration. The shortened procedure in Subpart K provides a means to 
have the complaint resolved by an administrative law judge upon a 
written record without oral hearing. A conciliation service is provided 
for under Subpart U, and the policy statement also refers generally to 
services provided by the then Office of Informal Inquiries, Complaints 
and Informal Dockets within the Office of the Secretary. Those services 
are now provided by the Office of Consumer Complaints within the Bureau 
of Consumer Complaints and Licensing.
    The Commission's rules provide for nonadjudicatory investigations 
under Subpart R and compromise procedures under Subpart W. Moreover, 
the services of a Settlement Judge are available and will continue to 
be available pursuant to section 502.91.
    In addition to requiring an agency policy statement, ADRA requires 
each agency to designate a Dispute Resolution Specialist of the agency, 
and to provide for training on a regular basis for the Dispute 
Resolution Specialist and other employees involved in implementing the 
agency's policy. The Commission has designated the Deputy Director, 
Bureau of Consumer Complaints and Licensing as its Dispute Resolution 
Specialist, 46 CFR 501.5(h)(1).
    Other key provisions of ADRA authorize agencies to use a dispute 
resolution proceeding for the resolution of an issue in controversy if 
the parties

[[Page 27923]]

agree to such proceeding, 5 U.S.C. 572; provide that a neutral may be 
an officer or employee of the Federal Government or any other 
individual acceptable to the parties, 5 U.S.C. 573; provide for 
confidentiality of communications, 5 U.S.C. 574; and provide for 
arbitration in lieu of formal administrative proceedings, 5 U.S.C. 575-
580.
    When reorganizing the Commission in February 2000, one of the 
primary reforms was a plan to develop a refined ADR program for the 
Commission. The intent was to involve the agency more deeply in ADR and 
other mediation activities so as to find ways to settle disputes 
without having them processed via costly and time-consuming formal 
adjudications. Since then, Commission staff has been developing the ADR 
process and pursuing training and developmental activities.
    The Commission's Dispute Resolution Specialist is a certified 
mediator and has made his services available to parties in formal 
complaint proceedings. Recently, those mediation services were 
instrumental in the parties to such a proceeding reaching an agreement 
that resolved not only the formal proceeding pending at the Commission, 
but also a pending suit before a state court.
    Also within the scope of the Commission's Dispute Resolution 
Services are the ombuds services provided by the Office of Consumer 
Complaints (``OCC'') within the Bureau of Consumer Complaints and 
Licensing. During the past year, a number of events have caused many to 
avail themselves more of those services. The failure of a number of 
non-vessel-operating common carriers (``NVOCCs'') generated numerous 
complaints from shippers and freight forwarders. Some of the problems 
affected commercial shippers, while others concerned individual 
shippers of household goods and automobiles. Also, a number of problems 
were experienced with unlicensed and unbonded NVOCCs that failed to 
fulfill their transportation commitments. A number of these matters 
were resolved to the satisfaction of shippers and forwarders. In 
addition, recent failures of cruise lines have generated a substantial 
number of complaints. For the most recent fiscal year, the Commission's 
ombuds services responded to more than 2900 inquiries and complaints, 
and the efforts of OCC yielded over $193,000 in recoveries for those 
making complaints.
    At this time, the Commission intends to further expand ADR services 
available from the Commission and issue the following proposed new 
rules. The proposed rules would implement an enhanced, comprehensive 
ADR program. These rules would emphasize requiring ADR consideration at 
early stages of proceedings and would provide for arbitration of 
matters at the Commission. The Commission will endeavor to provide 
mediation and other assisted negotiation procedures, and the rules 
provide for such services. Section 502.61 would be modified to make it 
mandatory for parties to consider ADR at an early stage of every 
proceeding in such a manner as the presiding Administrative Law Judge 
shall direct. Section 502.62 would be modified to require complainants 
to address the use of ADR when filing a complaint. Section 502.91 is 
revised to expand the means of ADR available in proceedings before 
Administrative Law Judges and to require the parties to consider ADR in 
all proceedings. Section 502.94 is modified to require consideration of 
ADR at prehearing conferences. Also, the current $10,000 limitation for 
informal docket proceedings in 502.301 has not been raised in a number 
of years, and would be raised to $50,000.
    Finally, the conciliation service provided for in Subpart U of the 
Commission's Rules of Practice and Procedure has rarely been utilized, 
and would now be revised to provide a framework by which the Commission 
will provide a number of ADR services. Although many provisions of the 
proposed rule may seem focused on the use of ADR in formal proceedings, 
the Commission encourages use of the Commission's dispute resolution 
services at any stage. To do so, parties should contact the 
Commission's Dispute Resolution Specialist.
    The provisions in the new proposed Subpart U regarding arbitration 
and confidentiality for the most part would be identical to provisions 
in the ADRA. Section 502.411, however, provides for mediation and other 
services, and makes clear that mediators and other neutrals involved in 
various means of dispute resolution are not bound by the Commission's 
ex parte rules. Mediators would be expressly authorized to conduct 
private sessions (or caucuses) with parties. While many mediators 
attempt to resolve disputes with little use of such caucuses, their use 
can be very effective in resolving many disputes.
    The proposed rule contains no additional information collection or 
record keeping requirements and need not be submitted to OMB for 
approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
    The Chairman certifies, pursuant to 5 U.S.C. 605, that the proposed 
rule would not have a significant impact on a substantial number of 
small entities. The final rule would expedite the complaint process, 
thereby reducing costs to small entities, while at the same time 
providing them with more assistance.

