by Charles Pou, Jr. ¹

In the closing hours of the 104th Congress, the House of Representatives completed work on legislation permanently reauthorizing the Administrative Dispute Resolution Act and the Negotiated Rulemaking Act. Signed into law by President Clinton on October 19, 1996, the Administrative Dispute Resolution Act of 1996 ("the 1996 Act" or "1996 amendments"), extends and makes improvements in two landmark federal statutes. As a result, federal agencies will find it easier to address a broad range of disputes with the full array of alternative dispute resolution processes. For the first time, these processes now range, by explicit statutory language, from avoidance techniques like ombudsmen (now in its gender neutral version "ombuds"), to facilitative processes like mediation and minitrials, all the way to full binding arbitration.

Overview of 1990 Acts -- When Congress initially enacted the ADR and Negotiated Rulemaking Acts in 1990, nearly all federal agencies (with a few notable exceptions) lagged far behind the private sector and the courts in employing consensus-based approaches to handling conflicts. The 1990 statutes -- which created two new subchapters of the Administrative Procedure Act, both subject to sunset provisions intended to allow congressional review of their implementation -- stimulated extensive initiatives at many federal agencies toward building these processes into their regulatory and management decisionmaking by providing encouragement, guidance, leadership, and a legal framework.

The 1996 amendments extend permanently the ADR and Negotiated Rulemaking Acts, and eliminate further sunset dates and special oversight or reporting requirements. Congress has thus implicitly confirmed the federal government's passage beyond the infancy of its use of collaborative processes and has recognized that these methods have just as much place in agencies' activities as do formal adjudication, notice-and-comment rulemaking, and other more formal procedures. The 1996 Act (Public Law No. 104-320), goes significantly beyond the original 1990 legislation to address concerns that -- in the words of Senator Charles Grassley, who introduced both the 1990 and the 1996 ADR Acts -- have caused some agencies to "lag behind in adopting ADR programs in their daily activities." Congress has taken several steps to deal with problems that had arisen in implementing the 1990 statutes, including:

• Clarifying and enhancing confidentiality protections by, among other things, explicitly exempting from disclosure under the Freedom of Information Act communications involving the neutral made in dispute resolution proceedings;

• Authorizing, for the first time, "genuine" binding arbitration for all federal agencies across-the-board, by eliminating a one-sided provision in the 1990 Act that had allowed agency heads (but not private parties) a period in which to void arbitral awards without explanation;

• Broadening the ADR Act's coverage by eliminating exceptions that had previously caused uncertainty as to its applicability to many workplace-related conflicts and to certain specific dispute resolution mechanisms, like ombuds;

• Taking steps to make it easier for agencies expeditiously to acquire the services of mediators and other neutrals;

• Taking first steps to find a new home in the federal government for some of the coordinating, consulting, and other functions performed by the Administrative Conference of the U.S. before its elimination by Congress; and

• Encouraging greater use of negotiated rulemaking by promoting actions to simplify the procedures that agencies must follow in establishing the negotiating committees that craft the substance of proposed regulations.

Except for the new law's provisions affecting arbitration and confidentiality, none of these changes, taken singly, does more than "tweak" the earlier laws to encourage, and make easier, resort to collaborative methods. Collectively, the 1996 amendments suggest that Congress, along with many federal agencies, have moved beyond an initial skepticism and concern over potential abuses to a point where they have begun to view ADR methods as safe and effective.

Here is a closer look at changes made by the 1996 amendments:

Confidentiality -- Of all the statutory issues affecting agencies' use of ADR under the 1990 Act, the interplay between its confidentiality provisions and the Freedom of Information Act ("FOIA") have most often been cited as problematic. While the 1990 Act set forth in great detail provisions governing the confidentiality of communications made in the course of a dispute resolution proceeding, it also provided, somewhat anomalously, that it did not exempt disclosure of these communications under FOIA. As a result, many feared that a mediator who is a government employee (as is common in federal Equal Employment Opportunity mediation programs and some other disputes) might be forced to reveal documents received from a party or to disclose his or her notes. The 1996 amendments address these concern by implementing a 1995 Administrative Conference recommendation to create a tightly drawn exception preventing disclosure, under FOIA or otherwise, for a neutral's documents and communications between a party and the neutral. While Congress also decided to continue to maintain the exemption from confidentiality for documents that were furnished or available to all parties, these documents likely will fall into other protections against wholesale disclosure. To encourage use of early neutral evaluation and similar methods, the Act's revised confidentiality section provides that dispute resolution communications, such as evaluations or settlement proposals, that are generated by the neutral remain protected.

Binding Arbitration -- Prior to enactment of the 1990 ADR Act, federal agencies were prohibited from engaging in binding arbitration in virtually all circumstances. ²

The 1990 law gave agencies broad new authority to submit claims and most other disputes to a private arbitrator, subject to certain criteria and safeguards intended to safeguard the public interest and protect nonparties. However, nebulous constitutional concerns raised at the time by the Department of Justice led Congress to include a provision in the 1990 Act's arbitral procedures that allowed an agency head unilaterally to vacate an arbitral award for any reason during a 30-day period following issuance of the award. ³

As a result of this provision, private parties have been reluctant to agree to arbitrate with agencies; indeed, not a single instance of arbitration by a private neutral under the 1990 Act's provisions has been found.

