Important Changes to International Arbitration ProceduresTo all our friends with international projects, partners, or contracts, please take note of some significant changes to one of the potential sets of procedures and rules that may govern or apply to your international dispute. The International Centre for Dispute Resolution (ICDR) recently amended its Dispute Resolution Procedures (including its Arbitration and Mediation Rules), which became effective on March 1, 2021.

The general thrust of these changes was to increase efficiency and cost-effectiveness. The updated rules also seek to address important current issues and dynamics, including, most notably, the ongoing COVID-19 pandemic. These amendments are the result of a year-long effort by the various arbitration experts around the world who make up the drafting committee.

In terms of efficiency and cost-effectiveness, the updated rules encourage the consideration of early disposition of issues, emphasize and incorporate the use of mediation, raise the ceiling amount for expedited arbitration procedures, and expand the applicability of these procedures.  After almost a year of navigating international disputes in a world with very little travel or face-to-face interaction, the ICDR drafters worked to address the ever-changing dynamics of the COVID-19 world, including the increasing role of video and virtual communications. Finally, there are other issues and developments addressed by the amendments, including the rise of third-party funding; the duty to discuss cybersecurity, privacy and data protection; transparency regarding ICDR decision-making; joinder and consolidation; arbitral jurisdiction and arbitrability; and the use and role of tribunal secretaries.

In addition to amending the Arbitration Rules, the ICDR also amended its Mediation Rules, including changes to address the procedure for the appointment of a mediator, guidance regarding the mediation process, and potential enforcement of settlements under the Singapore Convention on mediated settlements.

If you do business in the international arena or with businesses around the globe, take note of these key changes as they may very well alter the way international disputes are adjudicated. And, as always, remember the importance of the primary set of rules that govern your project or dispute: the contract.

GAO Clarifies the Scope of Its Jurisdiction over OTA ProtestsThe Government Accountability Office (GAO), in Spartan Medical, Inc., B-419503, recently clarified the scope of its jurisdiction over bid protests involving an agency’s use of its other transaction agreement (OTA) authority. The GAO’s decision in this case is noteworthy because agencies are increasingly relying on OTAs to meet their procurement needs.

The Facts

On November 12, 2020, the Air Force issued a solicitation seeking “white papers or solution briefs” responding to the need for rapid point-of-care and point-of-use COVID-19 testing products. Among other things, the solicitation stated that it sought responses from “vendors who have developed or are developing products that . . . [h]ave potential to achieve manufacturing production rates of 100K – 1M tests/day within 3-4 months of contract award.” The solicitation also notified vendors that the Air Force contemplated that award would be made pursuant to the agency’s OTA authority contained in 10 U.S.C. § 2371b. The solicitation established a closing date of December 7, 2020.

The contractor at issue never protested the agency’s use of the OTA vehicle before proposals were due. Instead, on or before the December 7 closing date, the contractor submitted its response to the solicitation, identifying therein that it is the distributor of a product manufactured by another business entity. On December 18, the Air Force notified the contractor that its solution would not be further considered. On January 4, 2021, the contractor filed a bid protest with the GAO, challenging the Air Force’s use of its OTA authority as well as the Air Force’s bases for eliminating the contractor from further consideration. The Air Force requested dismissal of the protest, asserting that the complaints were untimely filed and/or beyond the GAO’s protest jurisdiction.

The Holding

At the outset of its decision on the protest, the GAO noted that, under the Competition in Contracting Act of 1984 (CICA) and the GAO Bid Protest Regulations, the GAO reviews protests concerning alleged violations of procurement statutes or regulations by federal agencies in the award or proposed award of contracts for the procurement of goods and services, and solicitations leading to such an award (see 31 U.S.C. §§ 3551(1), 3552; 4 C.F.R. § 21.1(a)). However, the GAO noted that, in circumstances where an agency has statutory authorization to enter into “contracts . . . [or] other transactions,” the GAO has concluded that agreements issued by the agency under its “other transaction” authority “are not procurement contracts.” Accordingly, the GAO noted that it generally does not review protests of the award or solicitations for the award of these agreements under its bid protest jurisdiction.