List of Subjects in 46 CFR Part 502

    Administrative practice and procedure, Claims, Equal access to 
justice, Investigations, Lawyers, Maritime carriers, Penalties, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Federal Maritime 
Commission proposes to amend 46 CFR part 502 as follows:

PART 502--RULES OF PRACTICE AND PROCEDURE

    1. The authority section is revised to read:

    Authority: 5 U.S.C. 504, 551, 552, 553, 556(c), 559, 561-569, 
571-596; 5 U.S.C. 571-584; 12 U.S.C. 1141j(a); 18 U.S.C. 207; 26 
U.S.C. 501(c)(3); 28 U.S.C. 2112(a); 31 U.S.C. 9701; 46 U.S.C. app. 
817d, 817e, 1114(b), 1705, 1707-1711, 1713-1716; E.O. 11222 of May 
8, 1965, 30 FR 6469, 3 CFR, 1964-1965 Comp. p. 306; 21 U.S.C. 853a; 
Pub. L. 105-258, 112 Stat. 1902.

    2. Section 502.61 is amended by revising paragraph (d) to read as 
follows:


Sec. 502.61  Proceedings.

* * * * *
    (d) All orders instituting a proceeding or noticing the filing of a 
complaint will contain language requiring that at an early stage of the 
proceeding and when practicable the parties shall consider the use of 
alternative dispute resolution in such manner as the presiding officer 
shall direct and further requiring that hearings shall include oral 
testimony and cross-examination in the discretion of the presiding 
officer only upon proper showing that there are genuine issues of 
material fact that cannot be resolved on the basis of sworn statements, 
affidavits, depositions, or other documents, or that the nature of the 
matter in issue is such that an oral hearing and cross-examination are 
necessary for the development of an adequate record. [Rule 61.]
    2a. Section 502.62 is amended by redesignating paragraphs (e) 
through (h) as paragraphs (f) through (i) and adding a new paragraph 
(e) to read as follows:


Sec. 502.62  Complaints and fee.

* * * * *
    (e) Complainant(s) must state whether informal dispute resolution 
procedures were used prior to filing the complaint and whether 
complainant(s) consulted with the Commission Dispute

[[Page 27924]]

Resolution Specialist about utilizing alternative dispute resolution 
(ADR) under the Commission's ADR program.
* * * * *
    3. Section 502.91 is amended by revising current paragraph (d) and 
adding new paragraphs (e) and (f) to read as follows:


Sec. 502.91  Opportunity for informal settlement.