Following the Department of Justice's abandonment in 1995 of its earlier objections, the 1996 amendments eliminate the provision in the original ADR Act that gave agency heads this unilateral right to review arbitral awards. Agencies will be able to engage in arbitration whenever its use is consistent with the factors set forth in section 582 of the original Act governing appropriateness of using ADR.

To ensure that remaining concerns over possible abuse of agency arbitration are addressed, the Act requires federal agencies entering into arbitration to specify a maximum award that may be issued by the arbitrator in that case. It also calls on agency heads, prior to an agency's using arbitration under the 1996 Act, to issue guidance on the appropriate use of arbitration after consultation with the Attorney General. Apart from these safeguards -- and assuming that the Attorney General exercises her consultative role in a way that prevents new hurdles from being set up to limit this new power to arbitrate disputes -- agencies will soon be able to engage in binding arbitration in much the same way that private entities have done for generations under the Federal Arbitration Act.

Administrative Conference's ADR Duties -- The 1996 Act, reflecting the Administrative Conference's demise in October 1995, calls on the President to designate an agency, or to designate or create an interagency committee, that will facilitate and encourage use of ADR and negotiated rulemaking. The goals, according to the conference committee report on the 1996 Act, will be to promote coordination of policy, enhance institutional memory, and make more efficient the use of ADR and negotiated rulemaking. It is unclear where this responsibility will ultimately reside.

Negotiated Rulemaking Improvements -- The new law also requires the Office of Management and Budget to take appropriate action to expedite the establishment of negotiated rulemaking committees and committees created to resolve disputes under the ADR Act (e.g., Superfund or NEPA matters) within six months and to submit recommendations for any necessary legislative changes within one year after enactment. This provision is intended to ensure that artificial or duplicative bureaucratic requirements that have complicated and impeded agency resort to negotiated rulemaking are eliminated or streamlined. Several commentators have singled out the Federal Advisory Committee Act as imposing requirements on creating committees that impede negotiated rulemaking.

Acquiring Neutrals' Services -- The amendments provide that the agency or interagency committee designated by the President to take over many of the Administrative Conference's duties shall also develop procedures that permit agencies to obtain the services of neutrals on an expedited basis. In developing these procedures, the agency or committee is directed to consult with other appropriate federal agencies and with Professional organizations experienced in dispute resolution.

The 1996 Act makes plain that agencies need not engage in full competitive procedures when acquiring the services of ADR neutrals and negotiated rulemaking convenors and facilitators. Rather, as when hiring experts for litigation under the Federal Acquisition Streamlining Act of 1994 ("FASA"), agencies are now explicitly authorized by statute to obtain neutrals' services on an expedited basis. In reality, many agency contracting officers were reluctant to employ their new FASA authority to use sole source procedures to hire ADR neutrals, even though Amendments to the Federal Acquisition Regulation made explicit that this authority extended to mediators, facilitators, and other neutrals as well as other experts. The new law seeks to encourage such expedited hiring of neutrals. It also makes clear that federal agencies may use the services and facilities of state, local, and tribal governments when engaging in ADR.

Conclusion -- Many steps remain to be taken if these consensus methods of decisionmaking are to gain the kind of broad-based acceptance and use throughout the government that they merit -- especially in many enforcement agencies and in others where adversarial relations with regulated parties, contractors, grant recipients, advocacy groups, or even employee unions are still ingrained. Still, the initial stage of the journey can be termed a success, and the new Act clears a path for all federal agencies, as well as those who are affected by agency decisions, to take full advantage of these processes' potential.

¹ Mr. Pou was former Director of the Program on Dispute Resolution, Administrative Conference of the U.S., and currently is a principal in Harter & Pou, where he mediates public disputes and assists agencies in establishing ADR programs.

² Several obstacles have historically prevented resort to arbitration to resolve most federal disputes; one longstanding, serious roadblock was a series of opinions by the Comptroller General, extending back to 1916, holding that the government could not agree to be bound by a private arbitrator's decision unless the agency was specifically authorized by statute to arbitrate the dispute in question. This prohibition, which had been widely criticized in recent years, was effectively reversed by the 1990 Act's new authority to arbitrate (albeit subject to procedural restrictions, most notably those embodied in the 30-day review compromise).

³ While most knowledgeable observers consistently expressed the view that no major constitutional concerns prevented agencies from employing binding arbitration, DOJ took the position during the Reagan and Bush Administrations that arbitration by a private neutral would bind an agency through a decision by someone who was not "an officer of the United States." As a result, the 30-day review compromise was struck to avoid having Justice recommend a presidential veto of the entire ADR Act. In September 1995, DOJ's Office of Legal Counsel issued a formal opinion that found no significant constitutional problems attending agency use of binding arbitration in most cases. That opinion, in effect, reversed DOJ's prior position.