The GAO then stated that, “The only exception to this general rule pertains to situations where an agency is exercising its OTA authority, and the protester files a timely, pre-closing date protest alleging that the agency is improperly exercising that authority.” The GAO further stated that, “Where a protester is aware that the agency has issued a competitive solicitation seeking to enter into an OTA pursuant to its statutory authority, any protest regarding the use of that authority must be filed prior to the time for receipt of initial proposals.”

The GAO went on to find that the solicitation expressly placed the protester on notice that the Air Force intended to make the award pursuant to its OTA authority. . The GAO found that, on this record, the protester’s assertion that the Air Force’s use of its OTA authority in conducting this procurement was not timely filed, and the contractor’s challenges to the Air Force’s evaluation of the response to the solicitation are outside of the GAO’s bid protest jurisdiction.

The Takeaway

The GAO’s Spartan Medical decision merits discussion because it is yet another example of an agency using its increasingly popular OTA authority for what otherwise looks like a standard procurement for products and the GAO stepping back from having much of a role in reviewing the reasonableness of the agency’s decision. The case also serves as a reminder to contractors that, if they want relief from the GAO regarding an OTA, it is necessary to challenge the decision to use the OTA in the first place, rather than the selection decision after the fact.

If you have any questions about the GAO’s decision in this case, or about OTA protests in general, please feel free to contact Aron Beezley or Patrick Quigley.

Sooner Is Better than LaterFor our friends who litigate (or arbitrate!) in Alabama, take note of this recent Alabama Supreme Court decision. Although not a construction case, this recent decision dramatically illustrates what not to do if you want to arbitrate your dispute, as is the preferred dispute resolution mechanism in many design and construction contracts. In The Health Care Authority for Baptist Health et al. v. Dickson, the court found that a party to a contractual arbitration provision waived its right to arbitrate after substantially invoking the litigation process to its counterparty’s prejudice. This dispute involved an individual who was injured in an automobile accident and treated in the emergency room. The individual was partially covered by health insurance. The hospital was party to a provider agreement with the insurer under which the medical care rendered was reimbursable.

The individual filed suit challenging a reimbursement that the hospital received in exchange for his medical treatment. The parties to the case – the individual and the hospital system – participated in a litigation process involving numerous filings, motions, and a discovery process. Two years after the case had been pending, the hospital system moved to compel arbitration on the grounds that the health insurance policy required that claims related to the policy be arbitrated and that the provider agreement also provided for arbitration. The trial court denied this effort to compel arbitration, and the Alabama Supreme Court agreed.

Waiver is a defense to arbitration. The test for determining whether a party has waived its right to arbitration has two prongs: (i) whether the party’s actions as a whole have substantially invoked the litigation process and, (ii) whether the party opposing arbitration would be prejudiced if forced to submit its claims to arbitration subsequent to the other party’s actions invoking the litigation process.  In this case, the court found compelling the following: (i) the hospital system moved to compel arbitration two years after the case had been filed, and (ii) the various actions in the litigation taken by the hospital system prior to moving to compel arbitration (filing a motion to dismiss, supporting the attempt by another party to be dismissed from the action, filing motions to stay discovery, opposing nonparty subpoenas, submitting briefs to and participating in hearings, requesting that the case be transferred, participating in motion practice and hearings in the trial court, answering the individual’s complaint on the merits, and conducting and participating in discovery).

The court concluded that these actions were inconsistent with a desire to have the case resolved by arbitration. The hospital system, therefore, substantially invoked the litigation process before seeking to compel arbitration. The court also concluded that the individual was prejudiced by these actions, as courts recognize that there is prejudice where the party seeking arbitration allows the opposing party to undergo the types of litigation expenses that arbitration was designed to alleviate. The result: the hospital system waived its right to arbitrate and was forced to proceed in litigation.

The lesson here is a simple but important one: if you believe you have the contractual right to arbitrate your dispute – and if you want to arbitrate your dispute – it is prudent to request that the dispute be sent to arbitration sooner rather than later. The longer you participate in litigation or court (and the more expense your counterparty incurs), the more likely it is that you will be deemed to have waived your arbitration right.  If you are uncertain about whether you have the right to arbitrate or are unfamiliar with the mechanics for doing so, call a lawyer who can advise you as to your available rights and remedies before they slip away.