* * * * *
    (d) As soon as practicable after the commencement of any 
proceeding, the presiding judge shall direct the parties or their 
representatives to consider the use of alternative dispute resolution, 
including but not limited to mediation, and may direct the parties or 
their representatives to consult with the Federal Maritime Commission 
Alternative Dispute Resolution Specialist about the feasibility of 
alternative dispute resolution.
    (e) Any party may request that a mediator or other neutral be 
appointed to assist the parties in reaching a settlement. If such a 
request or suggestion is made and is not opposed, the presiding judge 
will appoint a mediator or other neutral who is acceptable to all 
parties, coordinating with the Federal Maritime Commission Alternative 
Dispute Resolution Specialist. The mediator or other neutral shall 
convene and conduct one or more mediation or other sessions with the 
parties and shall inform the presiding judge, within the time 
prescribed by the presiding judge, whether the dispute resolution 
proceeding resulted in a resolution or not, and may make 
recommendations as to future proceedings. If settlement is reached, it 
shall be submitted to the presiding judge who shall issue an 
appropriate decision or ruling. All such dispute resolution proceedings 
shall be subject to the provisions of subpart U.
    (f) Any party may request that a settlement judge be appointed to 
assist the parties in reaching a settlement. If such a request or 
suggestion is made and is not opposed, the presiding judge will advise 
the Chief Administrative Law Judge who may appoint a settlement judge 
who is acceptable to all parties. The settlement judge shall convene 
and preside over conferences and settlement negotiations and shall 
report to the presiding judge within the time prescribed by the Chief 
Administrative Law Judge, on the results of settlement discussions with 
appropriate recommendations as to future proceedings. If settlement is 
reached, it shall be submitted to the presiding judge who shall issue 
an appropriate decision or ruling. [Rule 91].
    4. Section 502.94 is amended by revising paragraph (c) to read as 
follows:


Sec. 502.94  Prehearing conference.

* * * * *
    (c) At any prehearing conference, consideration shall be given to 
whether the use of alternative dispute resolution would be appropriate 
or useful for the disposition of the proceeding whether or not there 
has been previous consideration of such use.
    5. Section 502.301 is amended by revising paragraph (b) to read as 
follows:


Sec. 502.301  Statement of policy.

* * * * *
    (b) With the consent of both parties, claims filed under this 
subpart in the amount of $50,000 or less will be decided by a 
Settlement Officer appointed by the Commission's Alternative Dispute 
Resolution Specialist, without the necessity of formal proceedings 
under the rules of this part. Authority to issue decisions under this 
subpart is delegated to the appointed Settlement Officer.
* * * * *
    6. Subpart U is revised in its entirety to read as follows:

Subpart U--Alternative Dispute Resolution

Sec.
502.401  Policy.
502.402  Definitions.
502.403  General authority.
502.404  Neutrals.
502.405  Confidentiality.
502.406  Arbitration.
502.407  Authority of the arbitrator.
502.408  Conduct of arbitration proceedings.
502.409  Arbitration awards.
502.410  Representation of parties.
502.411  Mediation and other alternative means of dispute 
resolution.


Sec. 502.401  Policy.

    It is the policy of the Federal Maritime Commission to use 
alternative means of dispute resolution to the fullest extent 
compatible with the law and the agency's mission and resources. The 
Commission will consider using ADR in all areas including workplace 
issues, formal and informal adjudication, issuance of regulations, 
enforcement and compliance, issuing and revoking licenses and permits, 
contract award and administration, litigation brought by or against the 
Commission, and other interactions with the public and the regulated 
community. The Commission will provide learning and development 
opportunities for its employees to develop their ability to use 
conflict resolution skills, instill knowledge of the theory and 
practice of ADR, and to facilitate appropriate use of ADR. To this end, 
all parties to matters under this part are required to consider use of 
a wide range of alternative means to resolve disputes at an early 
stage. Parties are encouraged to pursue use of alternative means 
through the Commission's Bureau of Consumer Complaints and Licensing in 
lieu of or prior to initiating a Commission proceeding. All employees 
and persons who interact with the Commission are encouraged to identify 
opportunities for collaborative, consensual approaches to dispute 
resolution or rulemaking.


