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In an 8 to 1 decision, the Supreme Court decided that financial arbitrationclauses in many credit-based contracts supersede a 1996 Federal law that enabled credit and loan customers to file litigation against their lenders if they were dissatisfied with them. Many consumer rights advocates are contesting this decision, asserting that this is unfair to customers.

What This Arbitration Ruling Affects

This arbitration ruling affects all credit cards, auto loans, student loans—every consumer credit or loan application except for mortgage loans, which are specifically prohibited from having arbitration clauses. Already, many loan and credit providers have placed arbitration clauses in their contracts. What this ultimately means is that in most cases, customers will only have arbitration as a recourse, and will no longer be able to file suit against their creditors for charges and fees.

Arbitration Clauses and Consumer Advocates

Consumer advocates believe that the ability to insert enforceable arbitration clauses into credit and loan application places an undue amount of power in the hands of credit lenders. The core of the argument is that they believe that an arbitration attorney is more likely to decide on behalf of the creditors due to financial incentive, whereas a trial judge would be immune. They also believe that this enables creditors to charge any fee they desire without any fair legal recourse for the customer.

The consumer groups involved are urging the newly formed Consumer Financial Protection Bureau to investigate the arbitration clauses being inserted into applications and contracts. If the CFPB finds that these clauses are unreasonable, they may be subject to stricter regulation and amendment, or they may be banned altogether.

Contract arbitration proceedings between the New Jersey township of Nutley and the local police union have ended and the arbitration attorney has decided on the nature of their new contracts. However, due to the lengthy 3 year process of this case and that the contracts are valid until December 2012, a new contract negotiation will soon be underway for the upcoming contracts. The Public Safety Commissioner Al Petracco was satisfied with the process, but the Police Benevolence Association (Local 33) President Mike O'Halloran was not. He believed that the township was negotiating in good faith, and that the whole arbitration was a “waste of money for both sides.”

Why Arbitration Was Necessary

According to O'Halloran, the police departments were offered an inferior contract to what the firefighters got. He claims that if the police union had received the same contract as other municipal employees, they would have taken the offer. The Public Safety Commission's argument was that the original contract offer was made in context of the township's budget difficulties. Petracco explained that the township's revenue has essentially been static, while its expenses have been steadily increasing.

The Arbitration Attorney's Decision

In the end, the decision to make the police contracts identical to the rest of the municipal workers' contracts was satisfactory to both sides. The police union was awarded a 9 percent base pay increase that applied retroactively to 2009. Unused sick days are to be capped at $15,000, and new employees will encounter a new longevity schedule with a longevity freeze. Petracco believes the cap on unused sick days is a progressive step to save money for the township, and that the pay increase for 2009 was “huge.” O'Halloran, while satisfied with the outcome, felt that the arbitration was unnecessary in order to match other municipal employees.

The multiple case dispute between American Superconductor Corporation (AMSC) and Sinovel Wind Group Inc., Ltd. has begun with a commercial arbitration over Sinovel's breach of contract in front of the Beijing Arbitration Commission. The breach of contract arbitration is valued at $770 million dollars--$70 million for non-delivered product shipments and the remaining $700 million is divided among other breaches of contract. The total value of all the cases is estimated at more than $1.2 billion.

The Civil Cases and Criminal Charges

AMSC is also charging Sinovel with three civil cases of intellectual property infringement, copyright infringement and is urging Beijing police to take action on criminal charges against specific Sinovel employees. These are all related to acts of corporate espionage exchanging trade secrets involving one former AMSC employee and high ranking employees at Sinovel. The cases of corporate espionage involve the exchange and implementation of AMSC-specific upgrades to wind turbines on the part of Sinovel. AMSC is asking for a total of $456 million and cease and desist orders. One of the claims is for $450 million, and represents the largest intellectual property claim that the Beijing Arbitration Commission has faced to date.

Evidence and Existing Impact of this Commercial Dispute

The evidence includes a confession by the former employee of AMSC, hundreds of emails between him and executives at Sinovel which include the proprietary intellectual property, contracts between him and Sinovel promising an excess of $1.5 million, and evidence that the intellectual property was put to use in Sinovel's wind farms in China. This published evidence against Sinovel is as solid as a proverbial “smoking gun” and has already cost Sinovel dearly. Already, Sinovel has lost a significant amount of business over this commercial dispute. Mainstream Renewable Power of Ireland backed out of a $1 billion arrangement with Sinovel for a wind turbine system. A commercial arbitration loss on their part could spell doom for the company.