ABA Journal - December 2009

Institute in October.

Her comments came shortly before the SEC released a draft of its strategic plan for the next five years. The plan outlines 70 initiatives, which include stricter enforcement to “obtain swift and firm sanctions, while remaining fair and reasonable.”

ARBITRATION
RATE-A-NEUTRAL
Group to offer evaluations
of arbitrators, mediators

By Virginia Groark

ROAD MAP FOR REFORM

EVEN AS THE SEC CALLS FOR A STEP- up of self-reporting, the agency itself is taking steps to centralize the thousands of tips and complaints it receives, with the aim of aiding investigations, better spotting trends and avoiding another massive fraud like Bernard Madoff’s multibillion-dollar Ponzi scheme that went uninvestigated for 16 years.

SEC Inspector General David Kotz’s proposals also include easing the process for junior-level enforcement attorneys to bring concerns to top managers.

“I think it will take months or maybe a year before it’s really running efficiently because there are a lot of steps,” Walter says, “but it is moving along as fast as we can move it along. And there’s a lot that’s being done today to try to replicate as much of that without the system in place because we want to make sure there is nothing we are missing.”

Paul R. Lovejoy, United Airlines general counsel and secretary, and Walter say conversations between the commissioner and corporate counsel at the Corporate Counsel Institute forums let both sides hear new proposals firsthand and voice concerns.

In her prepared remarks, Walter also addressed SEC support for increased liability for credit raters; the need for the SEC to issue guidance for corporate disclosures on climate change; and the possible use of international financial reporting standards, a set of global rules for financial statements.

The SEC should “move forward to IFRS if and only if it is the right thing to do for U.S. investors,” Walter says. SEC Chairman Mary Schapiro has said the agency will discuss IFRS through the fall. ■

WITH FORTUNE 500 COMPANIES DEMANDING MORE TRANSPARENCY in the dispute resolution process, a New York City-based non- profit has decided to start rating arbitrators and mediators. The International Institute for Conflict Prevention & Resolution hopes its online ratings will be available early next year. Its members will be able to use their passwords to access the information on the organization’s website.

The service is believed to be the first of its kind for alternative dispute
resolution. It was developed after institute
members—largely Fortune 500 companies
and their lawyers—complained there wasn’t
enough information available on mediators
and arbitrators, called neutrals, according to
Kathleen Bryan, the organization’s president
and chief executive officer.

Some neutrals have questions about the voluntary rating system, Bryan says. But the organization hopes they will recognize the time has come for such ratings. “This is something that the clients are demanding,” she says.

The system’s success depends on the cooperation of roughly 600 neutrals the institute has approved to do complex busi-ness-to-business mediation and arbitration. Those who sign up must provide 20 refer-

ences to a third-party company, Positively Neutral, which will interview the references and then score the neutrals in a variety of categories, such as whether they are good case managers. Aggregate averages will be compiled along with anecdotes and will be shared with the neutrals, who either can agree to have the information posted or opt out.

To account for bad scores from sore losers, the arbitrators’ ratings will be broken down into information from those who prevailed and those who lost.

The American Arbitration Association, which has a roster of about 7,700 mediators and arbitrators, doesn’t have a rating system but would consider instituting one if the demand arises, says Eric Tuchmann, the AAA’s general counsel in New York City. Currently, it screens its neutrals, sends surveys to conduct evaluations and offers an interviewing process so parties can help select an arbitrator or mediator, Tuchmann says.

Bryan expects some neutrals will take a wait-and-see attitude before signing up, noting some have suggested the ratings won’t include enough information.