Sec. 502.402  Definitions.

    (a) Alternative means of dispute resolution means any procedure 
that is used to resolve issues in controversy, including, but not 
limited to, conciliation, facilitation, mediation, factfinding, 
minitrials, arbitration, and use of ombuds, or any combination thereof;
    (b) Award means any decision by an arbitrator resolving the issues 
in controversy;
    (c) Dispute resolution communication means any oral or written 
communication prepared for the purposes of a dispute resolution 
proceeding, including any memoranda, notes or work product of the 
neutral, parties or nonparty participant; except that a written 
agreement to enter into a dispute resolution proceeding, or final 
written agreement or arbitral award reached as a result of a dispute 
resolution proceeding, is not a dispute resolution communication;
    (d) Dispute resolution proceeding means any process in which an 
alternative means of dispute resolution is used to resolve an issue in 
controversy in which a neutral is appointed and specified parties 
participate;
    (e) In confidence means, with respect to information, that the 
information is provided--
    (1) With the expressed intent of the source that it not be 
disclosed; or
    (2) Under circumstances that would create the reasonable 
expectation on behalf of the source that the information will not be 
disclosed;
    (f) Issue in controversy means an issue which is material to a 
decision concerning a program of the Commission, and with which there 
is disagreement--
    (1) Between the Commission and persons who would be substantially 
affected by the decision; or
    (2) Between persons who would be substantially affected by the 
decision;

[[Page 27925]]

    (g) Neutral means an individual who, with respect to an issue in 
controversy, functions specifically to aid the parties in resolving the 
controversy; and
    (h) Person has the same meaning as in 5 U.S.C. 551(2).


Sec. 502.403  General authority.

    (a) The Commission intends to consider using a dispute resolution 
proceeding for the resolution of an issue in controversy, if the 
parties agree to such proceeding.
    (b) The Commission will consider not using a dispute resolution 
proceeding if--
    (1) A definitive or authoritative resolution of the matter is 
required for precedential value, and such a proceeding is not likely to 
be accepted generally as an authoritative precedent;
    (2) The matter involves or may bear upon significant questions of 
Government policy that require additional procedures before a final 
resolution may be made, and such a proceeding would not likely serve to 
develop a recommended policy for the agency;
    (3) Maintaining established policies is of special importance, so 
that variations among individual decisions are not increased and such a 
proceeding would not likely reach consistent results among individual 
decisions;
    (4) The matter significantly affects persons or organizations who 
are not parties to the proceeding;
    (5) A full public record of the proceeding is important, and a 
dispute resolution proceeding cannot provide such a record; and
    (6) The Commission must maintain continuing jurisdiction over the 
matter with authority to alter the disposition of the matter in the 
light of changed circumstances, and a dispute resolution proceeding 
would interfere with the Commission's fulfilling that requirement.
    (c) Alternative means of dispute resolution authorized under this 
subpart are voluntary procedures which supplement rather than limit 
other available agency dispute resolution techniques.


Sec. 502.404  Neutrals.

