In a landmark decision, the United States Supreme Court announced on April 27, 2010 that under the Federal Arbitration Act (FAA) compelling parties to submit antitrust claims to class arbitration pursuant to an arbitration agreement indisputably silent on the subject "is fundamentally at war with the foundational FAA principle that arbitration is a matter of consent." The case arises from a partial final award governed by Article 1 of the FAA that required client Stolt-Nielsen and other shipping companies to arbitrate on a class basis with antitrust claimants, despite the fact that the parties had stipulated the governing arbitration agreements were silent on the class issue.

According to the Court, "what the arbitration panel did was simply to impose its own view of sound policy regarding class arbitration." Under such circumstances, the Court ruled that a decision "may be vacated under §10(a)(4) of the FAA on the ground that the arbitrator 'exceeded [his] powers,' for the task of an arbitrator is to interpret and enforce a contract, not to make public policy." The Court specified that parties may not be forced to arbitrate on a class basis "unless there is a contractual basis for concluding that the party agreed to do so."

The Supreme Court explained further that absent a contractual basis for permitting class arbitration, "the differences between bilateral and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties' mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings."

Under the auspices of the American Arbitration Association alone, there are currently more than 100 active arbitrations that have been filed on a class basis. Businesses will clearly need to examine their current arbitration contracts in light of the decision. Meanwhile, we also expect that a large number of companies currently embroiled in various stages of purported class arbitration will look to the Stolt-Nielsen decision to either defeat class arbitration claims at the outset or determine whether a rehearing on the issue is appropriate.

As a longtime leader in antitrust as well as international arbitration and other complex commercial disputes, White & Case has been at the forefront in responding to developments in class arbitration since 2003, when class arbitration burst onto the national scene. White & Case is committed to ensuring that clients obtain and receive the full benefit of their arbitration bargain. From counseling clients across industries on drafting and negotiating arbitration agreements, to regularly litigating and arbitrating disputes to conclusion on the merits, White & Case has developed substantial experience central to ensuring our clients' success.

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