    (a) A neutral may be a permanent or temporary officer or employee 
of the Federal Government or any other individual who is acceptable to 
the parties to a dispute resolution proceeding. A neutral shall have no 
official, financial, or personal conflict of interest with respect to 
the issues in controversy, unless such interest is fully disclosed in 
writing to all parties and all parties agree that the neutral may 
serve.
    (b) A neutral who serves as a conciliator, facilitator, or mediator 
serves at the will of the parties.
    (c) With consent of the parties, the Commission's Dispute 
Resolution Specialist will seek to provide a neutral in dispute 
resolution proceedings through Commission staff, arrangements with 
other agencies, or on a contractual basis.
    (d) Fees. Should parties choose a neutral other than an official or 
employee of the Commission, fees and expenses shall be borne by the 
parties as the parties shall agree.


Sec. 502.405  Confidentiality.

    (a) Except as provided in paragraphs (d) and (e) of this section, a 
neutral in a dispute resolution proceeding shall not voluntarily 
disclose or through discovery or compulsory process be required to 
disclose any dispute resolution communication or any communication 
provided in confidence to the neutral, unless--
    (1) All parties to the dispute resolution proceeding and the 
neutral consent in writing, and, if the dispute resolution 
communication was provided by a nonparty participant, that participant 
also consents in writing;
    (2) The dispute resolution communication has already been made 
public;
    (3) The dispute resolution communication is required by statute to 
be made public, but a neutral should make such communication public 
only if no other person is reasonably available to disclose the 
communication; or
    (4) A court determines that such testimony or disclosure is 
necessary to--
    (i) Prevent a manifest injustice;
    (ii) Help establish a violation of law; or
    (iii) Prevent harm to the public health or safety, of sufficient 
magnitude in the particular case to outweigh the integrity of dispute 
resolution proceedings in general by reducing the confidence of parties 
in future cases that their communications will remain confidential.
    (b) A party to a dispute resolution proceeding shall not 
voluntarily disclose or through discovery or compulsory process be 
required to disclose any dispute resolution communication, unless--
    (1) The communication was prepared by the party seeking disclosure;
    (2) All parties to the dispute resolution proceeding consent in 
writing;
    (3) The dispute resolution communication has already been made 
public;
    (4) The dispute resolution communication is required by statute to 
be made public;
    (5) A court determines that such testimony or disclosure is 
necessary to--
    (i) Prevent a manifest injustice;
    (ii) Help establish a violation of law; or
    (iii) Prevent harm to the public health and safety, of sufficient 
magnitude in the particular case to outweigh the integrity of dispute 
resolution proceedings in general by reducing the confidence of parties 
in future cases that their communications will remain confidential;
    (6) The dispute resolution communication is relevant to determining 
the existence or meaning of an agreement or award that resulted from 
the dispute resolution proceeding or to the enforcement of such an 
agreement or award; or
    (7) Except for dispute resolution communications generated by the 
neutral, the dispute resolution communication was provided to or was 
available to all parties to the dispute resolution proceeding.
    (c) Any dispute resolution communication that is disclosed in 
violation of subsection (a) or (b) shall not be admissible in any 
proceeding relating to the issues in controversy with respect to which 
the communication was made.
    (d)(1) The parties may agree between or amongst themselves to 
alternative confidential procedures for disclosures by a neutral. Upon 
such agreement the parties shall inform the neutral before the 
commencement of the dispute resolution proceeding of any modifications 
to the provisions of paragraph (a) of this section that will govern the 
confidentiality of the dispute resolution proceeding in accordance with 
the guidance on confidentiality in federal proceedings published by the 
Inter Agency ADR Working Group and adopted by the ADR Council. (see 
http://www.financenet.gov /financenet/fed/iadrwg/confid.pdf). If the 
parties do not so inform the neutral, (a) shall apply.
    (2) To qualify for the exemption under paragraph (j) of this 
section, an alternative confidential procedure under this subsection 
may not provide for less disclosure than the confidential procedures 
otherwise provided under this section.
    (e) If a demand for disclosure, by way of discovery request or 
other legal process, is made upon a neutral regarding a dispute 
resolution communication, the neutral shall make reasonable efforts to 
notify the parties

[[Page 27926]]

and any affected nonparty participants of the demand. Any party or 
affected nonparty participant who receives such notice and within 15 
calendar days does not offer to defend a refusal of the neutral to 
disclose the requested information shall have waived any objection to 
such disclosure.
    (f) Nothing in this section shall prevent the discovery or 
admissibility of any evidence that is otherwise discoverable, merely 
because the evidence was presented in the course of a dispute 
resolution proceeding.
    (g) Paragraphs (a) and (b) of this section shall have no effect on 
the information and data that are necessary to document an agreement 
reached or order issued pursuant to a dispute resolution proceeding.
    (h) Paragraphs (a) and (b) of this section shall not prevent the 
gathering of information for research or educational purposes, in 
cooperation with other agencies, governmental entities, or dispute 
resolution programs, so long as the parties and the specific issues in 
controversy are not identifiable.
    (i) Paragraphs (a) and (b) of this section shall not prevent use of 
a dispute resolution communication to resolve a dispute between the 
neutral in a dispute resolution proceeding and a party to or 
participant in such proceeding, so long as such dispute resolution 
communication is disclosed only to the extent necessary to resolve such 
dispute.
    (j) A dispute resolution communication which is between a neutral 
and a party and which may not be disclosed under this section shall 
also be exempt from disclosure under 5 U.S.C. 552(b)(3).


Sec. 502.406  Arbitration.

    (a) (1) Arbitration may be used as an alternative means of dispute 
resolution whenever all parties consent, except that arbitration may 
not be used when the Commission or one of its components is a party. 
Consent may be obtained either before or after an issue in controversy 
has arisen. A party may agree to--
    (i) Submit only certain issues in controversy to arbitration; or
    (ii) Arbitration on the condition that the award must be within a 
range of possible outcomes.
    (2) The arbitration agreement that sets forth the subject matter 
submitted to the arbitrator shall be in writing. Each such arbitration 
agreement shall specify a maximum award that may be issued by the 
arbitrator and may specify other conditions limiting the range of 
possible outcomes.
    (b) With the concurrence of the Dispute Resolution Specialist, 
binding arbitration may be used to resolve any and all disputes that 
could be the subject of a Commission administrative proceeding before 
an Administrative Law Judge. The Dispute Resolution Specialist may 
withhold such concurrence after considering the factors specified in 
Sec. 502.403, should the Commission's General Counsel object to use of 
binding arbitration.
    (c)(1) The Commission's Dispute Resolution Specialist will appoint 
an arbitrator of the parties' choosing for an arbitration proceeding.
    (2) A Commission officer or employee selected as an arbitrator by 
the parties and appointed by the Dispute Resolution Specialist shall 
have authority to settle an issue in controversy through binding 
arbitration pursuant to the arbitration agreement; provided, however, 
that decisions by arbitrators shall not have precedential value with 
respect to decisions by Administrative Law Judges or the Commission. 
Administrative Law Judges may be appointed as arbitrators with the 
concurrence of the Chief Administrative Law Judge.
    (d) The arbitrator shall be a neutral who meets the criteria of 5 
U.S.C. 573.


Sec. 502.407  Authority of the arbitrator.

    An arbitrator to whom a dispute is referred may--
    (a) Regulate the course of and conduct arbitral hearings;
    (b) Administer oaths and affirmations;
    (c) Compel the attendance of witnesses and production of evidence 
at the hearing under the provisions of 9 U.S.C. 7 only to the extent 
the Commission is otherwise authorized by law to do so; and
    (d) Make awards.


Sec. 502.408  Conduct of arbitration proceedings.

    (a) The arbitrator shall set a time and place for the hearing on 
the dispute and shall notify the parties not less than 5 days before 
the hearing.
    (b) Any party wishing a record of the hearing shall--
    (1) Be responsible for the preparation of such record;
    (2) Notify the other parties and the arbitrator of the preparation 
of such record;
    (3) Furnish copies to all identified parties and the arbitrator; 
and
    (4) Pay all costs for such record, unless the parties agree 
otherwise or the arbitrator determines that the costs should be 
apportioned.
    (c)(1) The parties to the arbitration are entitled to be heard, to 
present evidence material to the controversy, and to cross-examine 
witnesses appearing at the hearing.
    (2) The arbitrator may, with the consent of the parties, conduct 
all or part of the hearing by telephone, television, computer, or other 
electronic means, if each party has an opportunity to participate.
    (3) The hearing shall be conducted expeditiously and in an informal 
manner.
    (4) The arbitrator may receive any oral or documentary evidence, 
except that irrelevant, immaterial, unduly repetitious, or privileged 
evidence may be excluded by the arbitrator.
    (5) The arbitrator shall interpret and apply relevant statutory and 
regulatory requirements, legal precedents, and policy directives.
    (d) The provisions of Sec. 502.11 regarding ex parte communications 
apply to all arbitration proceedings. No interested person shall make 
or knowingly cause to be made to the arbitrator an unauthorized ex 
parte communication relevant to the merits of the proceeding, unless 
the parties agree otherwise. If a communication is made in violation of 
this subsection, the arbitrator shall ensure that a memorandum of the 
communication is prepared and made a part of the record, and that an 
opportunity for rebuttal is allowed. Upon receipt of a communication 
made in violation of this subsection, the arbitrator may, to the extent 
consistent with the interests of justice and the policies underlying 
this subchapter, require the offending party to show cause why the 
claim of such party should not be resolved against such party as a 
result of the improper conduct.
    (e) The arbitrator shall make an award within 30 days after the 
close of the hearing, or the date of the filing of any briefs 
authorized by the arbitrator, whichever date is later, unless the 
parties agree to some other time limit.


Sec. 502.409  Arbitration awards.

    (a)(1) The award in an arbitration proceeding under this subchapter 
shall include a brief, informal discussion of the factual and legal 
basis for the award, but formal findings of fact or conclusions of law 
shall not be required.
    (2) Exceptions to or an appeal of an arbitrator's decision may not 
be filed with the Commission.
    (b) An award entered in an arbitration proceeding may not serve as 
an estoppel in any other proceeding for any issue that was resolved in 
the proceeding. Such an award also may not be used as precedent or 
otherwise be considered in any factually unrelated proceeding.

[[Page 27927]]

Sec. 502.410  Representation of parties.

    (a) The provisions of Sec. 502.21 apply to representation of 
parties in dispute resolution proceedings, as do the provisions of 
Sec. 502.27 regarding representation of parties by nonattorneys.
    (b) A neutral in a dispute resolution proceeding may require 
participants to demonstrate authority to enter into a binding agreement 
reached by means of a dispute resolution proceeding.


Sec. 502.411  Mediation and other alternative means of dispute 
resolution.

    (a) Parties are encouraged to utilize mediation or other forms of 
alternative dispute resolution in all formal proceedings. The 
Commission also encourages those with disputes to pursue mediation in 
lieu of, or prior to, the initiation of a Commission proceeding.
    (b) Any party may request, at any time, that a mediator or other 
neutral be appointed to assist the parties in reaching a settlement. If 
such a request is made in a proceeding assigned to an Administrative 
Law Judge, the provisions of Sec. 502.91 apply. For all other matters, 
alternative dispute resolution services may be requested directly from 
the Commission's Alternative Dispute Resolution Specialist, who may 
serve as the neutral if the parties agree or who will arrange for the 
appointment of a neutral acceptable to all parties.
    (c) The neutral shall convene and conduct mediation or other 
appropriate dispute resolution proceedings with the parties.
    (d) Ex-parte Communications. Except with respect to arbitration, 
the provisions of 502.11 do not apply to dispute resolution 
proceedings, and mediators are expressly authorized to conduct private 
sessions with parties.

    By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 01-12500 Filed 5-18-01; 8:45 am]
BILLING CODE 6730-01-P